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Synonyms
Brief History
CBSR
With over 15 years of experience, CBSR is
Canada’s oldest organization dedicated solely to
Address with Web Link helping businesses build and advance their
corporate responsibility agenda. Founded in
Vancouver: 205–535 Thurlow Street. V6E 3 L2, Vancouver by a group of mission-based busi-
Canada nesses, CBSR has grown to support a network
Toronto: 300–360 Bay Street, M5H 2 V6, Canada of over 100 active companies across Canada.
Calgary: 225, 404–6, Avenue SW, T2P OR9,
Canada
www.cbsr.ca Mission/Objectives/Focus Areas
• CSR reporting and communication confirm the link between employee engage-
• Climate change and environmental ment and CSR.
management The Business Case for an Integrated Approach
• Strategic community investment to Water Management – This guide offers
• Employee engagement practical insights to help companies identify
• Ethical sourcing and manage the water-related risks and oppor-
• Social risk assessment tunities that impact their business – includes
a tool, best practices, and resources.
CBSR Transformational CSR Framework and
Structure of Governance Approach – Launched at the 7th Annual
Summit on CSR, this framework describes
CBSR governance model works with a Board of the continuum of CSR performance and
Directors, President, and Chief Executive characteristics of each stage of development.
Officer.
Increased injection of carbon compounds into greenhouse gases in the atmosphere and increases
the atmosphere is known to have serious impacts the global temperatures thus creating a very con-
on ecological balances both globally and locally venient and warm climate. This natural phenom-
even in minute quantities. Completely synthetic enon is known as the “greenhouse effect” and is
compounds of chlorofluorocarbons causing harm the main reason why living creatures could sur-
to ozone layer at the upper atmosphere and also vive and civilizations emerged. The strength of
taking part in the climate change is a good exam- the greenhouse effect is a result of the overall
ple to this. But the most important carbon injec- radiative properties of greenhouse gases existing
tion occurs through CO2 emissions mainly due to in the Earth’s atmosphere. Thus, any change in
fossil fuel burning and partly from the industrial their concentrations necessarily causes a change
processes. In the carbon cycle, photosynthetic in the global climate.
organisms such as the terrestrial plants and Excess of these atmospheric greenhouse con-
aquatic or marine life forms convert CO2 gas stituents that are in fact man-made pollutants add
into organic compounds as they inhale or use to the extremely delicate mechanism of normal
the carbonate/bicarbonate ions in water solutions. greenhouse warming and cause imbalances in
These organics include cellulose, proteins, lipids climate. The global temperature rises because of
(oils), carbohydrates (starch and sugars) that are the additional heat released by more infrared
stored and either used up by the same organism energy absorbed by excess greenhouse gases
for energy or others for food. These compounds quantities. As increase of the greenhouse gas
are the starting points for the food web and part of concentrations result from human activity since
the energy or raw material needs of industrial use. the industrial revolution, this additional global
Photochemical conversion of inorganic car- warming is anthropogenic in nature. In fact
bon occurs with the help of chlorophyll or other there are many other factors affecting the climate,
pigments in the plants. This reaction utilizes too. For example, other anthropogenic constitu-
water and solar radiation of a certain wavelength ents such as clouds containing more sulfates or
(PAR, photochemically active radiation) range. black carbon from several combustion sources
Thus, carbon dioxide is consumed and converted may negatively or positively interfere thus ending
into food and oxygen is produced and released. in local cooling or heating effects. On the other
An opposite mechanism occurring in all living hand, wildfires or volcano eruptions that are nat-
organisms is respiration, defined as the oxidation ural contribute to the cloud cover and might cause
of stored organic carbon to generate CO2 and cooling. So climate change is a very complex
energy for life. All living organisms in the carbon phenomenon varying in global and local extents
cycle respire and generate CO2, although only as well as in seasonal weather expectations.
photosynthetic organisms such as algae and When we study the respective contributions of
plants can fix the CO2 to form organic the greenhouse gases, water vapor and carbon
compounds. dioxide are the ones with highest impacts.
Some of the natural constituents of the atmo- Water vapor by far is the highest impact green-
sphere such as water vapor, carbon dioxide, and house gas; however, it is formed by secondary
much smaller quantities of methane, nitrous reactions. In other words, as the climate gets
oxide, ozone are known as greenhouse gases. warmer, water vapor increases in amount but it
These altogether impart to Earth’s atmosphere is not possible to directly control its increase
the unique property of absorbing part of the infra- without stopping the warming. Next greenhouse
red radiation emitted from the earth. The energy gas that is emitted more and more everyday by
of this captivated part would otherwise be anthropogenic sources is carbon dioxide, CO2.
reflected from the Earth, should the atmosphere It is mainly generated by combustion of fuels
be lacking these gases. This absorbed part of the of fossil origin.
energy is converted into heat at an amount The natural sinks in the carbon cycle for
corresponding to the concentrations of the excess CO2 in the air exist in three broad groups:
Carbon Capture 295 C
photosynthesis by plants (both aquatic and terres- of engineering technology. Alternative tech-
trial, also including the plankton masses), oceanic niques of energy efficiency upgrading, chemical
capture in the carbonate chemistry, and CO2 capture from emissions, changing the way
weathering of silicate rocks. These mechanisms fossil fuels are exploited and burned, catalytically
might be applied in enhanced forms by incorpo- converting CO2 into other compounds, or totally
rating CO2 into the oceanic part of the carbon abandoning the fossil fuels to replace them with
cycle (Rau et al. 2007), or geochemically binding renewable energy forms are next to improving the C
with serpentinic rocks to transform it into carbon- natural sinks of CO2. Also among the fossil fuel
ate minerals (Krevor and Lackner 2011). types, CO2 release per unit available energy is
Although the natural sinks mentioned have ranked from coal to gas forms; so converting into
very big capacity to uphold CO2 in the carbon more gaseous fuels generate less CO2 per unit
cycle, the pace of the chemical and biochemical activity.
reactions at different layers of the oceans and Specifically following options exist for fixing
terrestrial rocks is not as high as the rate of the atmospheric levels of carbon dioxide and
increase of emissions. Therefore, many decades therefore stabilizing the global temperatures
and even centuries is needed until the excess CO2 without damage to the climate and existing life
will eventually be captured only with these natu- on the Earth:
ral mechanisms. Until then increased atmo- 1. Increasing the energy use and production effi-
spheric CO2 concentrations will go on for many ciencies, therefore less use of fossil fuels
decades and even centuries at ever-increasing 2. Switching into less carbon-intensive sources
rates. It is an inescapable result of heavy use of of energy and consumption, using carbon-
carbon containing fuels that were buried under neutral or even carbon-negative resources,
the ground since geological times and it will such as biofuels or other renewable energy
continue costing us the global climate change. forms
To cope with the increasing carbon dioxide 3. Using techniques of carbon capture and geo-
emissions of human activities it is imperative logical storage (CCS)
that the high quantities of CO2 emissions must 4. Using nuclear energy
be controlled. It has been shown that such high 5. Devising more sustainable land-use practices
and ever increasing levels of emissions of CO2 for better management of more CO2 consum-
cannot be neutralized in any natural way within ing plant growth
a short period of time. Thus, the human activities Each one of these different alternatives has its
such as fossil fuel burning for heat and power, own successes, difficulties, and limitations in use.
transportation, industry, waste handling, space Some are commercially available techniques but
heating, and cooling, etc., as well as existing none of them should be expected to replace others
land-use practices are not sustainable. This is completely. For example, biofuels is a good
severed by the deforestation and loss of green method to capture CO2 either from stack gas
areas for competitive uses. emissions or from the air although it has
The significance of added carbon as carbon a number of economic and technological hurdles,
dioxide in the carbon cycle due to energy conver- but it can better be used as a transportation fuel
sion and use, as well as industrial and similar mix or replacement. Energy efficiency upgrading
activities is very high. Therefore, mitigation of is a must-be method but its success will not
CO2 emissions is of highest importance in our completely stop increases in carbon dioxide in
efforts of preserving the natural climatic bal- the air. CCS with its high coverage in technology
ances. Climate can be protected only by limiting and high-energy expenses is a method suitable to
the quantity of anthropogenically emitted CO2. large-scale fossil fuel power plants and some
Therefore, either the CO2 emissions must be industrial stack gases. There are enough fossil
diminished and/or these natural mechanisms fuel resources left to continue with older combus-
must be enhanced to increase their rates by way tion technologies, which will last until some more
C 296 Carbon Capture
time. However, it is not possible to overlook the formation of CO2 in the stack gases (such as
CO2 problem and for the fossil fuels remaining to IGCC-Integrated Gasification Combined
be used carbon capture is the only acceptable way Cycle)
out. The same is true for cement, iron-steel, lime (c) Oxy-fuel combustion techniques and carbon
industries, etc., which are responsible for moder- looping plants
ately high CO2 emissions. Among these five cat- There are several more techniques that can be
egories, nuclear energy is possibly the only one counted among CCS technologies but many of
that must be taken into consideration with utmost them are not in commercialization stage, yet.
care considering the opinions against it. Rather they are in research and development
Yet, the best strategy to stabilize the atmo- stages or just new concepts.
spheric concentration of CO2 could result from (a) In a postcombustion system, the stack gas
a harmonized approach, where sequestration of mixture coming from combustion of the fuel
CO2 into geological formations is combined with with air contains a relatively small fraction of
increased efficiency in electric power generation CO2. For separation, this mixture is contacted
and utilization, careful industrial management, with a liquid solvent that selectively absorbs
increased conservation of energy and resources, the CO2. Nearly pure CO2 can be obtained
use of lower carbon-intensity fuels, and increased upon stripping the CO2 from this absorbing
use of renewable resources. In this section, only solution. Such separation processes are
the third option is evaluated although it must already in use on large scale to remove CO2
strongly be emphasized that for success, options from natural gas.
must be used in combination and with harmony. (b) In a precombustion system, the primary fuel
There are also many questions in mind as to is subjected to gasification by first converting
the safety, economy, and sustainability of CCS in it into a gas by using steam and air or oxygen.
a given application. One answer to the question The conversion ends in a gas mixture
“do we really need a carbon capture technology” containing mainly hydrogen and CO2 that
is that “yes, we do,” and this answer is based on can be quite easily separated out. Remaining
the reality that the fossil fuels will not be totally hydrogen may be used for energy or heat
depleted very soon. But it might be in the form of production.
physically purifying the stack gas CO2, liquefy it (c) Oxy-fuel combustion uses pure oxygen
and convey it to injection sites to be buried under- instead of air to burn the fuel. It results in
ground. An alternative site of injection could be a gas mixture containing mainly water vapor
depleted oil and gas wells. Carbon capture will be and CO2. Water vapor is easily removed from
needed for at least a transient period of time. this mixture and CO2 is obtained.
Besides more fossil fuels will have to be used Directly capturing the CO2 from stack gases of
per specific work as the quality will be more large sources such as coal-fired power plants into
inferior and their extraction will be more and solvents is a postcombustion CCS method. This
more difficult. This will add to the CO2 emission method has many advantages, such as suitability
per unit amount of work to supply the energy use to retrofit the existing power plants. However,
in extraction, refining, and using of these fossil recycling of the solvent is necessary and it
fuels. requires desorption at high temperatures, ending
in subsequent cooling and heating cycles. At the
Methods of Carbon Capture end, nearly pure CO2 gas is obtained which must
Methodologically, this first step of CCS can be be compressed/liquefied for easy transfer to the
grouped into three main categories: injection site. This makes solvent operations
(a) Postcombustion capture of CO2 from com- a high cost step of the CCS because of high
bustion gases amount of energy required. Higher energy
(b) Capturing the carbon from fuels by requirement of the power plant with CCS com-
precombustion methods thus avoiding pared to a power plant of the same size is called
Carbon Capture 297 C
“energy penalty” and it may constitute nearly gas power plants are the smallest contributors of
30% of the power generated at the plant. Also CO2 compared to the other fossil fuels.
the stack gas operations take place in large
absorber reactors, as the combustor stack gas Industrial Carbon Capture
volumes are high. Such difficulties and disecon- Some industries such as glass, lime, cement,
omies as well as higher energy costs of liquid petroleum, oil shale and crude oil refinery, and
CO2 added by extra cost of transfer high distances open-heart iron furnaces and steel mills are C
to the site of injection must be taken into consid- known to emit large volumes of stack gases
eration in deciding for postcombustion CCS. with higher concentrations of CO2. Therefore,
Carbon capture by postcombustion as the first these industries are easier and more feasible to
step of CCS technologies is based on rather apply carbon capture technologies. But it must be
mature engineering knowledge. This is mainly remembered that the emissions of CO2 totally
thanks to the petroleum drilling and natural gas exceed 200 million tons per year from these sec-
cleaning operations that are already using it in tors only contribute about 0.7 per 100 in the
commercial scale for many years. Therefore, global CO2 emissions (Mills 2011). It might
postcombustion method is more applicable to seem unimportant at the first site, but for large
large-scale plants in contrast to many other car- point sources in these sectors it might be feasible
bon mitigation technologies. to apply CCS.
It has been estimated that there are more than In the future, share of CO2 emissions from
8,000 large-scale CO2 point sources in the world. industry may be expected to increase because of
They contribute to two thirds of the overall the hydrogen and syngas production.
anthropogenic CO2 emissions. For any success When CCS in industries are discussed it might
in carbon abatement, it is proposed that in at be added that some solid wastes from metal
least one-third of these point sources CO2 must industries such as iron scrap, aluminum wastes,
apply CCS (Mills 2011). Remaining one-third of iron and coal slags, concrete waste, mineral
CO2 emissions originate from smaller scale industry tailings, fly ash from oil shale burners,
sources, households, transportation etc., which incinerators, etc., capture CO2 from the air. This
are difficult to economically apply CCS. Other capture is either natural and occurs by itself in
carbon mitigation methods are more applicable to piles or in engineered systems.
those diverse sources. In relation to industrial CCS, an alternative
Contrary to the general belief postcombustion capture process based on the chemical reactivity
CCS is not the only CCS method; there are many ofCO2 especially with hydroxide or carbonate
different technological alternatives to it. solutions are exploitable to end in a low cost
For example, coal (or alternatively biomass) can CO2 mitigation method. As an example, the
be burned in fluidized combustion systems that waste metal oxides produced in cement klinker
have much higher thermal efficiency and can manufacture (cement kiln dust) can be hydrated
integrate pollution control techniques more easily and used to absorb CO2.
compared to conventional pulverized coal
burning. CO2 Purification and Reuse
Oil- and gas-fired power plants and large The separation of CO2 from stack gas emissions
industrial or space heating boilers are in the is possible by using traditional or novel tech-
same category as coal-fired power plants from niques such as scrubbing, sorption, membranes,
the CCS respect. But gas-fired or combined cryogenics, and other advanced concepts.
cycle power and heat plants that are firing gasi- After separation, CO2 can also be purified and
fied coal have higher thermal efficiency of con- reused in industry. For purification leading to
version. Also they produce waste gas mixtures reuse of concentrated or purified CO2 the well-
primarily of nitrogen oxides and CO2, which known process of monoethanolamine (MEA)
make them suitable to CCS applications. Natural process exists.
C 298 Carbon Capture
The Enhanced Oil Recovery (EOR): Bene- beds with recovery of methane and sequestration
ficial use of CO2 in oil recovery is another in deep saline aquifers are being investigated.
method involving beneficial use of CO2. This is Both techniques require a thorough estimation
also a type of carbon capture in geological for- of the potential storage capacity, the storage
mations briefly mentioned above. Several pilot integrity, and the physical and chemical pro-
programs are underway in various stages to test cesses that are to be used for injecting CO2 under-
the long-term storage of CO2 in non-oil produc- ground (White et al. 2003). Several projects
ing geologic formations, too. Also known as have been initiated in which CO2 is injected
geo-sequestration, this method involves injecting into deep coal seam or saline aquifers. In spite
carbon dioxide, generally in supercritical form, of some large-scale carbon sequestration
directly into underground geological formations. applications, substantial research and develop-
Oil fields, gas fields, saline formations, ment is needed to reduce the cost, decrease the
unminable coal seams, and saline-filled basalt risks, and increase the safety of carbon elimina-
formations have been suggested as storage sites. tion in these techniques. Therefore, field studies
Algae cultivation: There is ongoing discus- are needed to generate data for discussion of
sion on the economics and effectiveness of algal possible problems such as the safety concerns
carbon capture. Some researchers indicate that that need to be addressed because of the possibil-
algae may constitute a partial solution for carbon ities of leakage to the surface and induced
capture either for an individual point source emit- seismic activity.
ter or as a passive CO2 absorber from the air. Carbon capture on land: This method
Carbon capture from the air: Carbon diox- involves the net amount of CO2 transferred from
ide sequestration is possible from the atmo- the atmosphere into soils and land vegetation.
sphere. This passive kind of mitigation is in fact In other words, it includes both the removal
quite basic in the nature; CO2 is utilized by ter- of CO2 from the atmosphere and reduction of
restrial and aquatic plants, algae, etc., or transfer the CO2 emissions from terrestrial ecosystems
into the ocean to be used by biota or inclusion into into the atmosphere. Latter is due to the respira-
the aquatic carbonate chemistry or chemically tion and CO2 release into the atmosphere when
combined by serpentinic minerals containing sil- trees are cut down, crops are harvested and their
icates to transform them into carbonate formation residues are decayed, and when the soil is dis-
on land. However, when engineered systems with turbed, tilled, or eroded.
enhanced physical and chemical reactions can be A considerable amount of carbon originally
used, it will be another option of carbon capture. contained in soils and vegetation has been
Chemically bound CO2 injection into the released already as a result of deforestation and
oceans: Post capture operations leading to final traditional agricultural practices. The goal of ter-
CO2 sequestration are also new techniques which restrial sequestration is to reduce the amount of
must be carefully investigated and designed. CO2 that is released while enhancing the storage
Among them is the alternative of fixing the car- capacity of soils, meadows and farmlands, and
bon in ionic forms and dispose it into the oceans. trees through changes in forest management
Methods of deep sea or underground injection of practices.
wastes are well known and applied in various Terrestrial plants fix carbon dioxide during the
different fields of engineering. Our knowledge daytime when there is sufficient solar radiation of
from these applications will help the final seques- correct wavelength, but respire all the time to
tration process for safe CCS operations. How- give off some of this CO2 back to the atmosphere.
ever, in each case monitoring of CO2 gas The carbon taken up by the plants is converted to
leakage into the air must be carefully planned plant carbon and either stored or respired. The net
for safety reasons. amount of CO2 in the air varies with the seasons
Injection of CO2 into coal beds and saline as duration of daytime varies. For agricultural
aquifers: Sequestration in deep unminable coal plants, the same goes on but after harvest the
Carbon Capture 299 C
collected and residual biomass decays and con- limit primary production in the oceans, but the
verts to soil carbon and atmospheric carbon diox- darkness and lack of certain nutrients do.
ide. However, although decaying parts of trees Ocean pH is defined by the action of ocean
return partly into the carbon cycle, woody parts water chemistry and physical conditions such as
continue storing the carbon for many years until temperature and pressure in equilibrium with
the tree dies or cut off. Smaller plants participate respective partial pressures of CO2 in air
in a smaller loop of the carbon cycle by returning and water. Although due to buffering ions of C
CO2 back to the atmosphere in a few years, but salinity in the ocean water, there is a natural
trees may store some carbon that is not returned resistance to acidification, but in the long run
to the atmosphere for sometimes a century or oceans might have reduced pH, too, thus “ocean
longer. Cutting the forests interrupts this natural acidification” (Rau 2011). Carbonates in the
cycle and puts carbon stored in the trees back into saline waters form salts of low solubility, such
the atmosphere before the natural life cycle is as calcium carbonate and depending on the pH
completed. Thus decaying takes over and returns and temperature of the system carbonates tend to
CO2 into the atmosphere. Therefore, sustainable precipitate.
forestry with reforestation policies must be
regarded as one of the most promising carbon Enhanced Oceanic Processes for Carbon
sequestration operations. Sequestration
Because of the strength of the natural oceanic
Carbon Capture in the Oceans sink mentioned above, one might think of adding
Absorption of carbon dioxide by the ocean is one certain limiting nutrients into the ocean in order
of the main natural sinks for carbon. Rates of to improve sequestration of carbon through bio-
circulation of carbon through air-sea and sea- logical cycles. Nutrients such as nitrates, phos-
bottom sediment interfaces have important role phates, and silica, as well as iron may cause ocean
in this process. Sequestration of CO2 by the fertilization. Therefore, it was hypothesized in
oceans may occur via physicochemical and bio- the 1980s that one way to increase the carbon
logical processes. Oceanic carbon capture and sequestration efficiency of the oceans is to add
storage occurs in two compartments: upper and micron-sized iron particles (iron oxides or sul-
bottom compartments. Upper compartment is fates) into the ocean.
euphotic, oxic, and rich in living organisms, con- It was expected that the presence of iron in
tain more bicarbonates and nutrients, so is very waters having sufficient quantities of all other
complex compared to the bottom compartment. It nutrients, plankton populations quickly grow,
takes less time for storing the carbon in this layer a phenomenon called “blooming.” This enhanced
in contrast to much longer time required in stor- biomass productivity helps removing significant
age at the bottom. That is really the final seques- quantities of CO2 from the atmosphere via pho-
tration step. tosynthesis. There have been some proposals for
Depending on physical conditions, oceans adding iron in pulses for fertilization of the
may act as both source or sink for atmospheric oceans, for obtaining effective growth so that
CO2. At about 390 ppm by volume of CO2 con- carbon can be sent rapidly to ocean floor.
centration in the atmosphere today, oceans are net Although some large-scale tests were conducted,
carbon sinks. In fact they are presently the largest there are conflicting views about the iron addition
active carbon sinks on Earth, absorbing more for carbon capture. Risks are still unknown and
than one-fourth of the CO2 that is put into the there is no consensus about its benefits and risks.
air anthropologically. The solubility mechanism As the effect of such small-scale phytoplankton
mentioned above is the primary reason driving blooms on ocean ecosystems is unclear, more
this, with the biological elements playing a less studies are certainly needed to evaluate the envi-
significant role. Because of the abundance of ronmental effects of the enhanced ocean capture
inorganic carbon in the ocean, CO2 does not of carbon. There are strong scientific opinions
C 300 Carbon Capture
against the iron addition into the ocean for carbon also proposed that the bicarbonate approach
sequestration (Long and Caldeira 2010). would help control the ocean acidification and
enhance the retention of CO2 in the ocean.
Disposal of CO2 into the Ocean (Ocean Although it seems rather promising, large-
Storage of Carbon) scale oceanographic studies are needed to
Another option for sequestering CO2 is the deep provide data to show the benefits of this
ocean storage. method.
This is a kind of storage of carbon rather than 4. Storage of CO2 in the form of solid CO2/sea-
purely a capture function and therefore also water/CO2 hydrate composite particles
called “ocean storage.” Ocean storage can be obtained from liquid CO2 at depths below
worked out into a geophysical or geophysical- 500 m has been proposed as another method
chemical engineering operation. Several differ- (Tsouris et al. 2004).
ent ideas are under discussion in this field: 5. In oceanic capture methods, adding limestone,
1. In one of the discussions, it is proposed that quicklime, or dolomite at quantities to fix man-
CO2 is injected either by dumping from ships made CO2 in the air is another novel concept.
or by pumping through pipelines into the And mineralization of the additional CO2 in the
water column at depths of 1,000 m or more, form of bicarbonates in the ocean by adding
and let to stay stagnant there. CO2 there is to alkali cations into seawater in engineered reac-
dissolve. This is called “CO2 dissolution” tors at the coastal facilities is another idea.
method. It is suggested that by injecting CO2 6. A conceptual method for long-term oceanic
directly into the ocean instead of the atmo- carbon sequestration is to deposit carbon-rich
sphere, the ocean’s natural uptake processes agricultural crop residue in the form of heavy
are accelerated, thus reducing the global bales into the alluvial fan areas of the deep
warming (NERSC website). ocean basins. These biomass residues in allu-
2. Alternatively, deposits of CO2 are formed by vial fans would cause them to be quickly buried
directly dumping it onto the sea floor at depths in silt on the sea floor, sequestering the biomass
greater than 3,000 m. Because of hydrostatic for very long time spans. Alluvial fans exist in
pressures at these depths, CO2 is denser than all of the world’s oceans and seas where river
water and is expected to form a “lake” that deltas fall off the edge of the continental shelf.
would delay dissolution of CO2 into the envi- As a result, the environmental effects of oce-
ronment. This is also called “CO2 lake” anic carbon storage are either negative or poorly
method. understood. Large concentrations of CO2 in
3. Another idea for sequestration is converting solution may kill aquatic organisms. Another
the CO2 to bicarbonates in the ocean by adding problem is that dissolved CO2 in water would
suitable reagents such as limestone after injec- eventually equilibrate with the free CO2 in the
tion. Although, under natural conditions, this atmosphere, so the storage would not be perma-
process is expected to take millennia, chemi- nent. So any technique of carbon storage must
cally enhancing this dissolution has been involve the elimination of risk of leakage of
thought as a way of sequestering significant stored CO2. Leakage through the injection pipe
quantities of CO2. This would involve bring- is another risk and the injection pipeline must be
ing mineral carbonates and water into direct equipped with special valves to prevent release
contact with CO2-rich waste gas effluent from on a power cut. There is still a risk that the pipe
centralized industrial or municipal sources; itself could tear and leak.
thus, at least partially, consuming the CO2 to Although carbon capture and storage projects
form relatively long-lived cations and bicar- help reducing the CO2 emissions from industries
bonate in equilibrium which would directly or and power plants, additional energy is usually
indirectly be added to the already large pool of required for CO2 capture. This means that more
these ions in the ocean (Rau et al. 2007). It was fuel has to be used, depending on the method,
Carbon Capture and Sequestration (CCS) 301 C
therefore sustainability of methods of carbon cap- Lackner, K. S. (2010). Capturing carbon dioxide
ture are to be evaluated from this perspective, too. from air. www.netl.doe.gov/publications/proceedings/
01/carbon. . ./7b1.pdf
Long, C., & Caldeira, K. (2010). Can ocean iron fertiliza-
tion mitigate ocean acidification? Climatic Change.
Future Directions doi:10.1007/s10584-010-9799-4.
Mill, R. (2011). Capturing carbon, the new weapon in the
Almost anything discussed in this entry has some- war against climate change. New York: Columbia
University Press.
C
thing to do with future technologies, as CCS itself NERSC – Nansen Environmental and Remote Sensing
is a futuristic concept. There are many alternative Center a non-profit research institute affiliated with
carbon capture methodologies encountered in this the University of Bergen. http://www.nersc.no/main/
discussion. But it is almost impossible which one nansen_group/coto/disposal.html
Park, A. H. A., Jadhav, R., & Fan, L.-S. (2003). CO2
of them has more chance than others. mineral sequestration: Chemically enhanced aqueous
One thing for sure is that as the fossil fuels will carbonation of serpentine. Canadian Journal of Chem-
continue to be used for some more time, there ical Engineering, 81, 885–890.
will be a definite need to CCS. And R&D projects Rau, R. H. (2011). CO2 mitigation via capture and chem-
ical conversion in seawater. Environmental Science &
show that there will be successful carbon capture Technology, 45, 1088–1092.
technologies in the near future for use. Definitely, Rau, G. H., Knauss, K. G., Langer, W. H., & Caldeira, K.
business as usual for fossil fuel use with no regard (2007). Reducing energy-related CO2 emissions using
to CO2 mitigation will not be a sustainable way of accelerated weathering of limestone. Energy, 32,
1471–1477.
life on the Earth. Stolaroff, J. K., Lowry, G. V., & Keith, D. W. (2005).
Among the promising technologies for the Using CaO- and MgO-rich industrial waste streams for
future, oxygen separation for use in oxy- carbon sequestration. Energy Conversion and Man-
combustion energy facilities, CO2 absorption in agement, 46, 687–699.
Tsouris, C., Brewer, P., Peltzer, E., Walz, P., Riestenberg,
better solvent processes, membrane processes for D., Liang, L., & West, A. (2004). Hydrate composite
oxygen and CO2 diffusion, solid sorbents, biotech- particles for ocean carbon sequestration: Field verifi-
nologies, cryogenic separation of CO2 from its cation. Environmental Science & Technology, 38,
mixtures can be counted. Future techniques in rela- 2470–2475.
White, C. M., Straziser, B. R., Granite, E. J., Hoffman, J. S.,
tion to power generation using combustion tech- & Pennline, H. W. (2003). Separation and capture of
nologies with high temperature and pressure thanks CO2 from large stationary sources and sequestration in
to newly developing materials are promising, too. geological formations – coalbeds and deep saline aqui-
When R&D projects will start giving results, fers. Journal of the Air & Waste Management Associa-
tion, 53, 645–715.
CCS might prove itself as a low risk, scalable and
therefore very helpful way of controlling the cli-
mate change.
Carbon Disclosure Project, Table 2 Investor CDP – who have to choose the supplier companies they
process and timeline wish to be covered by the analysis.
CDP issues a request for information The 2010 report claims that 44 member com-
(questionnaire) to the largest companies panies suggested 1,402 suppliers to be
1 February globally by market capitalization
approached by the CDP; 710 of those (51 %)
31 May Deadline for companies to respond to
the questionnaire
completed and returned the questionnaire they
September– Findings launched across the globe had received. More than a third of the suppliers
December (597 or 42 %), however, did not send a reply of
September– Consultation phase for amendments to any kind.
November annual questions The report covers the following areas:
November– CDP signatories review and sign the 1. Strategic awareness with regard to carbon
January questionnaire
emissions
Source: https://www.cdproject.net/en-US/Programmes/ 2. Carbon reduction ambition
Pages/CDP-Investors.aspx#timeline, February 07, 2012
3. Reporting capabilities
4. Implementation practices
The report comes to the conclusion that if
companies want to be on top of carbon emissions
Supply Chain program in 2007, which focuses on along their entire supply chain, there is still a lot
carbon emissions in the supply chain of compa- of work that remains to be done. The CDP Supply
nies. Currently, more than 50 of the largest cor- Chain has indeed drawn attention to supply
porations world-wide are members of the CDP chain carbon emissions and their contribution to
Supply Chain. The program can be seen as climate change from smaller, not necessarily
a concerted action of companies, aimed at gath- stock-quoted supplier companies worldwide.
ering and bundling supplier data on carbon emis- The true impact, however, has not yet material-
sions. When reported according to the GHG ized for all of the relevant suppliers.
protocol, supplier carbon emissions fall into the
category of Scope 3 reporting, thus CDP Water Disclosure
complementing the companies’ data. Once With the CDP Water Disclosure Program, the
again, the CDP uses a questionnaire in order to CDP initiated a survey of how companies handle
gather the data, which has been developed and one of the most important resources today: water.
adjusted over 7 years. The survey is undertaken in The idea behind this survey is to – once again –
close cooperation with the member companies increase awareness and transparency and foster
C 306 Carbon Disclosure Project
Carbon Disclosure Project, Table 3 C40 cities one of the most costly and dear resources for
Steering committee Participating corporations around the world. The CDP sends
cities cities Affiliate cities questionnaires to water-intensive industries or
Berlin Addis Ababa Amsterdam companies that are more than average exposed
Hong Kong Athens Austin to water-related risks in their own business or
Jakarta Bangkok Barcelona along their supply chain. The sample currently
Johannesburg Beijing Basel includes:
Los Angeles Berlin Changwon – The largest 500 companies globally (FTSE
London Bogota Copenhagen Global Equity Index Series)
New York Buenos Aires Curitiba
– The largest 100 Australian companies (ASX
Sao Paolo Cairo Heidelberg
100)
Seoul Caracas Ho Chi Minh
City
– The largest 100 South African companies (JSE
Tokyo Chicago Milan 100)
Delhi New Orleans – The largest 500 US companies (S&P 500)
Dhaka Portland While the next report is due in 2013, the latest
Hanoi Rotterdam report from 2011 – backed by 354 investors
Hong Kong San Francisco representing assets of US $43 trillion – sums up
Houston Santiago de results from eight different sectors:
Chile – Consumer discretionary
Istanbul Seattle – Consumer staples
Jakarta Stockholm – Energy
Johannesburg Yokohama – Health care
Karachi
– Industrials
Lagos
– Information technology
Lima
– Materials
London
– Utilities
Los Angeles
Madrid
For the 2011 report, questionnaires were sent
Melbourne to selected companies from the FTSE Global 500
Mexico City and, for the first time, to companies from the
Moscow Australia 100 and South Africa 100. The response
Mumbai rates amounted to 60 %, 41 %, and 46 % respec-
New York tively, providing the CDP with data from 238
Paris companies. Fifty-nine percent of them had iden-
Philadelphia tified water as a considerable risk for their busi-
Rio de Janeiro ness and even more (63 %) had already evaluated
Rome water-related opportunities. Overall, water-
Sao Paolo related issues have not yet been attributed as
Seoul much attention as has climate change: only
Shanghai 57 % of the companies report board-level respon-
Tokyo sibility with regard to water issues while 94 % of
Toronto
the Global 500 (Investor CDP) claim board-level
Warsaw
attention to climate change.
Source: http://live.c40cities.org/cities, February 07, 2012
CDP Public Procurement Program
the sustainable use of water. According to the The CDP Public Procurement Program was initi-
CDP Water Disclosure Program, there will be – ated in 2008 but has received less attention than
by 2030 – a demand for (fresh) water that will the other programs, probably due to its currently
exceed supply by 40 %. Hence, water is or will be narrow geographical focus. The program’s
Carbon Disclosure Project 307 C
Carbon Disclosure 3500
Project, Fig. 1 Number of
responding companies 3050
(Investor and Supply Chain 3000
programs) (Source: Carbon
Disclosure Project 2456
Information Pack (2011),
2500
p. 2) C
2204
2000
1449
1500
922
1000
500 355
235 295
0
2003 2004 2005 2006 2007 2008 2009 2010
objective is the assessment and subsequent reduc- also to decision makers from corporations and
tion of carbon emissions within the supply chain politics, investors, etc. The objective is to provide
of public sector organizations in the UK on the a sound decision base that takes into consider-
national as well as local level. By analogy with ation the risks and opportunities of climate
the CDP Supply Chain, the members of the change and water-related issues. With support
Public Procurement Program can request climate from its financial partners, the information and
change–relevant information and data from their data gathered by the CDP are made accessible to
suppliers in order to quantify supply chain emis- decision makers in the financial community
sions. The latest report – from 2010 – covers 25 through established tools such as Bloomberg Pro-
UK government departments as well as the fessional. Companies and organizations partici-
Greater London Authority (GLA Group) and pating in the CDP benefit from increased clarity
five organizations from the National Health Ser- (following a set structure) as well as transparency
vice (NHS). Two hundred and sixty two listed (setting a good example) with regard to their own
and non-listed suppliers from the UK and abroad emissions, strategies, and measures. They can
took part in the survey. also compare their performance with other com-
Across the Investor as well as Supply Chain panies from the same sector or country and thus
Programs, the Carbon Disclosure Project has gen- establish a benchmark.
erated a large growth in the number of respon- More than 70 people work at the CDP’s head-
dents since its beginnings (see Fig. 1). quarters in London, UK, and offices in Brazil,
The CDP thus holds a large database of cli- China, France, Germany, India, Ireland, Italy,
mate change–related as well as water-related data Japan, Sweden, and USA. Partner organizations
from more than 3,000 companies and organiza- working together with the CDP cover more than
tions world-wide with the reporting numbers 60 additional countries. The CDP is a registered
likely to grow as more samples get included charity and funded by corporate sponsoring, phil-
over time. The information is made available anthropic donations, government support, mem-
not only to the signatories and members, but bership fees, and fees for special projects.
C 308 Carbon Disclosure Project
Nicholas Harkiolakis
Cross-References Business, Health and Technology, Higher
Colleges of Technology, Abu Dhabi, United
▶ Accountability Arab Emirates
▶ Carbon Footprint
▶ Climate Change
▶ Communicating with Stakeholders Synonyms
▶ Disclosure (CSR Reporting)
▶ Greenhouse Gases Carbon cost; Carbon dioxide emissions; Carbon
▶ Institutional Investors emissions; Greenhouse gas footprint
C 310 Carbon Footprint
transactions. Regulating emissions through the individuals to choose what to buy and use. Credit
market is in many ways better to emission penal- allocation is also difficult while at the same time
ties or environmental taxes because it is an incen- important as it reinforces healthy behavior and
tive measure that involves the market. Such further alleviates the problem.
systems by their own nature are more responsive The challenge with carbon footprint is in pro-
to cost and inflation changes than any govern- viding a representative enough term that will
ment could handle. Economic uncertainties allow us to make comparisons and evaluations
though can make it difficult to see which and come up with appropriate decisions and
approach works better in the long run. policies to control its damaging effect. Measuring
total CO2 emissions is difficult as there are con-
tributions from different sources and modes like
Key Issues direct contributions from heating and transporta-
tion and indirect contributions from the genera-
The carbon footprint metric was developed as tion of electricity and the production of goods and
a response to the need for quantifying the services. Some rough estimates indicate that
atmospheric pollution that resulted from human about a third of the emissions is due to transpor-
activity. Measurements allow for critical assess- tation, a third due to heating and electricity in
ments and the design and implementation of homes and the remaining for everything else.
countermeasures to combat pollution. These distributions are quite significant as they
There are two major aspects of any type of allow policy makers to distinguish on the magni-
pollution: tude of the sources of pollution and develop
• How is the pollution taking place and what is policies with the highest possible impact.
the extent of it? In the case of CO2 pollution, Despite the appeal and pressure from the
as we saw before, a major challenge comes media and the public, a precise definition has
from identifying the sources, we will include not been reached yet at least at the academic
in our calculations and the methodology we level. The difficulty with defining the carbon
will use to calculate the metric. footprint stems from the way we measure and
• Who needs to react and what actions need to quantify the metric. Some calculations include
be taken to reduce it? Responsibilities fall on only direct carbon dioxide (CO2) emissions of
both producers and consumers. For produces, greenhouse gas emissions, while others also
it is probably more clear-cut as they have include carbon-based chemical-like methane.
control of the production or service process The sources of production and the units of mea-
and can implement changes. In addition, it is surement are another area of debate. While the
easier to enforce policies through appropriate majority of CO2 comes from burning fossil fuels,
legislation or through market incentives and there are contributions from other sources like
pressures. Being seen as eco-friendly, emissions from soils.
businesses can increase their popularity and One also wonders if a metric focusing only on
acceptance by the public. The challenge with carbon realistically represents the magnitude of
businesses is whether we also want to assign atmospheric pollution, we observe and whether
responsibilities for their downstream the inclusion of other pollutants like nitrogen
processes, or we want to impose responsibili- substances needs to also be part of the
ties for their upstream processes (procurement metric. And should we only include substances
decisions) including the choice of suppliers. with a greenhouse warming potential or allow for
If we go along that line, we also need to decide other pollutants like carbon monoxide (CO) to be
how far upstream or downstream we extend included. CO in particular is a chemical that not
the sphere of responsibilities. only directly damages the environment and our
For consumers, the responsibilities are health but also gets converted to CO2 through
difficult to enforce, and it is primarily up to the chemical processes in the atmosphere further
Carbon Footprint 313 C
impacting CO2 levels. Additional considerations role in the greater community they serve as well
include the possibility of incorporating every- as their impact on all aspects of human life. Busi-
thing that contributes to CO2 throughout the life ness decision makers are bound by the image and
cycle of a product like the involved upstream obligations of their organization to act in the inter-
production processes, the on-site emissions at est of the public and in addition to providing jobs
the time of the measurement, and the contribu- and wealth for their communities to ensure the
tions from the follow-up recycling and degrada- longevity of the environment and our living con- C
tion processes. ditions. Considering carbon footprint reduction
A case in point is the carbon footprint practices instills in businesses an ethical perspec-
contribution in the 2010 report on the National tive and consideration for the future of the people
Footprint Accounts (Global Footprint Network) and the planet. In conclusion, we should keep in
that included in the calculations the CO2 mind that the issues reflected and addressed by
produced for the supply of energy for all purposes a carbon footprint metric concern both producers
and not just heat and electricity. In calculating and consumers. This is vital in assigning respon-
national footprints, contributions from imports sibility and getting both to collaborate in reducing
of energy and a country’s contribution to interna- our overall carbon footprint.
tional transportation (as a fraction of the
countries imports) were also considered.
Cross-References
community and your personal data is not revealed to vehicle availability, lower cost of fuel, aging
anyone until you choose to. You then finish your population, higher education levels, less children,
listing with commuting times and some optional
comments such as your musical preferences, possible changes in workforce composition with increasing
detours, or further contact details. If you fit some- numbers of female participants, increased emphasis
one’s search criteria, your marker will appear on the on road building, poor governance and
map along with your commuting times once they management of public transport, and, interestingly,
click on it, and people can contact you through the
portal’s email system without disclosing your email increasing suburbanization. On the other hand,
address to work things out. social capital studies have found an increasing
propensity to carpool between neighbors who are
Public policy needs to consider incorporating of a same race and, as the European Union studies
informal arrangements such as carpooling as part indicate, an inclination to accept carpooling where
of an integrated attempt at alleviating issues with support exists within the community in the form of
growth in transport, economic growth, environ- free or cheaper car parking and other preferential
mental concerns and life satisfaction. Encourage- treatment. In fact, the ICARO study suggested the
ment of carpooling can be achieved, as it is in some adoption of a universal logo signifying carpooling
cities, by allowing carpool vehicles preferential in the form of a car with two occupants and
access to freeways and car parks and in establishing the symbol 2+.
exclusive lanes for carpool vehicles, while New ways of adapting this simple but effec-
using restrictive measures such as imposing tive private arrangement between individuals to
fines on one occupant vehicles traveling in minimize any disadvantages may lead to greater
such lanes. See examples with the FasTrak exper- adoption of carpooling, reducing the need for
iment in San Diego California and Salzburg building more freeways for large suburban tran-
testet Fahrgemeinschaften demonstration project. sit systems. With changes occurring in individ-
Private organizations can also play a vital role in uals’ value systems and growing concern for the
encouraging the use of carpooling. For example, environment and community, the likelihood for
people are more likely to carpool when they can be carpooling to increase in usage is considerable.
assured of getting a ride on the return journey. Organizations whose primary concern is with
However, with employees on shifts, or who may the environment are adopting strategies to assist
become sick at work, this cannot always be with this change in values. HelpSaveEarth.org
guaranteed. To overcome this inhibiting factor, and the global Transport Knowledge Partner-
Boots, a major chemist in the UK, encouraged ship are both examples of global organizations
use of carpooling by offering a guaranteed ride that assist in promoting carpooling for work-
home as an inducement to staff at its headquarters places. While more education and information
in Nottingham. It was found that while this encour- at a local level is needed to foster the usage of
aged carpooling from a staff of 7,500 people, it carpooling, organizations that raise environ-
required little extra expense as the backup of mental awareness are assisting in this process.
a guaranteed ride home was only used on a very Clearer understanding of the roles and responsi-
small number of occasions. bility of government and organizations, and
smoother integration between the institutional,
legal and cultural frameworks, driven by well-
Future Directions researched and clear public policy guidelines,
will assist in achieving clarity. However, it
For over a 20-year period, there has been should always be integrated with the overarch-
a significant decline in the use of carpooling ing directions of future transit policy.
in both the USA (1970–1990) and Australia Carpooling should never be encouraged where
(1976–2006). Research has linked this to various it would draw existing public transport users
causes, largely economic factors, but also away from public transit and so risk making
socio-economic reasons such as the increase of public transport less viable and supported.
Carroll, A.B. 317 C
Cross-References
Carroll, A.B.
▶ Carbon Emissions
▶ Carbon Footprint Samuel O. Idowu
▶ Design for Environment London Metropolitan Business School, London
▶ Eco-efficiency Metropolitan University, London, UK
▶ Ecological Footprint C
▶ Government (Role in Regulation, etc.)
▶ Green Workplace Basic Biographical Information
▶ Greenhouse Gases
Archie B. Carroll is professor emeritus of
management in the Terry College of Business,
University of Georgia, Athens, Georgia, United
References and Readings
States of America. He served also as part-time
Charles, K. K., & Kline, P. (2006). Relational costs and director of the Nonprofit Management & Com-
the production of social capital: Evidence from munity Service Program for over 10 years,
carpooling. The Economic Journal, 116, 581–604. a position he currently holds.
Oxford: Blackwell Publishing.
Professor Carroll spent the bulk of his academic
Evans, J. J., IV, & Pratt, R. H. (2005). Traveler responses
to transportation system changes. Ch 5: Vanpools and career as a tenured faculty member in the Terry
buspools (TRCP Report 95). Washington, DC: Trans- College of Business, University of Georgia. He
port Research Board. was on the full-time faculty from 1972 to 2005
Ferguson, E. (1997). The rise and fall of the American
and continued part-time for 6 years more. During
carpool: 1970–1990. Transportation, 24, 349–376.
(2011) Global Transport Knowledge Partnership. http:// this time, he rose among the ranks from assistant
www.gtkp.com/. Accessed 2 Oct 2010. professor to full professor and was awarded the
(2012) HelpSaveEarth.org. http://www.helpsaveearth.org/ Robert W. Scherer Chair of Management and Cor-
custom_commuting_report.asp. Accessed 16 Oct 2010.
porate Public Affairs beginning in 1986 and con-
Mees, P., Sorupia, E., Stone, J. (December 2007). Travel
to work in Australian capital cities, 1976–2006: An tinuing until his retirement. During this time, he
analysis of census data. http://www.abp.unimelb.edu. wrote books, research articles, directed doctoral
au/aboutus/pdf/census-travel-to-work-1976-2006.pdf. dissertations, served on graduate committees;
Accessed 16 Oct 2010.
spoke publically to business, government, and
Millard-Ball, A. (2005). Car-sharing: Where and how
it succeeds (TCRP Report 108). Washington, DC: nonprofit groups; and consulted with numerous
Transport Research Board. organizations throughout the United States and
Monash University Carpool Service. http://fsd.monash. elsewhere. He also served as associate dean of
edu.au/travel-parking/parking/carpooling-new-matching-
the college (1979–1982) and department head of
service. Accessed 3 Oct 2010.
OECD Publication (2002). Road Travel Demand: Meeting the Management Department (1995–2000). For
the Challenge; see also World Road Statistics 2010, a decade beginning in 2001, he served on the
Data 2003–2008, International Road Federation. University of Georgia GLOBIS Study Abroad
Sammer, G. (1999). Conclusions on ICARO-lessons from
Program Faculty teaching business ethics to
the ICARO-project. International conference increasing
car occupancy through innovative measures and students in Verona, Italy.
technical instruments, Leeds (UK), 22 Mar 1999; He was born in Jacksonville, Florida, and
See report summary. ftp://ftp.cordis.europa.eu/ spent 8 years (1956–1963) living in the Panama
pub/transport/docs/summaries/urban_icaro_report.pdf.
Canal Zone where his father was employed,
Accessed 16 Oct 2010.
Transport Research Knowledge Centre funded by the Euro- before returning to the states. Dr. Carroll received
pean Commission’s Directorate General for Mobility and his three academic degrees from The Florida
Transport under the Sixth Framework Programme for State University (Tallahassee, Florida): BS, Per-
Research and Technological Development. http://www.
sonnel Management, 1965; MBA, Organization
transport-research.info/web/. Accessed 10 Oct 2010.
Vuchic, V. R. (2007). Urban transit systems and technology Management, 1966; Ph.D. in Business Adminis-
(pp. 503–506). Hoboken: Wiley. tration/Management and Organizations, 1972.
C 318 Carroll, A.B.
Cross-References
Cause-related marketing is deemed to incorpo- an attempt to align societal and commercial inter-
rate philanthropy into the marketing strategy of ests. Companies who engage in, or intend to
company therefore serving societal as well as practice, corporate social responsibility normally
corporate interests. Compared to philanthropy, seek to leverage their effort and investments in
cause-related marketing particularly and visibly CSR by appealing to a broad audience. Yet, cor-
associates the firm’s contribution with its corpo- porate social responsibility is a complex con-
rate brand, product brands, or particular products struct, which in practice often remains elusive to
and services. At the same time, cause-related many consumers and managers alike. As Brønn
marketing shifts emphasis to communicating the and Vrioni (2001) put it, “the normative universe
company’s support for a cause and engaging cur- is large, diverse, often vague, uncertain of rele-
rent and potential customers actively and emo- vance or application, difficult to customize.”
tionally in a company’s benefaction in order to Managers and practitioners have found it benefi-
foster a bond between brand and customer. cial to pin down the concept of corporate social
Through a cause-related marketing activity, com- responsibility by reifying a company’s social
panies often attempt to engage customers, for responsibility as a material contribution to
instance, by making the firm’s support condi- a specific cause. Cause-related marketing is char-
tional upon purchases of the firm’s products and acterized by cause specificity, hence reducing the
services. abstract realm of corporate citizenship to one
Cause-related marketing is commonly dedicated societal cause. This greatly simplifies
conducted as promotional campaign. A promo- and materializes the societal responsibility of
tional campaign is a series of mass or personal a company. It also localizes corporate social
communication messages that share a single idea responsibility in the common organizational
and theme and that appear in different media structure of a commercial enterprise by assigning
within a specific time frame. Although many the tasks of planning and implementing a CSR
marketing campaigns throughout the twentieth campaign to the marketing department.
century fall under the definition of cause-related The effectiveness of cause-related marketing
marketing, the expression “cause-related market- as a communication tool for corporate social
ing” is commonly attributed to the US financial responsibility results from the following: (a)
services provider and credit card issuer American cause specificity, (b) targeting, and (c) customer
Express, whose marketing department coined this involvement. The essential goal of cause-related
term in 1983 to denote a campaign which donated marketing is to associate a company with a cause
funds to a number of different nonprofit organi- in the minds of a targeted audience. The associa-
zations and causes, most notably the Statue of tion of a company with a cause has two funda-
Liberty renovation (Adkins 1999). Though mental benefits. Firstly, it is an instantiation of
American Express had established a philan- societal responsibility without the obligation to
thropic foundation much earlier in 1954 as change operational processes and, secondly, it
a vehicle for grant making, the new initiative creates company-customer fit. As mentioned
aimed at connecting its customers directly to above, the abstract nature of corporate social
a charity. The amount of the donation was deter- responsibility makes it difficult for consumers to
mined by the number of new applications to the discern. The use of cause specificity within the
payment card and the number of transactions CSR of a company illustrates a company’s efforts
within a certain period of time. Many companies and is, therefore, easier for a broad audience to
have introduced similar campaigns since. comprehend compared to the abstract identity of
Conceptually, the designation of cause-related a company of being a “good” and responsible
marketing has been broadened beyond just dona- corporate citizen. Cause-related marketing
tions to a charity to encompass other marketing answers the question about how a company is
schemes that follow the same theoretical ratio- doing or being “good.” Cause-related marketing
nale. The concept of cause-related marketing is campaigns illustrate and reify the social
Cause-Related Marketing 323 C
responsibility of a corporation enabling it to corporate brand. Caring for a cause creates rele-
appear responsible while keeping all organiza- vance and identification at least for those con-
tional processes unaffected. Since cause-related sumers who care for the same cause. How much
marketing campaigns can be – and mostly are – a consumer cares for a specific cause is denoted
completely separated and independent from the as cause affinity. Cause-related marketing acts as
day-to-day business of a firm, this “CSR effort” mediator from consumer cause affinity to com-
can be contained in the marketing department and pany affinity which is expected to increase pur- C
run with a clear cost-benefit plan and even with chase intention and loyalty. The higher the cause
a small marketing budget. There is no need to affinity of a consumer the more relevant and
restructure (▶ Socially Responsible Enterprise therefore successful the cause-related campaign
Restructuring) or change any internal processes. is expected to be. Cause-related marketing is
Cause-related marketing campaigns are often often indeed being used to target specific demo-
even designed to fit seamlessly into existing inter- graphic or lifestyle segments of the market.
nal processes. For instance, the “Change for Mekonnen et al. (2008) introduce the term
Good” campaign initiated originally by British “affinity marketing” to emphasize the aim to
Airlines in cooperation with UNICEF builds on appeal to a specific group of customers and to
the existing service of flight attendants. During become an identifier of that group. A cause helps
in-flight announcements, passengers are asked to brand marketing to stress the fit between a certain
hand over any leftover loose change of foreign customer group and the brand. Affinity marketing
currency for which they have little use (Pringle has long-term and discrete group orientation,
and Thompson 1999). The change is then handed rather than short-term and mass-market
over to UNICEF. The cost for the airline is mar- orientation.
ginal. In this case, and also in the case of the It has been suggested that another objective of
American Express type of cause-related market- cause-related marketing is to thwart negative
ing described above, a firm’s donations is really publicity in case of a product-harm incident or
a donation of the customer or a direct result of to compensate for negative public attitudes
a purchase of a product or service. The company toward an industry, that are costly to avoid, such
acts merely as the facilitator for the cause. The as the damage to the environment by oil explora-
customer feels that he himself donated to the tion or the animal testing of pharmaceutical firms.
cause. Customer identification with a company leads not
The second essential benefits of a cause- only to more favorable consumer evaluations but
related campaign is fit or congruence between negative events are also expected to be treated
a company and its customers. Company- with more lenience.
customer congruence describes how much Another secondary benefit of cause-related
a company is perceived as sharing similar char- marketing is employee motivation or internal
acteristics with a customer. Bhattacharya and Sen marketing. Employees can be conceptualized as
(2003) view deep meaningful relationships to internal customers. The endorsement and organi-
consumers as the essential aim of a company to zational support of a cause by the company can
create brand loyalty. In this view, a company or increase social identification of employees with
brand can overcome buyer disenchantment and their company’s brand foster the bond between
its own detachment from its consumers by employees and corporate brand. Cause-related
appearing relevant and part of a community marketing campaigns are often more invigorating
with similar interests. Consumer identification to the organization because employees have more
with companies also helps the consumer satisfy opportunities to actively participate in the cam-
one or more key self-definitional needs. paign, for instance, as fund-raiser or by actively
Supporting the same cause creates opportunities soliciting customers for the cause during a service
for a consumer to identify with a corporation and encounter. Sometimes cause-related marketing
as a result grow affection and loyalty to the campaigns are even explicitly communicated as
C 324 Cause-Related Marketing
having been initiated or are organized by the cause affinity is a measure of the size of the
company’s employees instead of the marketing market segment that is most effectively reached.
department. Normally, companies select causes that are gen-
erally liked. However, causes can be also be
controversial and disliked by a part of the popu-
Key Issues lation such a religious causes or societal causes
that infringe upon religious doctrine (e.g., abor-
As a promotional tool, the effectiveness of cause- tion, coeducation, women’s rights). Negative
related marketing is judged by the degree of cause affinity can hurt a brand’s image and it
achievement of the marketing objectives of the has to be assessed by a company whether the
campaign. Cause-related marketing is normally positive effects in the market segment with pos-
targeted at consumers although business-to- itive cause affinity can make up for the negative
business cause-related marketing exists, for brand impression consumer with negative cause
example, campaigns initiated by business consul- affinity might acquire.
tancies or advertisement agencies to raise funds Believability is considered an important
among corporate clients. The response of con- moderator for the success of cause-related mar-
sumers to cause-related marketing campaigns is keting campaigns. Consumers could recognize
the main research objective in the area of cause- cause-related marketing as a sales tactic and attri-
related marketing. bute it to ulterior motives of a company.
The effectiveness of cause-related marketing A company can appear to merely exploiting
rests on its relevance, believability, and the a cause, a form of “greenwashing,” instead of
impact on consumer purchasing decisions. Rele- fulfilling their social responsibility, which can
vance is related to the degree of consumer cause lead to consumer resentment and adverse conse-
affinity and the prevalence of cause affinity in the quence for the brand’s image. For instance, dona-
population. A consumer’s cause affinity is the tion campaigns for disaster victims are typically
concept of how strongly a consumer associates criticized in public as misappropriation of
with a cause either by actively supporting the a tragedy for a branding opportunity. Conse-
cause or just by liking it. Low cause affinity quently, the strength and direction of consumer
leads to indifference of a consumer toward the reaction to a cause-related marketing campaign
cause and lowers the attention for a cause-related depends on the pervasiveness of consumer skep-
marketing campaign. However, for consumers ticism, the quantity of support (e.g., the amount
with low cause affinity, support for the cause donated) and the fit between the company and the
can still be a signifier for a company’s corporate cause (Barone et al. 2007). Cause-related market-
social responsibility. Consumers with high cause ing suffers from consumer skepticism toward
affinity are expected to react much stronger to advertisement claims in general and the per-
cause-related marketing campaigns and therefore ceived upsurge of cause-related marketing cam-
are normally the targeted market segment in paigns after product-harm crises (Webb and
a cause-related marketing campaign. Since con- Mohr 1998; Brønn and Vrioni 2001). The believ-
sumers with high cause affinity are genuinely ability of a company’s social responsibility is
interested in the cause itself, a cause-related mar- suggested to increase with the perceived related-
keting campaign offers them another opportunity ness of a company’s business to the cause that it
to help the cause. By purchasing and supports (or the “fit” between company and
recommending the brand, consumers can feel cause). This fit is commonly defined as the “per-
that they have done something for the cause. It ceived link between the company’s image, posi-
has also been found that consumers with high tioning, target market, and the cause’s image or
cause affinity are more forgiving in case of neg- constituency” (Varadarajan and Menon 1988).
ative media events such as a product-harm crisis A high cause fit evokes the image that the com-
(Sheik and Beise-Zee 2011). The prevalence of pany supports a cause not only for promotional
Cause-Related Marketing 325 C
reasons but because it is serious about the social beginning with successful restoration of the
issue. For instance, since most body care products Statue of Liberty in New York City, it is unknown
are tested on animals for their allergic effects, what cause-related marketing campaigns have
campaigning against animal testing is credible really contributed to more general societal
for a retailer such as Body Shop. A low fit, in causes. Statistics on the monetary contributions
contrast, implies that there are no reasons related of cause-related marketing to nonprofit organiza-
to the product or company context that can tions are rare and their reliability unknown. C
explain why a company supports the cause indi- According to the consultancy IEG, a subsidiary
cating ulterior motives of the company. A low fit of WPP, one of the largest advertisement agen-
between cause and company is expected to cause cies, US companies spent around US$1.5 billion
suspicion in the market, though customers with on cause campaigns in 2008, up from US$828
a high cause affinity may be less concerned about million in 2001. This compares to US$11.5 bil-
the cause fit. lion US companies spend in the same year on
Business organizations emphasize that cause- sports sponsorship, and an estimated total adver-
related marketing is of mutual benefit for the tisement spending of between US$130 and US
company as well as for the cause. Both claims $150 billion, which means that US companies
are not universally supported by evidence. spend around an equivalent of 1 % of their adver-
A growing body of studies aims at measuring tisement budgets on cause-related campaigns.
the commercial benefits of cause-related market- Charities that tap into the source of cause-
ing for a company. Case studies have found that related partnerships with corporations realize
sales, awareness levels, and loyalty have indeed that most corporations view the success of
gone up during cause-related marketing cam- a campaign in terms of increased sales or other
paigns. Yet, cases exist of successful and less commercial objectives. As a result, they are
successful cause-related marketing campaigns. pressured to deliver as much business back to
Statistical evidence is more difficult to produce. the companies in order to maintain the relation-
Surveys usually indicate that a large fraction of ship. This relationship between profit and non-
consumers (typically around 90 %) state that they profit is likely to affect the way charities work as
would prefer a brand that is associated with well, because it means that nonprofit organiza-
a cause. However, surveys are inherently tions are not only pressured to presenting them-
unreliable due to the so-called social desirability selves in order to raise funds from a population
bias which renders it difficult to measure the true for a cause but they are then also obliged to
willingness to purchase products or services that present the cause in such a way as to generate
are promoted through cause-related marketing sales or enhance brand equity of a commercial
campaigns. Most respondents hold a positive atti- corporation. From this, the question arises
tude toward or claim to support a cause if it is whether cause-related marketing really is intrin-
a socially desirable cause. In reality, however, sically part of corporate social responsibility or
many consumers fail to act upon their stated under which conditions cause-related marketing
preferences. In order to statistically validate the can be considered a genuine CSR practice. On the
effect of cause-related marketing campaigns, it other hand, one could argue that cause-related
has to be shown that in a representative sample, marketing is an excellent example of how both
the sales profits or brand equity (depending on the commercial and societal interests can be pursued
marketing objective of the campaign) are higher at the same time. One of the fundamental criti-
during the campaign than before (after deducting cisms against corporate social responsibility is
the cost of the campaign). that for-profit corporations need to concentrate
On the other hand, many charities have tre- on profitability and any deviation from this objec-
mendously benefited financially from donations tive weakens their competitiveness. Cause-
through cause-related marketing campaigns. Yet, related marketing is a model that “aligns” private
despite successful cases of accomplishment, rents and welfare at least for a dedicated cause.
C 326 Cause-Related Marketing Campaign
Introduction
Synonyms
The CRT Principles were the joint product of
Global codes of conduct; Global ethics guide- collaboration between the Caux Round
lines; International ethics principles, standards, Table and the Minnesota Center for Corporate
and guidelines Responsibility (MCCR). To appreciate how the
principles came into existence, it is necessary to
briefly understand each of these two organiza-
Definition tions and the paths they took that brought them
together.
The Caux Round Table (CRT) Principles for In the 1980s, the Caux Round Table (CRT)
Business articulate a worldwide vision for ethical was founded by senior Japanese and European
and responsible corporate behavior. As a set of executives who were concerned about trade fric-
seven core principles, they serve as a foundation tions that were occurring in the automotive and
for ethical action for business leaders across the electronics industries. In an effort to mediate the
globe. The CRT Principles are a statement of disputes that arose, the founding members agreed
aspirations that seek to communicate a world to meet at a hotel in Caux, Switzerland. The site
standard against which business social and ethi- was chosen to be a neutral site where the execu-
cal behavior can be gauged. tives of the competing companies could get to
The CRT Principles for Business were created know one another so that they could better appre-
through a sophisticated, collaborative process in ciate one another’s views on the issues at hand.
1994. The Principles were developed by business The initial group was approximately 20 execu-
leaders and, therefore, carry considerable credi- tives who agreed to meet each year at the Caux
bility in the business community. They are the location and to have a second meeting annually
end result of a process that sought to identify rotating between the world’s major trading
shared values, reconciling differing values, and regions.
concluding in a shared point of view about busi- By the early 1990s, the group’s objectives had
ness behavior that would be deemed acceptable been achieved. Much of the trade tension had
to and honored by all. dissolved, and the CRT began thinking about
There are seven core CRT Principles which other missions it might pursue. During the years
include the following: of meetings of the CRT, the members would
1. Respect Stakeholders Beyond Shareholders often get together in the evenings and discuss
2. Contribute to Economic, Social, and Environ- the great issues of the day. They often wondered
mental Development what roles CEOs ought to be playing in
3. Build Trust by Going Beyond the Letter of the addressing these world issues.
Law Independent of the activities of CRT, a group
4. Respect Rules and Conventions of responsible business executives in Minneapo-
5. Support Responsible Globalization lis, Minnesota, had founded an organization in
6. Respect the Environment 1977 which they officially called the Minnesota
7. Avoid Illicit Activities Project on Corporate Responsibility (MPCC).
C 328 Caux Round Table Principles
In the 1970s, the group focused on the theme of owners/investors, suppliers, communities, and
corporate citizenship, and by the 1980s, it was competitors. Their principles were copyrighted
thinking in terms of responsibilities to busi- in 1992. But, as Charles Denny later observed,
nesses’ stakeholders – customers, employees, the executives realized that they could have an
shareholders, suppliers, and communities. important impact within the United States, but
The business leaders in the MPCC renamed they needed an organization that was embedded
themselves the Minnesota Center for Corporate in the international business world to carry forth
Responsibility (MCCR). Under the leadership of their message around the globe. Their fortuitous
Bob MacGregor, MCCR brought together connection with the Caux Round Table turned out
a group of business and academic leaders who to be just the linkage they needed.
were deeply interested in the importance of busi- In 1992, Charles Denny, who had been
ness ethics and integrity. The newly named center a member of the Caux Round Table, along with
decided to formulate what would be called the Bob MacGregor, representing the Minnesota
“Minnesota Principles,” a set of ethical guide- Center, arranged to present the Minnesota Prin-
lines, or code of conduct, that they thought ciples at one of the annual Caux meetings in
would be valuable to businesses as they thought Switzerland. Denny reported that the Caux mem-
about their responsibilities to the world in which bership was enthusiastic about their presentation
they operated. In 2000, the Minnesota Center and to their proposal that the Caux Round
took on a new name, the Center for Ethical Table adopt the Minnesota Principles.
Business Cultures (CEBC). The Caux group concluded that a major revi-
Charles M. Denny, Jr., CEO of ADC Telecom- sion of the Minnesota Principles would be neces-
munications was one of the early supporters of sary before it adopted them so that they could
the principles, and MacGregor and Denny integrate the perspectives and philosophies of the
became the prime movers in the development of Asian members to the principles. The Minnesota
a cadre of executives and academics to formulate Principles had been written largely from
the ethical guidelines. They wanted the principles a Eurocentric and Judeo-Christian perspective in
to be both pragmatic and universal in the sense which the focus had been on the rights and dig-
that they could be applicable around the world in nity of individuals. The Asian perspective, how-
spite of cultural differences that might exist ever, emphasized the idea of communitarianism
among the world’s different trading regions. which believed in the subordination of the indi-
The business leaders enlisted the support of vidual to the group or the common good.
Professor Kenneth E. Goodpaster, who had come The chair of the CRT at the time of these
to the University of St. Thomas in Minneapolis in developments was Ryuzaburo Kaku, who was
1989 to fill the Koch Endowed Chair in Business CEO and chair of Canon Corporation, the camera
Ethics, to commit the principles to paper. and office equipment company. Among his many
Dr. Goodpaster had developed the ethics curric- achievements, Kaku was known for adopting the
ulum at the Harvard Business School and had also term “kyosei” to express the concept of “working
taught ethics and philosophy at Notre Dame. and living together for the common good.” In
According to David Koch, who founded the a quest to produce a document that would be
endowed chair which was filled by Goodpaster, satisfactory to all, Charles Denny worked dili-
the professor was their top choice to draft the gently to revise the Minnesota Principles to incor-
principles. porate the philosophy of the common good.
The Minnesota Center decided to name the Chairman Kaku approved of his revisions and
document they produced “The Minnesota Princi- the document was presented to the group and
ples: Toward an Ethical Basis for Global Busi- the Caux Round Table Principles were adopted
ness.” The Minnesota Principles were divided with a unanimous vote of the group.
into five general principles and six stakeholder In the Introduction to the CRT Principles, it
principles, embracing customers, employees, was stated that they were intended to be ethical
Caux Round Table Principles 329 C
norms for acceptable business practices. The trust Principle 3. Respect the Letter and the Spirit
and confidence that is needed to sustain free mar- of the Law. This principle recognizes that some
kets would be reflected in ethical businesses prac- business practices may be legal but not necessar-
tices. It was argued that the singular pursuit of ily fair to all stakeholders. Therefore, it is
profits, with no concern for other stakeholders, recommended that businesses strive to honor the
would eventually lead to business failure and spirit as well as the letter of laws. This means that
sometimes to regulations that were counterpro- business conduct may have to operate at levels C
ductive. Therefore, it was necessary for business beyond the minimums required by law. In this
leaders to display ethical leadership if they pursuit, critical and necessary traits such as truth-
wanted to sustain prosperity. The introduction fulness, transparency, and promise keeping will
also asserted that a moral compass was needed be required.
by the business community and that it could not Principle 4. Respect Rules and Conventions.
just rely on traditional measures of profitability. Responsible businesses strive to emphasize fair-
There are seven core principles in the Caux ness and equality and respect local cultures and
Round Table’s conception of responsible busi- traditions found in the communities in which they
ness conduct. The principles were anchored in operate. They also value relevant national and
three ethical bases. These underpinnings international laws, regulations, and conventions.
included (1) the notion of responsible steward- Principle 5. Support Responsible Globaliza-
ship, (2) living and working together for mutual tion. Open and fair multilateral trade should be
advantage, and (3) respect and protection of supported. In the pursuit of fair global commerce,
human dignity. The CRT Principles are responsible businesses will support the reform of
supported by detailed Stakeholder Management domestic rules and regulations that obstruct this
Guidelines, and these will be discussed after cov- objective.
erage of each of the seven core principles. Principle 6. Respect the Environment. This
Following is a presentation and summary principle addresses the natural environment in
explanation of each of the seven core principles which businesses operate. The idea here is that
as set forth by the Caux Round Table. These businesses will protect and improve the environ-
principles were reviewed and updated in 2009 ment and steer clear of wasteful uses of natural
and 2010. resources.
Principle 1. Respect Stakeholders Beyond Principle 7. Avoid Illicit Activities. To be
Shareholders. Responsible businesses are responsible, businesses do not engage in or
expected to value not just the stockholders but excuse corruption, bribery, money laundering,
other stakeholders as well. Important stake- or other illicit activities. Responsible businesses
holders of business include, but are not limited also avoid transactions that are linked to or
to, its customers, employees, suppliers, competi- supported by terrorist activities, drug trafficking,
tors, and the broader community. Responsible or any other such questionable activity.
businesses are expected to respect the interests In support of these seven core principles, the
of these stakeholders and to deal with them fairly Caux Round Table supplements them with more
and honestly. detailed standards for interacting with key stake-
Principle 2. Contribute to Economic, Social, holder groups. These are referred to as Stake-
and Environmental Development. Economic holder Management Guidelines. The primary
development is needed in societies in which busi- stakeholders are those constituent groups which
nesses aspire to succeed. Therefore, responsible are critical to the success and sustainability of the
businesses will invest in the economic, social, business enterprise. These stakeholders include
and environmental sectors of these societies. the following groups that contribute in the ways
These investments will improve societies through indicated:
sensible use of resources, fair competition, and • Customers purchase goods and services and
technological innovation. provide cash flows for the businesses.
C 330 Caux Round Table Principles
• Employees produce the goods and services. wealth; and to respect the views, complaints,
• Owners and other investors provide the and resolutions filed by shareholders.
capital for the business and any other needed Suppliers. Responsible businesses treat their
funds. suppliers and subcontractors with mutual
• Suppliers provide needed resources. respect, candor, and fairness. They have
• Competitors ensure that markets are efficient. a responsibility to pursue fairness and openness
• Communities provide needed social capital in all relationships; ensure that supplier and sub-
and security for the businesses. contractor activities are free from threats and
• The environment provides natural resources coercion; foster long-term stability in relation-
and other needed conditions for operating. ships; share information and integrate suppliers
Following is a summary description of the into planning processes; seek, encourage, and
Stakeholder Management Guidelines which indi- prefer suppliers that will use upstanding
cate how responsible businesses deal with the employment practices; seek, encourage, and
various stakeholder groups enumerated. prefer suppliers who practice good environmen-
Customers. Responsible businesses treat their tal management and who uphold high environ-
customers with respect and dignity. They have mental standards.
a responsibility to provide customers with high Competitors. Responsible businesses will
quality products and services; treat customers engage in fair competition. They have
fairly; provide high levels of service; ensure a responsibility to advance open markets; encour-
their health and safety; protect them from harm- age competitive behavior; shun anticompetitive
ful environmental impacts; and respect their and/or collusive arrangements; avoid question-
rights, dignity, and culture. able payments that seek to bypass fair, competi-
Employees. Responsible businesses are tive advantage; respect property rights; and
expected to treat their employees with dignity refuse to acquire information through dishonest
and respect. They have a responsibility to provide means, e.g., industrial espionage.
jobs and compensation which improve their liv- Communities. Responsible businesses should
ing standards; provide safe and healthy working strive to be global corporate citizens and to con-
conditions; provide working conditions that tribute to good public policy and human rights
boost employees’ well-being as citizens, family where it operates. These businesses have
members, and capacity for caring for others; be a responsibility to respect human rights and dem-
open and honest with them; listen to them; avoid ocratic institutions, promoting them whenever
discriminatory practices; provide equal treat- possible; respect government’s legitimate obliga-
ment; support differently abled employees; be tions to society and support policies that promote
sensitive to unemployment impacts; work with social capital; promote harmonious relationships
others to assist employee dislocations; ensure that between business and other societal sectors; col-
executive compensation and benefits reward laborate with initiatives aimed at raising stan-
management carefulness and discourage too dards of health, education, workplace safety,
much risk taking; and avoid illicit child labor and economic well-being; promote sustainable
practices. development; support peace, security, and the
Shareholders. Responsible businesses treat rule of law; and be a good corporate citizen
their shareholders with care and loyalty. They through ongoing community investments.
deal with them in good faith. The deal with According to the Caux Round Table, these
them in the best interests of the organization. principles have been published in 12 languages,
They have a responsibility to apply diligent and used in business school curricula worldwide, and
professional management so that fair and com- are widely recognized as the most comprehensive
petitive returns on investment may be achieved; statement of responsible business practices that
disclose all relevant information to shareholders; have been formulated by business leaders for
to conserve, protect, and increase shareholder business leaders.
Caux Round Table Principles 331 C
Key Issues global codes of conduct and other avenues com-
panies are taking to address the global corruption
There is a growing anticorruption movement in issue.
the world. With significant increases in global
trade and competition, free markets and democ-
racy over the past decade, this comes as no sur- Future Directions
prise. There are a number of different avenues of C
development aimed toward curtaining global In looking toward the future, the Caux Round
corruption and bribery. There are multilateral Table web site reveals that the CRT Principles
treaties and agreements such as the North are continuously being reviewed and updated so
American Free Trade Agreement (NAFTA), the that they are constantly relevant and applicable.
Kyoto Treaty on Global Warming, and the OECD They were updated in 2009 and 2010. It is appar-
Anti-Bribery Agreements. Another major avenue ent that the CRT views the principles to be one of
is that of global codes of business conduct cre- the key building blocks in its mission to improve
ated by international organizations. Among the global business and government affairs now and
more well known of these are the Caux Round in the future. To supplement the CRT Principles
Table Principles for Business, Global Sullivan in their application to employees, the CRT has
Principles, United Nations Global Compact, and issued “Guidelines for Management and
the Ceres Principles. Another avenue is that of Employees – People, Performance, Well-Being,”
individual corporations developing company- a statement expressing specific concern for
specific global codes of conduct of their own. employee stakeholders.
Among the more well known of these are the Though the CRT Principles for Business are
global codes promulgated by companies such as the initial platform for improving business con-
Caterpillar Tractor, Chiquita Brands Interna- duct around the world, the Caux Round
tional, Allis Chalmers, S. C. Johnson, Medtronic, Table continues to build upon this platform by
and Levi Strauss & Company. developing related guidelines applicable to other
In light of these outstanding, high profile, and types of organizations. For example, as part of its
competing avenues for improving global busi- continuing stream, the CRT has also developed
ness ethics, the major issue for the CRT Princi- Principles for Governments, Principles for
ples is attracting and retaining adherents in NGOs, Principles for Ownership and Wealth,
a world in which so many diverse ethics initia- and Principles for Responsible Globalization.
tives are competing to be the defining code. Each Another initiative of the CRT, in partnership
of the other global codes of conduct is also striv- with The Global Leadership Commonwealth
ing to be the gold standard by which all others are (GLC), is the creation of an assessment tool
measured. All the competing standards are excel- called the “Ethical Leadership Profile” (ELP)
lent and have their own followings. An issue and which is designed to help individuals in consid-
challenge for multinational enterprises is to ering and applying their individual preferences in
decide which among these various global codes initiating ethical action in both business and gov-
they wish to associate with and support. Some ernment. By using the ELP, leaders may discover
companies try to sign on to a number of different their personal preferences for decision-making
codes and others choose to just select and identify styles.
with one. Still, other companies decide to It is apparent that the Caux Round Table is
develop their own codes of conduct or ethics. a vibrant, mature, and adapting organization and
Most companies would agree, in general, with that many of its initiatives are being built around
virtually all of the elements of the global codes the CRT Principles for Business presented in this
but typically choose to identify primarily with essay. The Caux Round Table is an active group
one of them. The CRT Principles, then, are in of business executives, and it should be expected
a friendly competition with a number of other that they will continue to be a major player in the
C 332 CBSR
quest to improve global ethics in all organizations Denny, C. M., Jr. (with Paige E. Evans). (2008).
operating at the world level. In describing its own The corporation in Modern American Society.
Minneapolis: Hubert H. Humphrey Institute of Public
role and future, the Caux Round Table says it “is Affairs, University of Minnesota.
committed to move its ideals and principles into Goodpaster, K. E. (2000). The Caux Round
action programs to improve the outcomes of Table principles: Corporate moral reflection in
globalization in the world and to enhance the a global business environment. In O. F. Williams
(Ed.), Global codes of conduct: An idea whose time
impact of ethical conduct and social responsibil- has come (pp. 183–195). Notre Dame: University of
ity in companies. The Caux Round Table defines Notre Dame Press.
its principal tasks as discussing, evaluating, Koch, D. A. (2009). Lessons in life and business:
drafting and distributing principles, implementa- Dialogues with David A. Koch. Minneapolis: Opus
College of Business, University of St. Thomas.
tion standards and benchmarks, position papers,
commentaries and proposals.” This statement
clearly suggests that more can be expected from
the CRT in the future.
CBSR
Cross-References ▶ Canadian Business for Corporate Social
Responsibility
▶ Bribery and Corruption
▶ Coalition of Environmentally Responsible
Economies (CERES)
▶ Corporate Codes of Conduct
▶ Corporate Social Responsibility
▶ Global Governance and CSR CCG
▶ UN Global Compact
▶ Centre for Corporate Governance (Nairobi)
Kenya, and Pan African Consultative Forum on sector in Kenya; the cooperative sector in Kenya;
Corporate Governance (PACFCG). disclosure and reporting in Kenya; impacts of the
2. Education and Training Activities 5-day training course on corporate performance
in Kenya; and corporate governance and manage-
Training Activities ment practices in the African Capacity Building
As at early 2010, the CCG had conducted Foundation (ACBF)-supported institutions in
39 five-day residential training courses in Kenya. Eastern, Central, and Western Africa.
The CCG has also played a key role in launching Among the regional studies undertaken are the
of 14 other five-day training courses in various following: Defining and Harmonizing Business
countries in Africa. The Centre has trained and Laws and Standards for Corporate Governance in
certified 2,046 directors from the public and Eastern Africa for the United Nations Economic
private sectors through its 5-day training course as Commission for Africa (UNECA); Defining the
follows: 1,640 directors in Kenya, Uganda, and Status of Corporate Governance in Africa, which
Tanzania; 59 directors in Zambia; 26 in Zimbabwe; was commissioned by the African Development
61 in Rwanda; 41 in Mauritius; 30 in Ethiopia; Bank (AfDB); and Defining the Status of Corpo-
74 in Senegal; 23 in Cameroon; 50 in Gabon; and rate Governance in Tanzania, which was
38 in Ghana. commissioned by the NEPAD secretariat.
The CCG has trained 2,879 directors through The CCG has also developed the following
its 1–3 day training courses as follows: 2,351 generic guidelines on corporate governance prin-
directors in Kenya, 142 in Uganda, 89 in Tanzania; ciples and practices: guidelines for shareholders;
80 in Ethiopia; 43 in Ghana, 19 in Egypt, and 155 guidelines for state-owned corporations; guide-
in Nigeria. In addition, the Centre trained 110 lines for banking sector; guidelines for the coop-
chairmen of leading corporations in East Africa erative sectors; guidelines for disclosure and
and certified 73 trainers in Kenya, Uganda, reporting; guidelines for universities in Kenya,
Tanzania, Zambia, Zimbabwe, and Nigeria. and guidelines on corporate governance certifica-
The CCG has also collaborated with the African tion of suppliers. The eventual adoption of the
Development Bank, the Government of Rwanda, guidelines for state-owned enterprises by the
the West African Bankers Association, and Centre Kenya government in April 2003, culminated in
Africain D’etudes Superieures en Gestion the introduction of performance contracts in gov-
[CESAG] to adopt training courses and materials ernment ministries, companies, and institutions.
to the needs of Francophone Africa. 4. Monitoring and Evaluation and Advocacy and
Communication
Education The CCG has conducted monitoring and eval-
The Centre has developed curricula for the uation activities for boards of five organizations
Master of Business Administration (MBA), in Kenya: the Kenya Roads Board, the UAP Pro-
LLM degree programs, and the Postgraduate vincial Insurance Company, KCA University,
Diploma in Corporate Governance for adaptation ICDCI (Investment), and the Centre for Corpo-
and implementation by collaborating institutions rate Governance.
of higher learning. These programs have been 5. Advocacy and Communication
adapted for teaching at the Eastern and Southern Apart from holding awareness-building work-
Africa Management Institute (ESAMI) Execu- shops with leaders of state-owned corporations,
tive MBA, the University of Nairobi (Thematic universities, the Institute of Directors, the media,
LLM), and the KCA University (Executive Post- and shareholders, the CCG has also collaborated
graduate Diploma). with several regional, Pan African, and Interna-
3. Research and Development tional Agencies in Africa within the framework
The CCG has conducted six major research of the Pan African Consultative Forum on Cor-
studies, which relate to corporate governance in porate Governance, New Partnership for Africa’s
state-owned corporations in Kenya; the banking Development (NEPAD), and the African Peer
Cheating 335 C
Review Mechanism (APRM). The Centre has, for
instance, played a key role in the NEPAD African Character Ethics
Peer Review Mechanism for Kenya as the Lead
Technical Agency for the Corporate Governance ▶ Virtue Ethics and CSR
Chapter. ▶ Virtue Ethics and the Environment
C
Cross-References
Charismatic Authority
▶ Corporate Governance
▶ Authority Versus Bureaucracy
Cheating
Chain of Event
Yvon Pesqueux
▶ CSR Butterfly Effect Conservatoire National des Arts et Metiérs
(CNAM), Développement des Systèmes
d’Organisation, Paris, France
Chain Restaurants
Synonyms
▶ Franchising
Deception; Escheat; Forfait; Fraud; Swindle
a profession, providing it with a set of codified thing because it can also be viewed as a source of
rules or at least usages delineating the duties of its learning. Cheating cannot be easily reduced to
members. theft or corruption (which unlike cheating implies
a pact between the “corrupter” and the
“corrupted”). Unlike corruption, cheating does
Introduction not taint the corrupter or the corrupted and it is
not regarded as such.
“Value-based management” is based on the The entry has the following rationale. It first
assumption that those values are necessarily defines cheating and looks into its position in
given a positive content and a process that brings relation to deontology when it comes to
together the values in usage with those professed. bypassing the rules of the profession. The notion
This is a highly deceptive theme as it addresses is also related to mores and rules.
major missteps only as particular cases (e.g., Cheating is about playing with the rules for
Enron, Parmalat, Société Générale) related to the one’s benefit, and it does not lead to wrongdoing
failing of one person or another (one or several or fraud unless the cheater is caught in the act in
managers, an auditing firm, a trader, etc.). In this which case the fact becomes a misdemeanor.
theme of “value-based management,” “manage- In this maneuvering dimension, cheating takes
ment” (including its whole rationalist array) and on a form of lying and trickery. Cheating occurs
“business” (where trickery prevails) tend to be when the lines of tolerance have been crossed –
confused with one another. Yet, the nature of lines that are drawn in order to consolidate
business probably differs widely from that of man- sociopolitical balances. Cheating induces an
agement. “Business practice” affects the way one appropriation process which makes it very simi-
behaves with third parties as well as the relation- lar to ownership (cheating makes a person rich)
ships among organizational agents. In the mean- and interest narrowed down to selfishness
time, the firm is experiencing challenges to its because it helps vindicate it. But it is also
legitimacy with suspicion of cheating looming a learning factor and a potential innovation
over its role in the crises it brings about directly process. It usually leads to forgiveness in the
or indirectly (e.g., the “mad cow” crisis). In some protagonists’ appeal for benevolence based on
ways, the organization is infused with a sense of “I won’t do it again” rationalization. Cheating is
cheating that can be sparked off at any given time. built around the notion of “play” in the primary
“Sense of cheating” – in its moralized sense – and sense of the term (it is about playing with the
“risk” turn out to be closer than they seem in that rules) and in the secondary sense of the term
cheating is also risk-taking. But cheating in and of because cheating not only grows out of the
itself is mostly more about denial than recognition. bypassing of the rules of the game but also of
Cheating spans all the areas of human activity their potential looseness. Cheating, like trans-
including play, gambling, sport, religion, politics, gression, is the middle ground between the limit
and of course business. This entry keeps to the (designed to be crossed) and the border (or
field of business, but the previous list shows the boundary), which cannot be crossed. Emphasiz-
many contexts that cheating is likely to appear in. ing the notion of intention, Y. Vardi and Y.
Similarly, an examination of the unending host of Wierner (1996) refer to types of deviance and
stakeholders reveals that any relationship may distinguish between the “S” type (benefits the
result in cheating, as demonstrated by the insider self) where cheating is performed for the benefit
trading that breaches the level playing field of the organizational agent, the “O” type (benefits
among shareholders. Cheating is a significant the organization) where cheating is performed in
but hidden issue in “business practice” and in order to turn a profit for the organization, and the
other fields for that matter. Its hidden nature “D” type (damages the organization) where
serves conveniently to not recognize the paradox cheating is intended to inflict damage on the
of cheating and that it is not necessarily a “bad” materials or premises.
Cheating 337 C
Whether it is about resistance or a selfish of a misdemeanor and the legal domain on account
act, cheating involves a maneuver that saves of fraud. In both cases, the cheater as a person is
the cheater from getting caught. Accordingly, targeted rather than the process, and beyond poten-
cheating is also about strategy. Identifying the tial reparations, the objective is to punish
cheaters is problematic despite the flurry of coun- a reputation. Its educational virtue lies in the expe-
ter strategies that are carried out, including pre- rience that a person gains from it. The misdemeanor
vention, control, intimidation, education, etc. is judged according to how serious it is and the C
In some ways, cheating is also the dark side of standards vary depending on the conditions, time,
the today’s precedence given to consequentialism and location. Thus, cheating also has a cultural
(to judge acts based on their consequences), sense and whenever “cheating” is involved the
mainly in the business world where the end result reference is both the virtue and the norm because
outweighs how it is achieved. judgment emphasizes conduct and hinges on the
In that way, cheating can be equated with person who makes the judgment. Cheating cannot
transgression and innovation. It implies be regarded as “bad” regardless of the conditions,
a transgression of the rules that is both hidden time, and location. For example, the clandestine
and accepted as it can potentially destroy the practice of a religion consists in cheating with the
reputation and quality of intra- and interorgani- official religious norms by pretending to abide by
zational relationships. In the mean time, it drives the legal cultural forms. This clandestine religious
learning, creativity, and result, creeping into such practice is illegal and resembles cheating of some
thought processes as those of budget control. To kind, but can it be regarded as “bad” anyway?
make instrumentation work, it is necessary to Judging by certain third parties, it is regarded as
bring life to the instruments. A budget control an act of resistance, which brings it closer to trans-
system is redundant unless it is combined with gression than misappropriation. Cheating spills
good management. And this is where the notion over beyond the issue of benefit, interest, and own-
of bargaining comes in, and it should be noted ership and brings into focus the role of notions like
here that there is a fine line between bargaining trickery, maneuver, and learning.
and cheating. The following statements can help pin down
Just as transgression leads to deviance, the definition of cheating:
cheating is contiguous to marginality and can 1. A durable and clandestine action (or half clan-
lead to delinquency. In this sense of cheating, destine – can cheating happen without collu-
the emphasis is laid on the importance of the sion?) designed to gain an advantage and
“middle ground.” It may be traceable to an indi- resulting in wrongdoing (moral judgment)
vidual initiative due to the exercise of willpower and/or fraud (judgment of legal nature) when
and/or the individual’s inability to conform to the found out. Cheating involves three components,
norm. But deviance is acceptable based on how a person, a type of behavior, and a context.
the nondeviant group regards it and thus not only 2. Wrongdoing leads to moral condemnation but
as a departure from the norm. In this case, also leniency and/or forgiveness and/or repen-
cheating and deviance alike can be considered tance whereas fraud results in a sentence (or
as a diversion from conformity. Cheating thus discharge). Opposing these two categories of
takes the form of a conscious maneuver akin to judgment (moral and legal) is the currently
misappropriation and parasitism, both processes developing right to go wrong, which demoral-
consisting in appropriating to one’s benefit izes and decriminalizes cheating.
modalities aimed at different ends. 3. Cheating is an “underlying” process whereby
In that respect, cheating is an ambiguous the cheater is not revealed until another person
“object” because it has a paradoxically educational exposes them, despite all the developments
virtue, although canceled out by moral and legal related to the “principle” of transparency. But
standards. But these cannot be easily confused as it cannot be solely regarded as an offshoot of
the moral domain punishes the cheater on account individual initiative.
C 338 Cheating
4. Cheating lies at the core of the tension “heter- separates winners from losers, thus encouraging
onomy-autonomy” in which heteronomy is cheating in the process (in order to win because
represented by the rule (that was bypassed) one might lose otherwise). Now, what if someone
and autonomy by the exercised will of the else cheats? Then, counter cheating stands as
cheater. The importance of autonomy in man- prevention against cheating, in accordance with
agerial discourses should not be viewed in the ideology inherent in gambling theory. In that
a neutral light because it contributes to increas- case, cheating mirrors doubt, suspicion, distrust,
ing the paradoxical impositions placed on the and defiance.
organizational agent. Cheating also results With the centrality given to opportunism,
from the disjunction of regulations as the auton- cheating is placed at the core of the “new theories
omous regulation prevails over the heterono- of the firm,” however implicitly referred to. It is
mous regulation (Reynaud 2004) and causes latent in the moral hazard of O. E. Williamson’s
cheating to be personalized to the benefit of transaction cost economics or the methodological
the cheater. It then boils down to the pursuit selfishness of agency theory (Jenssen and
of a personal advantage whereas the interplay Meckling 1976; Williamson 1985). It is hardly
of regulations seems to point to a much broader surprising then that the “economization” of the
issue. The heteronomous regulation clears the world, in which the economy occupies a central
way for the cheater’s maneuver (autonomous and legitimate place, corresponds to the legiti-
regulation – to act not to get caught) in relation macy of opportunism and doubts about the uncer-
to a set of culturally defined standards whose tainty inherent in behavior opportunism and the
content varies in space and time. spread of cheating.
5. The “spirit” of the heteronomous regulation While cheating is about playing with the
can be equated with the importance attached norm, it also refers to deontology from
to mores by Montesquieu in De l’esprit des a professional standpoint.
lois (The Spirit of the Laws – 1748). Today, the Deontology is a set of standard rules applied to
legitimacy given to competition can be a professional field. It has a communitarian and
regarded as one component of this “spirit,” “corporate-based” scope, and those rules are built
legitimacy that props up the winners and in on values that are not necessarily explicit (implic-
the process prompts the losers to cheat. itness of the profession). This is where the margin
6. From a demoralized point of view, cheating of interpretation brings cheating into focus. It
can be regarded as a social and moral learning pertains to communitarian liberalism and also
factor (Kohlberg 1972). grounds the communal legitimacy of the lobby.
7. Cheating is anchored in the figure of the cheater The term “deontology” was coined by British
in a rationale where the cheater tends to be author J. Bentham in the nineteenth century
separated artificially from the society (and/or (Deontology, 1834) and is mostly used in French
the organization) in which they are situated. today.
For all the references to ethical evidence in the For R. Savatier in Encycopedia Universalis,
late twentieth century, particularly in business, “etymologically deontology is the science of
what cheating effectively signals is a shift from duties (. . .) It has been restricted due to its
the “impartial spectator” to the “invisible hand” being monopolized by the law of professions
(Smith 1759, 1776). As the reference to (. . .) When a profession gets organized, it tends
Mandeville’s Fable of the Bees (1740) affirms, to equip itself with a codified status or at least
the “invisible hand” may transform private vices usages that lay down the duties of its members.”
into public virtues, hence the consistent spread of But it should be stressed that such comprehensive
cheating in business underpinned by trade and the codification is impossible as evidenced by terms
market. In the market, however, business life is such as “integrity,” “selflessness,” “moderation,”
driven by theoretical tenets referring to competi- “fraternity,” and “honor” featured in those texts.
tion, and ultimately economic judgment that Deontology aims at the internal order of the
Cheating 339 C
profession. It is coupled with sanctions restric- of those interests. The issue of politics gives way
tively defined in the form of “disciplinary law” to the issue of ethics and the norm clears the way
that provides the groups involved with a legal for transgression and cheating (a way to break
basis to defend themselves, ranging from moral rules). Also, the inherent creativity of cheating
sanctions designed to hit professionals (censure, constitutes a form of learning.
reprimand) to warnings designed to prevent fur- The “free-market” moment is also character-
ther violations of deontological rules. Occasion- ized by commonalities between: C
ally, there are fines. The most serious disciplinary – “Traditional” political liberalism which
sentences include suspension or exclusion of the emphasizes the principle of freedom, that is,
professional from the group. The authority that the connections between the universality of
enforces these norms goes hand in hand with the the law and the expression of particular inter-
powers devolved to professional jurisdictions. ests, paving the way for the political legiti-
Accordingly, the specific characteristic of deon- macy of interest and its abridged form,
tology is to punish the cheater based on wrong- selfishness.
doing, fraud, or both at the same time. – Economic liberalism, as crafted by A. Smith
As seen above, the contentious issue is not from a political and moral philosophy based
cheating but the contiguous relationships on moral feelings, which promotes the free-
between the notion and those on either side of dom of expression of interests. This economic
its boundary: “consistent-inconsistent, unsound” liberalism is amoral by nature and completely
or “allowed-forbidden” or “cheating-deviance eludes the notion of cheating.
disorder.” In that way, cheating is not problem- – Utilitarianism formulated in the nineteenth
atic but the issue of cheating is contentious. century by J-Mill, which solely attaches
The relative legitimacy given to cheating ties value to what is useful and legitimizes the
into certain categories of the “free-market distinction between “theory” (incidentally
moment,” a period that we have lived in since useful) and “practice” (fundamentally useful).
the early 1980s. Utilitarianism, similarly, leaves cheating
The “free-market” moment (Pesqueux 2007) “unthought” because it appreciates the result
is an offshoot of changes to the issue of the regardless of how it is obtained.
political. The topic of “living in” broached by – Positivism which attaches value to technical
the philosophy of Enlightenment in the wake of determinism which on account of the suspi-
Greek thought, in particular with Aristotle, was cion of science and technique (e.g., the atom
substituted by the topic of “living with” (the bomb) has resulted in substituting semanti-
others) which lies at the core of free-market cally the term technology for that of technique
thought. The “living in” is built around the con- based on the reference to the firm. Again,
cept of law viewed from the perspective of its cheating is left totally “unthought.”
genesis (who lays down the laws?), its legitimi- – Pragmatism, a doctrine in which practical suc-
zation (the democratic vote), and its enforcement cess is a criterion of truth, here viewed from
(the State and its apparatus). And the law turns the perspective of material success regardless
cheating into fraud. The “living with” is premised of how that success is achieved.
on the individual and the expression of their free- – Legitimacy given to capitalism which is an old
dom. The concept of law corresponds to the con- economic practice born in the fourteenth and
cept of norm, in other words the self-enactment of fifteenth century in its modern form as
rules by a social group regardless of their political a political order and now applying worldwide
representativeness but based on a criterion of from the perspective of a globalist ideology.
efficiency. These norms are focused toward the Arguably, these commonalities have been
expression of freedom of individuals in relation complemented by the following aspects:
to their interests in the general context of a police – Those of libertarian and communitarian liber-
State that lays down the rules for the expression alism, two perspectives of contemporary
C 340 Cheating
Introduction
Chemical Sunshield
The arrival of the role of chief sustainability
▶ Ozonelayer officer mirrors the evolution to sustainability as
a strategic issue for a number of large corpora-
tions. Sustainability emerged as a significant
business issue in the 1990s, when it was mainly
the preserve of the corporate social responsibility
Chemical Sustainability Voluntary (CSR) function within a company. As the impact
Initiative of business activities on the environment and
society has increasingly been recognized, the
▶ Responsible Care (Chemical Industry’s Sector CSR department has been tasked with complying
Wide Initiative) with relevant policy and communicating with key
stakeholder groups. Within that context, its prom-
inence is raised sporadically through environ-
mental disasters where a company’s license to
operate would be at risk, but it is largely regarded
Chief Sustainability Officer as a below board-level issue. Larger companies
have employed a dedicated sustainability func-
Jim Woods and Andy Cartland tion, often headed up by a head of sustainability,
Acre Resources, London, England, UK a model that remains the case for the majority of
very large companies in the USA and Europe.
Synonyms
Key Issues
CR director; CSR director; Director of sustain-
ability; Sustainability director A small but increasing number of companies are
seeing strategic opportunities in sustainability.
The following roles can have similar responsibil- As a result, sustainability is raised up the corpo-
ities, but are generally regarded as of lower rate agenda and meriting the attention of the
authority within a firm: head of sustainability, board. As public consciousness of the science of
environmental policy manager, social and envi- climate change has risen, a coalition of drivers
ronmental sustainability manager, head of CSR, which includes government policy, consumer,
head of corporate responsibility, head of corpo- and investor pressure is starting to change the
rate citizenship. paradigm in favor of a low-carbon economy.
This raises the risks associated with high-carbon
business models, but more importantly increases
Definition the opportunities for those who can understand
emerging business opportunities such as the
The chief sustainability officer is a main board emerging low-carbon economy.
role whose responsibility is to integrate sustain- The number of major companies that are seeing
ability into the core strategy and operations of substantial opportunity in sustainability remains
a company. They usually report directly into the the distinct minority, but includes some well-
CEO and will leverage the opinions of those in known global companies. Almost without excep-
the sustainability function as well as the heads of tion, these companies are led by a visionary CEO
other major functions within the company, most and main board; a key common feature is the
notably finance, energy, property, transport and appointment to the board of someone whose ded-
logistics, and IT. icated responsibility is sustainability. Listed below
Chief Sustainability Officer 343 C
are three companies who have achieved significant regard as a business person. Energy managers
commercial advantage through their understand- can see a new focus on energy efficiency as an
ing of the changing paradigm, all of whom have implication that they have not been performing
a board-level person who is dedicated to sustain- well in their job and resent new analytical tools
ability. Some are called chief sustainability officer, such as marginal abatement curves that look to
while others have a more unique title which substantially reduce energy consumption. In
integrates with the company’s business short, it can be a transformational appointment C
strategy, such as “Director of Plan A” (http://corpo- for a company and can involve significant
rate.marksandspencer.com/page.aspx?pointerid¼0 change.
ee5cbc993fe48109cd3215f3f7d5fa9) at Marks &
Spencer. The Activities of a CSO
• Siemens identified the emerging markets in The CSO will typically focus on issues of strate-
wind and solar products in the 1990s, with gic importance, working with the main board.
their environmental products division Their remit will be to explore activities that
generating 28bn revenues in 2010 (http:// which will make a significant difference to share-
www.siemens.com/investor/pool/en/investor_ holder value, as opposed to the looking at sus-
relations/siemens_ar_2010.pdf), or 37 % of tainability as a compliance issue or “the right
total revenues. thing to do,” which is likely to remain the remit
• GE identified opportunities in environmental of the head of sustainability. They will look for
products, from smart grid to nuclear technol- initiatives that, on their own or in total, represent
ogy, which they separate out in their a strategic opportunity. The relevant issues
Ecomagination division that generated change from organization to organization, but
$18bn in 2010 (http://www.ft.com/cms/s/0/ the following can be taken as a generic frame-
342511b2-eb4d-11df-811d-00144feab49a.html# work within which they operate:
axzz1ZRmvfZOg), or 12 % of total revenues. • Revenue generation:
• Marks & Spencer introduced Plan A in • Developing products and services for new
2009, which now generates 10 % of group markets associated with sustainability, for
net profit (http://corporate.marksandspencer. example, Siemens, 28bn revenues in 2010
com/documents/publications/2010/planacom- from environmental products
mitments2010), mainly through energy effi- • Improving the sustainability credentials of
ciency investments. existing products and services which are
demand-sensitive, for example, Phillip’s
The Significance of the Appointment of EcoVision, which generated 7bn in 2010
a CSO from consumer products which have higher
Companies that appoint a CSO envisage substan- energy efficiency
tial strategic and commercial advantage through • Selling sustainability services to other
their sustainability performance. By elevating it companies, where they have developed
to board level, a company is sending out leading expertise, for example, Siemens’
a message that they no longer want CSR to be finance division, which lends to major cor-
viewed as a business silo within the organization porate investing in renewable energy and
and that they want it to impact the major budget- energy efficiency
ary areas of the business. • ADD Supply Chain Innovation
The appointment can be regarded as threaten- • ADD customer/market segmentation
ing to many groups within an organization, and it • ADD customer education leading to new
can be regarded as a brave appointment by markets and opportunities
a CEO. People in a sustainability function can • Other main strategic opportunities:
resent reporting into a new appointment with • Acquisition of companies that lead in sus-
“sustainability” in their title, but whom they tainability in similar markets. This may
C 344 Chief Sustainability Officer
focus on Chinese companies who are being • Introducing a societal model for evaluating
built purely on a low-carbon platform, such performance, for example, Pepsi’s “Full
as electric car manufacturer BYD. Business Value”
• New financing opportunities, for example, • Building corporate marginal abatement
climate bonds, VCTs, or enterprise invest- curve for all divisions of their business,
ment scheme funds, which have a lower for example, the Royal Mail, Scottish
cost of capital than most companies and Water
have government incentives to make low- • Working with the finance function to build
carbon investments. alternative financial statements with a price
• Achieving major cost savings, particularly of carbon factored in
around energy efficiency. It is estimated • Employing life cycle analysis for goods
that 15–25 % of the average big European and services
company’s emissions can be removed by • Measuring how brand/trust/reputation is
investments that have internal rates of impacted by a company’s sustainability
return (IRR) of 16 % or above, representing stance
a substantial strategic opportunity (http:// • Partnerships and collaboration:
www.carbontrust.co.uk/cut-carbon-reduce- • Exploring the outsourcing of energy man-
costs/large-business/Documents/energy- agement to an ESCO. As energy becomes
efficiency-report-2010.pdf). The Royal more expensive and complicated to man-
Mail in the UK, for example, identified in age as a result of policy, the case for
2010 £38 m of energy efficiency invest- outsourcing increases.
ments with a higher IRR than its core • Partnering with nongovernmental organi-
business. zations to give customers confidence in
• Business structure: the supply chain, for example, Lipton tea
• Separating out a “green products” portfolio and the Rainforest Alliance (http://www.
with aggressive goals. Some pioneers of rainforest-alliance.org/newsroom/news/
this technique, such as GE with their unilever).
Ecomagination program, have employed • Working with competitors in the sector to
separate boards including leading venture form a voluntary industry standard in order
capitalists and have invested abnormally to reduce the sustainability risks for the
high amounts of R&D to achieve their sector.
goals. • Engaging in a constructive dialogue with
• Incorporate sustainability into executive policy makers to reduce the uncertainty in
remuneration system. This is not always the policy framework.
popular at the outset, but as Akzo Nobel • Key stakeholder engagement:
in the Netherlands have shown, this is one • Introducing enhanced training for man-
of the most effective ways of engaging key agers across the business
decision makers in the sustainability • Communicating the benefits of the
journey. company’s sustainability strategy to finan-
• Changing the reporting structure so that the cial analysts, who may not yet realize the
sustainability function reports directly to commercial benefits of the program
the CEO. The appointment of the CSO
usually achieves this, but there is additional
credibility work required in evolving the Future Directions
sustainability function from a compliance
unit to the innovations unit. McKinsey & Company reported in their global
• Employing the latest analytical tools to assess survey results in August 2010 (titled “The next
the company’s CSR performance: environmental issue for business”) (http://www.
Christian Way of Doing Business with Societal Obligations 345 C
mckinseyquarterly.com/The_next_environmental_ http://www.carbontrust.co.uk/cut-carbon-reduce-costs/
issue_for_business_McKinsey_Global_Survey_ large-business/Documents/energy-efficiency-report-
2010.pdf
results_2651) that the issue of biodiversity http://www.ft.com/cms/s/0/342511b2-eb4d-11df-811d-
now occupies a similar position in the public 00144feab49a.html#axzz1ZRmvfZOg
debate as climate change did in 2007. At the http://www.mckinseyquarterly.com/The_next_environ-
time of their survey, 59 % of executives said mental_issue_for_business_McKinsey_Global_Survey_
results_2651
they saw biodiversity as more of an opportunity http://www.rainforest-alliance.org/newsroom/news/unilever
C
than a risk for their company. In comparison, http://www.siemens.com/investor/pool/en/investor_
29 % of executives viewed climate change as relations/siemens_ar_2010.pdf
more of an opportunity than a risk in 2007.
They predict that over the coming years,
biodiversity will reach the same strategic posi-
tion that climate change has reached in the cor-
porate strategy. Christian Ethical Philosophy
It is hard to imagine the issue of climate
change decreasing in importance on the strategic ▶ Christianity and CSR
corporate agenda in the next 20 years, given that
global emissions are still rising, the population is
growing, and the science calls for a carbon reduc-
tion increase rather than decrease. It is likely that
other issues such as biodiversity will add to what Christian Foundations on Ethics
Lord Stern called in his 2007 review for the UK
government “the greatest market failure that the ▶ Christianity and CSR
world has ever seen.” In this context, one can
imagine that the issue of sustainability will rise
in the corporate agenda and that the number of
companies employing a CSO will increase.
On this basis, it seems reasonable to think that
the tenure of the CSO will be substantially longer Christian Guidelines
than the 20-year span of the chief electricity
officer. We expect that the teams managed by ▶ Christianity and CSR
the CSO will grow as they become more special-
ized, looking at the industry leaders at the
moment that trend has already started.
Man
man needs to protect nature or be in harmony Similar to Islamic ethics, Catholic Catechism
with animals and nature. In the books of Jeremiah teaches that God created an ordered universe, and
(9: 9–11) and Habakkuk (2: 17), for example, since it came out of His goodness, it was good.
God warns against destroying nature and wildlife. Thus, human beings are bound to respect and
defend the goodness of creation, including the
physical world in which they live. God entrusted
Key Issues human beings with having dominion over
the Earth. In giving back, human beings should
Being Responsible Stewards complete the work of creation and perfect it for
We are living in a world with too many problems the good of all.
such as, to name a few, different kinds of pollutions, We can take that Catholics and Christians
violence, environmental problems, global warming, alike believe that God expects humankind to
and a host of others – yet there are too few answers. exercise stewardship over the Earth. As God’s
Here, the Bible, Christians believe that God highest creation, human beings have
has really communicated with humans, stresses a responsibility to use their knowledge to pre-
on the importance of wisdom; after all, “wisdom serve and protect the environment and the crea-
is the prime thing. Acquire wisdom, and with tures which inhabit it.
all that you acquire, acquire understanding” Both the Vatican and the United States Con-
(Proverbs 4: 7). Many may view abortion as ference of Catholic Bishops have pressed for
a matter of personal choice; women have action in response to global warming and have
authority over their bodies, but for Christians, exhorted governments to move toward models of
the Bible – the Word of God, written by men sustainable development. In the United States,
but inspired by God – offers an authority and the Church operates an environmental justice
guidance in matters of morality and even for non- grants program that provides money for environ-
believers; the Bible – like any other Holy Books mental education, research, and action. In short,
such as the Sutras, Quran, and others – can be the Church’s environmentalist posture is closely
argued as offering this great and clear-cut advice: related to its support for developing countries as
a helping attitude really benefits everyone. And their growth hinges on an equitable sharing of the
what more, love conquers all. It is natural to love earth’s resources (Keeler, Grimbly and
ourselves, but to be emotionally healthy, the Wiggins 2005).
Bible says that we have to balance that love for What more, the responsibility of humankind to
self with a love for others. value and protect the natural environment is
Christianity and CSR 349 C
a theme that appears throughout the Bible, often “vocation in beatitude,” and it is the duty of each
referring to just the types of problems we face Christian. Vocation is a call and Christians are
today: brutality to farm animals or heartlessness called to help others. The Catholic Church
to wild animals, damage to wildlife and habitat, explains the beatitudes portray Christ’s charity.
and pollution of our food, air, and water. It is said The beatitudes are principles meant to comfort
that what is possibly the world’s first antipollu- and inspire believers to do charity for the gentle,
tion control or rule is found in the Book of the poor, the hungry, and the marginalized peo- C
Deuteronomy (23: 13–15), which forbids dirtying ple, for whom Christ spoke so eloquently in His
the land with human excrement. Sermon on the Mount.
In stressing the reverence humans should have Jesus was not born with the material advan-
toward the land, the Scriptures convey a strong tages that wealth and social position can give; he
conservation message, warning against overusing was born in a stable. Jesus preached and taught
and wearing out natural resources. In Leviticus but His life did not end on a note of triumph; he
(25: 2–4), God is said to order that “the land shall suffered the shameful death of crucifixion. Over-
keep a Sabbath unto the Lord . . .in the seventh all, in the footsteps of Jesus as the role model and
year shall be a Sabbath for the Lord; thou shalt in whichever the course of action is taken, the
neither sow thy field, nor prune thy vineyard.” Christians are called to be humble, help, and love
fellow human beings, as well as to devote time,
Promoting Human Rights and effort, and money to causes that improve
Charitable Values the world and the life of those in it. Good works
Sweatshops, child labor, and exploitation of labor are not only a requirement or requisite of Chris-
with meager or unsatisfactorily low wages by tian life and a path to unity with Jesus; they also
employers are to be avoided. The Catholic give the opportunity to work for justice and
Church teaches that “the dignity of the human equality on a political stage.
person is rooted in his creation in the image and Pope John Paul II has often been credited with
likeness of God” (Catechism of the Catholic having played a pivotal role in the downfall of
Church, cited in Keeler, Grimbly, and Wiggins communism in Europe in the late of 1980s. How-
2005: 232). Charity is a virtue that exposes or ever, he clarified that his words and actions in
places people to love God above all else and to supporting the Polish Labor Union Solidarity at
include their neighbors as part of that love. that time was not against one system, but he was
There is a definite need to give to and share indeed in favor of the basic rights of every man
with others. and woman. For the Pope (Karol Wojtyla), these
The obligations to give to others are rooted in rights include the right to participate in social life,
the message of the Gospels. Jesus says, “You the right to the truth, the right to join free associ-
shall love your neighbors as yourself” (Matthew ation and assembly, and also various economic
22: 29). Jesus tells people to treat their neighbors and professional rights. Furthermore, the Pope
as they themselves would like to be treated. The believed that a just and peaceful society
Church holds this message in mind as it cham- depended on every member of the community
pions and lobbies in political forums, publishes or nation respecting the dignity of every other
encyclicals, and sends its charities out to work in member and working for the common good.
the world. It seeks the unity of humankind He once remarked, “When human rights are
through a union of the spirit and the cultivation ignored or scorned and that when the pursuit of
of equality for all people. individual interests unjustly prevails over the
In line with Jesus’ teachings, Christians common good, then the seed of instability;
believe that each good deed done for the rebellion and violence are inevitably sown”
benefit of other person is also done for Jesus (Burke 2000: 156).
Christ – after all, the person in need is a child of A paradigm of Christian practices in promot-
God. The Church calls this service toward others ing human rights and charitable virtues is that of
C 350 Christianity and CSR
the works of the late Mother Teresa of Calcutta. Himself the hungry one, the naked one, the home-
Mother Teresa of Calcutta established the less one, the sick one, the one in prison, the lonely
Missionary of Charity which consists of homes one, the unwanted one, and He says: ‘You did it
for women, for orphaned children, and for the to me.’ He is hungry for our love, and this is the
dying; an AIDS hospice; a school for street hunger of our poor people. This is the hunger that
children; and a leper colony. What more, Mother you and I must find. It may be in your own
Teresa’s Missionaries of Charity had grown from home. . .” (Rai and Chawla 1996). To millions,
a one-woman folly in Calcutta in 1948 into Mother Teresa portrayed herself as an image of
a global beacon of self-abnegating care, and the a small woman in a white sari, offering love and
services are provided to people regardless of their compassion to the poorest of the poor. However,
religion or social caste. Mother Teresa, the her speech conveyed her faith, spirituality, and
diminutive nun who straddled her century as simplicity as well as her practical down-to-earth
one of its most towering personalities, was at nature and her understanding of Christian
one level a very simple person and at another practices.
a complex enigma. In modern management par- In the twenty-first century, particularly over
lance, she could well be projected as the past 10 years, social responsibility has come
a management guru who could have presented to be expressed in terms of company social
to the world’s best business schools of social responsibility, community service, the setting up
responsibility, her uniquely evolved model for of charitable organizations, philanthropic foun-
success. With 4,000 nuns, she created dations, and social funds as well as various inno-
a multinational enterprise of service that vative forms of social entrepreneurship, and these
encompassed 123 countries by the time she died have been on the rise. The rising challenges fac-
in 1997 (Chawla 2009). ing our world today include the growing disparity
In 1979, Mother Teresa, in her Nobel Prize or gaps between the rich and the poor, environ-
Acceptance Speech at Oslo, Norway, said, “. . . mental degradation, illiteracy, and inaccessibility
It is not enough for us to say: ‘I love God, but I do to basic services and public goods by more than
not love my neighbor.’” Mother Teresa also half of the world’s population, and have lead to
added that since in dying on the cross, God had a sense of urgency among the privileged or
“(made) himself, the hungry one – the naked the-haves and the various religious groups
one – the homeless one.” And “Jesus’ hunger is including the Christians to return, be answerable
what you and I must find” and alleviate. She also and improve the conditions of their surrounding
condemned abortion and bemoaned youthful communities and environment.
drug addiction in the West (Mother Teresa cited Jesus was born to a peasant family in Galilee,
in Van Biema 2007: 26). St. John said that “you and he attracted a ragtag following of fishermen
are a liar if you say you love God and you don’t and farmers. He preached that wealth and mate-
love your neighbor. How can you love God whom rialism not only was not the way to heaven and
you do not see, if you do not love your neighbor enlightenment but that worldly riches interfere
whom you see, whom you touch, with whom you with humans’ attempt to lead a good life. Jesus
live? And so this is very important for us to spoke of detachment from personal possessions,
realize: that love, to be true, has to hurt. It hurts and personal enrichment was found in heaven
Jesus to love us. It hurts him. And to make sure rather than in the marketplaces of the world. He
we remember His great love, He made Himself spoke of no slave can serve two masters, one
the bread of life to satisfy our hunger to His cannot serve God and wealth (Luke 16: 13).
love – our hunger for God – because we have When a man ran up and knelt before Jesus and
been created for that love. We have been created said that he had observed and followed the com-
in His image. We have been created for love and mandments since youth and that he would like to
be loved, and He had become Man to make it know about how to have eternal life, Jesus
possible for us to love as He loved us. He makes looking upon him loved him and said to him,
Christianity and CSR 351 C
“You lack one thing; go, sell what you have, and their flaws, so that their opposites seemed more
give the money to the poor, and you will have precious than they. He was the founder of the
treasure in heaven; then come, follow me.” At Order of Friars Minor, more commonly known
that saying, his countenance fell, and he went as the Franciscans. And today, St. Francis is most
away sorrowful, for he had great possessions. widely known for his sermon to birds; and for
And Jesus looked around and said to his disciples, this, he is known as the patron saint of animals
“How hard it will be for those who have riches to and the environment (House 2000). C
enter the kingdom of God!” And the disciples In terms of the Catholic Church, it is said that
were amazed at these words. But Jesus said to in Brazil, Ms. Chiara Lubich’s thoughts and
them again, “Children, how hard it is to enter the actions sparked the Focolare Movement, which
kingdom of God! It is easier for a camel to go in 1991 birthed a new business philosophy called
through the eye of a needle than for someone who the Economy of Communion, which promotes
is rich to enter the kingdom of God.” They were operating a business both to make a profit and
greatly astounded and said to one another, “Then benefit society.
who can be saved?” Jesus looked at them Pope Benedict XVI’s social encyclical praises
and said, “For mortals it is impossible, but not such alternative business thinking, because its top
for God; for God all things are possible” priority is not to rack up large profits solely for
(Mark 10: 21–26). a company and its employees.
Here we once again run into the notions of “Once profit becomes the exclusive goal, if it
human detachment for a simpler life that is free is produced by improper means and without the
from desires and worries and of what it means to common good as its ultimate end, it risks
serve the world. Jesus highlighted, “Therefore destroying wealth and creating poverty,” the
I tell you do not be anxious about your life, pope wrote in his encyclical “Caritas in Veritate”
what you shall eat, nor about your body, what (“Charity in Truth”).
you shall put on. Is not life more than food, and The Pope has stressed on the point that man-
the body more than clothing? Look at the birds of kind or human beings are more important than
the air; they neither sow nor reap nor gather into capital, and he places the highest price on the
barns, and yet your heavenly father feed them. . . integrity of every human person. He has also
Therefore do not be anxious about tomorrow expressed that in recent decades, “a broad inter-
for tomorrow will be anxious of itself. Lets the mediate area has emerged” between companies
day’s own trouble be sufficient for the day” that are solely profit-based and those that are
(Matthew 6: 25–34). Thus, one is to be detached nonprofit: companies that “do not exclude” profit
from the worldly possessions, one would have to but consider it “a means for achieving human and
put one’s faith and trust in God. This is similar to social ends” (Abrams 2009).
the birds who do not worry of what they have to It is said that worldwide, there are 754 busi-
eat for the day as they are totally dependent on nesses involved in the Economy of Communion
God’s grace and His providence of nature. initiative.
Following Jesus’ teachings centuries later, The business owners need to be socially
St. Francis of Assisi (1182–1226 A.D.), responsible, yes, they still want to make a profit,
a Catholic deacon and a preacher, renounced but they distribute their profits differently from
both money and possessions at the age of 24. other businesses. The numbers of these busi-
This, combined with his honesty, humility, and nesses is not so important but what is more crit-
courage, released him from the burdens and ical is that they serve as good role models of
restraints of worldly conventions and left him doing business in a viable and responsible way
free to carry out his belief in God, in Jesus as (Abrams 2009).
the Son of God. His song was love and he tossed One of the key issues is that when things are to
up society’s most cherished possessions – rank, be done or carried out, they are to be done for the
wealth, fame, reputation, and power – exposing greater good of the members of the Christian
C 352 Christianity and CSR
community, presumably in line with the Christian in developing countries and/or sponsoring some
principles, or for the greater good of the bigger awareness events including posting Internet arti-
and wider society. Therefore, issues such as abor- cles and printing simple leaflets [which could
tion, birth control measures, and stem cell exper- include facts and figures to end sex trade/traffick-
iments are put in the crucible, being examined ing, prostitution, pornography, and child sex
and discussed to determine the stand of Christian- tourism].
ity [the Church(es)] as well as how, in the spirit of Street children (they are human beings who
continuous improvement, to attain the greater need the basic human rights too), particularly in
goal of the common good. developing countries, can also be attended to.
As the number of priests and clergymen Companies can also help to improve their welfare
increases with time, it is of great importance to and thus fulfilling their CSR while contributing to
make sure that they have proper spiritual and the society’s well-being. The families of street
self-discipline education and training to help children are often too poor to feed an extra
them to live up to the Christian Faith and Prac- mouth, and among other things, companies can
tices. This kind of education, training, and culti- help by giving meals, books/educational
vation is very much needed so that the priests resources, and old toys and improve their welfare.
and the faithful can work together living up to Besides street children, companies can also
Christian expectations and seek up the Christian help prisoners by sending them books so that
Churches’ image and reputation without they can educate themselves to a get a high-
betraying the trusts of the faithful and the overall school diploma or a college degree.
public. For the betterment and future of the churches,
recruitment of church priests and clerics
should be properly screened and examined.
Future Directions Effective standards, procedures (though it be
bureaucratic – but such procedures may have its
One of the chief challenges faced is that of giving beneficial control effects), and guidelines should
back or returning to the community and attaining be carefully followed and monitored by the
the goal of greater common good yet subscribing churches so that a good population of up-to-
to and upholding the Christian guidelines and, in standard and well-disciplined priests and clerics
fact, to some Christian denominations to preserve can keep and maintain the church’s system and
the sacred cows or religious traditions. There image.
is certainly a need to give to and share with
others, and realistically translating these into
actions, unencumbered by the religion’s own
Cross-References
sacred cows or the country’s political obstacles.
Jesus said, “Whoever welcomes one of these
▶ Buddhist Ethics and CSR
little children in my name welcomes me; and
▶ Confucian Ethics
whoever welcomes me does not welcome me
▶ Islamic Ethics and CSR
but the one who sent me” (Mark 9: 37). There-
▶ Trust and CSR
fore, child prostitution, like child slavery, should
not be simply accepted or tolerated. It is a gross
abuse of the human rights of those who are least
able to do anything. Whoever one is and whatever References and Readings
one does, one should and must do something
about it. Just imagine if it happened to one when Abrams, J. (2009). Encyclical brings light to economy of
communion movement. Washington, DC: Catholic
one were young or to one’s own child. Individ- News Service (CNS).
uals and companies alike need to raise public Adrian House. (2000). Francis of Assisi. London: Chatto
awareness such as sponsoring children education & Windus.
Christine Parker 353 C
Burke, G. (2000). John Paul II, An invitation to joy, 2006–2011 Australian Research Fellow, Melbourne Law
selections from the writings and speeches of his holi- School, University of Melbourne (Funded by
ness John Paul II. New York: Simon& Schuster. the Australian Research Council to research
Chawla, N. (2009). The mystery of Mother Teresa. The only for 5 years)
Hindu Newspaper, New Delhi, India. http://beta.
2005–2006 Associate Professor and Reader, Melbourne
thehindu.com/opinion/lead/article9166.ece. Accessed
Law School, University of Melbourne
20 July 2010.
Cheng, P. L. K. (2008). Leadership thoughts to build your 2002–2005 Senior Lecturer, Melbourne Law School,
life on – Leading, the Jesus way. Leadership & Orga- University of Melbourne C
nizational Management Journal, 2008(4), 1–12. 2002–2003 Research Fellow, Centre for Competition
Keeler, H., Grimbly, S., & Wiggins, J. B. (2005). 101 and Consumer Policy, Research School of
things everyone should know about Catholicism. Can- Social Sciences, Australian National
ada: Adams Media and F & W. University
Rai, R., & Chawla, N. (1996). Faith and compassion, the 2000–2002 Senior Lecturer, Law Faculty, University of
life and work of Mother Teresa. Shaftesbury, Dorset: New South Wales
Element Books. 1998–1999 Postdoctoral Fellow, Law Faculty,
Reverends Killgallon, J., Weber, G., & Ziegmann, L. University of New South Wales
(1983). Life in Christ. Chicago: Acta Foundation.
1997–1998 Visiting Fellow and Half-time Lecturer,
Sider, R. (1979). Christ and violence. Bristol: Lion
Law Faculty, University of New South
Publishing.
Wales
The Jerusalem Bible: TJB. (1967). New testament.
London: Darton, Longman and Todd. 1994–1996 PhD Student and Part-time Tutor, Law,
van Biema, D. (2007, September 3). Her agony. Time, Australian National University
pp. 26–33. 1993–1994 Research Associate, National Institute for
Law, Ethics and Public Affairs, Law Faculty,
Griffith University
She has published extensively and her works boards of Law and Policy and Regulation and
are highly cited in the academic arena. The num- Governance. Currently, she is the cochair of the
ber of her scholarly articles in reputed journals is Law and Society Association’s Collaborative
many. Among her books, the undermentioned are Research Network for Regulatory Governance
prominent: and a Member of Advisory Committee for
1. Explaining Compliance: Business Responses Australian Law Reform Commission reference
to Regulation. (2011). Edward Elgar. on Discovery in Federal Civil Litigation
(Coedited with Vibeke, L. N.) and Enforceable Undertakings Panel, Environ-
2. Inside Lawyers’ Ethics. (2007). Cambridge: mental Protection Authority, Victoria. She was
Cambridge University Press. (Coauthored also related with the Restorative Justice and
with Adrian, E.) Workplace Death Project of the Creative
3. The Open Corporation: Self-regulation and Ministries Network, Advisory Committee for
Corporate Citizenship. (2002). Cambridge: Australian Law Reform Commission reference
Cambridge University Press on Client Legal Privilege and Federal
4. Regulating Law. (2002). Oxford: Oxford Investigatory Bodies, Cancer Council of
University Press Victoria Legal Policy Advisory Group, Victorian
5. Just Lawyers: Regulation and Access to Legal Ombudsman’s Reference Group, and
Justice. (1999). Oxford: Oxford University New South Wales Bar’s Professional
Press Conduct Committee. In 2008, she was the
With Professor Adrian Evans, she designed Honorary Fellow of the Australasian Compliance
Inside Lawyers’ Ethics to help law students and Institute.
new lawyers to understand and modify their own
ethical priorities; it is not just because this knowl-
edge makes it easier to practice law and earn an Cross-References
income but also because it makes one aware of
lots of related things including self-awareness, ▶ Meta-regulation Approach to CSR
the belief that ethical legal practice is right,
makes him feel better, and above all, enhances
justice. Packed with case studies of ethical scan-
References and Readings
dals and dilemmas from real-life legal practice in
Australia, each chapter delves into the most dif- Christine, P., & Aitken, L. (2011). The queensland work-
ficult issues lawyers face. From lawyers’ part in place culture check: learning from reflection on ethics
corporate fraud to the ethics of time-based bill- inside law firms. Georgetown Journal of Legal Ethic,
24(2), 399–441.
ing, the authors expose the values that underlie
Christine P., Haller L. (2012). Inside running: internal
current practice and set out the alternatives ethi- complaints management practice and regulation
cal lawyers can practice. in the legal profession. Monash University Law
The Open Corporation has already made an Review, 37.
Christine, P., & Nielsen, V. (2011a). The Fels effect: the
immense impact on the traditional scholarship of
impact of business opinions of the ACCC. Griffith Law
corporate regulation. In this seminal book, she Review, 20(1), 91–126.
warns us against institutional reductionism and Christine, P., & Nielsen, V. (2011b). Deterrence and the
underestimation of the complex nature of the impact of calculative thinking on business compliance
with regulation. Antitrust Bulletin, 56(2), 377–426.
personal and institutional relationships which Christine P., & Ruschena D. (2011). The pressures of
comprises the corporation. Her ideas mentioned billable hours: lessons from a survey of billing prac-
in this book give a new insight in the debate on tices inside law firms. St Thomas Law Review. http://
corporate social responsibility from nihilism to ssrn.com/abstract=1790082 or http://dx.doi.org/
10.2139/ ssrn.1790082. Accessed 18 March 2011.
potentially achievable aspiration.
Monash University Law. (2012). Professor Christine
Professor Christine Parker is also the editor of Parker. http://www.law.monash.edu.au/staff/cparker.
the journal, Legal Ethics, and is on the editorial html. Accessed 10 April 2012.
Climate Change 355 C
Definition
Chrysotile
Climate change, according to the United Nations
▶ Asbestos Framework Convention on this issue, can be
defined as a change in climate which is attributed
directly or indirectly to human activity, which
Cigarettes alters the composition of the global atmosphere, C
and which in the same way as natural climate
▶ Tobacco variability is observed over comparable periods
of time.
It is the greenhouse effect which is causing the
earth to become gradually warmer. Although
Civic or Third Sector greenhouse gases amount to only a very small
part of the atmosphere, they are the cause of
▶ View on the Ground: CSR from a Capabilities what is known as the greenhouse effect. Green-
Approach house gases are located in the upper levels of the
atmosphere. Sunlight is absorbed by these gases
before they are released into space. This creates
Civil Regulation an unnatural warming of the earth known as the
“greenhouse effect” which distorts the natural
▶ Ethical Trading Initiative balance of the earth’s climate systems. There
are a number of factors which cause an abnormal
accumulation of greenhouse gases, the most
important of which is the use of fossil fuels.
Civil-Society Organizations (CSO) Any postponement of measures to curb the use
and CSR of these fuels will lead to irrecoverable situations
with the excessive accumulation of greenhouse
▶ NGOs and CSR gases deepening the problems by depleting the
ozone layer.
Climate change implies the changes have
large-scale and local-regional effects on climate
Clean Technology over a period of time. Changes become apparent
not only through increase in temperatures but
▶ Sustainable Primary Energy Production also through changes in rainfall regimes. Since
economic forecasts, future developments in
technology, and population growth are still
unclear, it is difficult to predict exactly which
Climate Change regions of the world will be affected by climate
change and the degree and rate at which these
Yunus Emre Özer changes might happen. However, one thing is
Faculty of Economics and Administrative certain: the demand for energy will increase
Sciences, Public Administration Department, even more in the next 25 years, and this energy
Dokuz Eyl€ ul University, Buca İzmir, Turkey will be mainly sourced by fossil fuels.
According to the data of the 2009 International
Energy Agency (IEA) report, about 40% of CO2
Synonyms emissions are produced by the energy sector.
This situation shows that if no measures are
Climatic change; Global climate change taken, the effects of climate change will not
C 356 Climate Change
diminish by themselves. When the action and and questions began to emerge (Hulme and
policymaking related to climate change is con- Mahony 2010).
sidered, global cooperation, awareness of In the late 1980s, studies by the United Nations
energy conservation, use of appropriate technol- and other institutions were carried out in order to
ogies, and the production of measurable data are reduce the negative impact of humans on climate
all important issues which need to be change. The “United Nations Framework Conven-
emphasized. tion on Climate Change” which appeared on the
agenda of the international community at the
United Nations Rio Summit in 1992 is recognized
Introduction as a broad acceptance of issues related to the envi-
ronment. In 1994, a contract on sustainable devel-
The world has experienced changes of cooling opment was drawn up. It included measures to
and warming of its climate since its formation. In minimize the effects of climate change with the
retrospect, it is evident that the Athens Charter, cooperation of all countries. Greenhouse gases
which appeared in the 1930s, was probably the were not defined in this context. Under this agree-
first document proposing environmental protec- ment, two annexes were created to clarify respon-
tion of air, plant life, and sun as one of its themes. sibilities. The country parties assigned to Annex
However, toward the end of the twentieth cen- I were Australia, Austria, Belarus, Belgium,
tury, human impact on climate change was Bulgaria, Canada, Croatia, the Czech Republic,
becoming increasingly evident. However, this Denmark, the European Economic Community,
impact was clearly revealed for the first time in Estonia, Finland, France, Germany, Greece,
the World Climate Conference in 1979. In the Hungary, Iceland, Ireland, Italy, Japan, Latvia,
1970s, the effects of chlorofluorocarbons Liechtenstein, Lithuania, Luxembourg, Monaco,
(CFCs) and other ozone-depleting substances Netherlands, New Zealand, Norway, Poland,
(ODSs) were identified. In the 1980s, the subject Portugal, Romania, Russian Federation, Slovakia,
of human impact on the greenhouse effect was Slovenia, Spain, Sweden, Switzerland, Turkey,
agreed upon in a scientific sense. During these Ukraine, the United Kingdom of Great Britain and
years, sensitivity toward ozone depletion and cli- Northern Ireland, and the United States of America.
mate change increased. In 1987, the Montreal According to the United Nations Framework
Protocol demanded the gradual reduction of the Convention on Climate Change, the member
use of substances that were causing the depletion parties of Annex I committed themselves to adopt
of the ozone layer. national policies and take corresponding measures
In 1988, IPCC (the Intergovernmental Panel on the mitigation of climate change by limiting its
on Climate Change) was established with the anthropogenic emissions of greenhouse gases and
contributions of scientists from many countries protecting and enhancing its greenhouse gas sinks
in the world. The main aim of IPCC was to and reservoirs. Countries in this context were
investigate human influence on the greenhouse responsible for reducing greenhouse gas emissions
effect and provide scientific information for to the level of the 1990 level by the year 2000. The
reducing climate change. At the same time within member parties of Annex II, Australia, Austria,
the framework of this information, IPCC made Belgium, Canada, Denmark, European Economic
recommendations in terms of scientific, techni- Community, Finland, France, Germany, Greece,
cal, and socioeconomic areas related to climate Iceland, Ireland, Italy, Japan, Luxembourg,
change. In addition, they prepared assessment Netherlands, New Zealand, Norway, Portugal,
reports, technical papers, and methodologies for Spain, Sweden, Switzerland, the United Kingdom
the use of policymakers, scientists, and other of Great Britain and Northern Ireland, and the
experts. Following the reports prepared by United States of America, were assigned the same
IPCC, climate change policies were understood responsibilities as those in Annex I. According to
to be inadequate at the international level the United Nations Framework Convention on
Climate Change 357 C
Climate Change, “the developed country Parties 92, Netherlands 92, New Zealand 100, Norway
along with other developed Parties included in 101, Poland 94, Portugal 92, Romania 92, Russian
Annex II, shall provide new and additional financial Federation 100, Slovakia 92, Slovenia 92, Spain 92,
resources to meet the agreed full costs incurred by Sweden 92, Switzerland 92, Ukraine 100, the
developing country Parties in complying with their United Kingdom of Great Britain and Northern
obligations in the Convention. The developed Ireland 92, and the United States of America 93.
country Parties and other developed Parties According to the article 3/1 of the Kyoto C
included in Annex II shall also provide such Protocol, the parties included in Annex I
financial resources, including those for the transfer (Australia, Austria, Belarus, Belgium, Bulgaria,
of technology, needed by the developing country Canada, Croatia, the Czech Republic, Denmark,
Parties to meet the agreed full incremental costs of the European Economic Community, Estonia,
implementing measures. The developed country Finland, France, Germany, Greece, Hungary,
Parties and other developed Parties included in Iceland, Ireland, Italy, Japan, Latvia,
Annex II shall also assist the developing country Liechtenstein, Lithuania, Luxembourg, Monaco,
Parties that are particularly vulnerable to the Netherlands, New Zealand, Norway, Poland,
adverse effects of climate change in meeting costs Portugal, Romania, Russian Federation, Slovakia,
of adaptation to those adverse effects. The devel- Slovenia, Spain, Sweden, Switzerland, Turkey,
oped country Parties and other developed Parties Ukraine, the United Kingdom of Great Britain
included in Annex II shall also assist the developing and Northern Ireland, and the United States of
country Parties that are particularly vulnerable to America) “shall, individually or jointly, ensure
the adverse effects of climate change in meeting that their aggregate anthropogenic carbon dioxide
costs of adaptation to those adverse effects.” The equivalent emissions of the greenhouse gases listed
United Nations Framework Convention on Climate in Annex A (carbon dioxide (CO2), methane
Change could not reach the predicted targets (CH4), nitrous oxide (N2O), per fluorocarbons
because firstly the agreement was not binding (PFCs), hydro fluorocarbons (HFCs), sulpfur
and secondly numerical targets for the year 2000 hexafluoride (SF6)) do not exceed their assigned
were unclear. amounts, calculated pursuant to their quantified
After the United Nations Framework Conven- emission limitation and reduction commitments
tion on Climate Change, the subsequent and the inscribed in Annex B and in accordance with the
most important development relating to climate provisions of article 3/1 of Kyoto Protocol, with
change was the Kyoto Protocol adopted in 1997 a view to reducing their overall emissions of such
to control gas emissions. In Annex A of this proto- gases by at least 5% below the 1990 levels in the
col, the greenhouse gases accepted as being detri- commitment period 2008–2012.” Developing
mental were listed as follows: carbon dioxide countries that are not included in Annex I had no
(CO2), methane (CH4), nitrous oxide (N2O), such responsibilities in reducing their overall emis-
perfluorocarbons (PFCs), hydrofluorocarbons sions of such gases within this period. Developing
(HFCs), and sulfur hexafluoride (SF6). Annex countries that were not included in Annex I were
B showed details of the quantified emission obliged to give a greenhouse gas inventory each
limitation or reduction commitments of some year. It is clear that the main responsibility and
countries as a percentage of that of the base year. liability of reducing the effects of global warming
These commitments by member parties of Annex and climate change in the Kyoto Protocol were
I were as follows: Australia 108, Austria 92, based on the Annex I countries. In addition, the
Belgium 92, Bulgaria 92, Canada 94, Croatia 95, protocol planned to develop policies to prevent
Czech Republic 92, Denmark 92, Estonia 92, the climate change within the understanding of the
European Community 92, Finland 92, France 92, cooperation and implement these policies. Also
Germany 92, Greece 92, Hungary 94, Iceland 110, they would contribute to the exchange of informa-
Ireland 92, Italy 92, Japan 94, Latvia 92, Liechten- tion on climate change by “raising awareness.”
stein 92, Lithuania 92, Luxembourg 92, Monaco The Kyoto Protocol set more concrete targets
C 358 Climate Change
than the United Nations Framework Convention inadequate. Its lack of success was blamed on
on Climate Change, thereby demanding greater the delay in its application which was a result of
obligator responsibilities. the reduction in carbon dioxide emissions by
The purpose of the “clean development Annex I parties not being achieved without the
mechanism” included in the Kyoto Protocol is to inclusion of the Russian Federation. In addition,
assist parties not included in Annex I in achieving two countries, Japan and Russia, objected to the
sustainable development and in contributing to the extension of the Kyoto Protocol. Therefore,
ultimate objective of the United Nations negotiations for post-2012 were negatively aff
Framework Convention on Climate Change and ected at COP 16. One positive aspect of COP 16
to assist parties included in Annex I in achieving was the acceptance of the Green Climate
compliance with their quantified emission Fund which will be introduced in 2020
limitation and reduction commitments. (Decision 1/CP.16 of COP 16). Through this f
Although the Kyoto Protocol was signed in und, the sum of $100 billion will be transferred
1997, it did not come into force until 2005 to the developing countries annually by
because according to article 25/1 of the protocol, developed countries, and in addition, issues of
entry into force is possible only if 55 parties to the meaningful mitigation actions and transparency
convention, included in Annex I, which on implementation will be supported.
accounted in total for at least 55% of the total The increase in greenhouse gases is not the
carbon dioxide emissions for 1,990 of the parties, problem of one country alone. The problem
have deposited their instruments of ratification, is global and will have to be solved by global
acceptance, approval, or accession. This changed consensus and cooperation among countries.
when Russia became party to the protocol, thus The many international and supranational
allowing 55% to be achieved. organizations engaged in climate change studies
After the Kyoto Protocol for 2012, processes are therefore important platforms in this context.
and changes in climate were addressed by countries Of these, the United Nations is the key actor in
at meetings of the Conference of the Parties to the climate change issues on the international
Convention (COP). At COP 11, which became the agenda. UNDP’s (United Nations Development
first conference of the parties of the Kyoto Protocol, Program) 2011 report entitled “Adapting to
a 5-year action plan on climate change was adopted Climate Change” argues that the UNDP has
(Decision 2/CP.11). At COP 12, the second confer- been operating in 166 countries to minimize the
ence of the parties of the protocol, organized in effects of climate change and to prevent it. The
2006, it was decided that the Kyoto Protocol UNDP helps developing countries put in place
would continue to apply after 2012 without inter- the elements needed for a decent standard of
ruption. At COP 15 in Copenhagen, the need for an living and aid people’s ability to withstand
international climate change agreement was climate change. UNDP also supports poor people
announced for the period following 2012 (Decision in adapting to climate change since reducing
1/CP.15). The necessity of bringing international poverty and tackling climate change need to
public opinion to the agenda was emphasized by go hand in hand. UNDP works together
negotiation of a new climate change contract. with the least developed countries who are most
COP 16 was organized in Mexico. At this meeting, vulnerable to climate change and whose
it was revealed that no international progress economic growth highly depends on climate-
on climate change had been achieved, the EU’s sensitive sectors in order to adapt their national
leadership on climate change had failed, poverty programs by developing their technol-
and countries had reverted to small-scale ogy, adaptation, and mitigation activities. For
and regional agreements (http://www.tobb.org.tr/ example, the Global Environment Facility
AvrupaBirligiDairesi/Dokumanlar/Raporlar/cop16.pdf). (GEF) assists developing countries and transition
In addition, the Kyoto Protocol, which ceases be countries to cope with the adverse effects of
obligatory in 2012, is considered to be climate change. GEF aims to support developing
Climate Change 359 C
countries to increase their resilience to climate countries. The report also claims that climate
change through both immediate and longer term change could be prevented in both rich and poor
adaptation measures in development policies, countries by the reduction of greenhouse gases.
plans, programs, projects, and actions. According Especially in developing countries, if action on
to the UNDP’s 2011 report, the GEF has invested climate change is postponed, expenditures on this
more than $3 billion and leveraged close to $20 issue will be double. The World Bank is clear that
billion for climate change projects over the on the issue of climate change, they should act C
last 20 years. together with the governments. Long-term plans
The European Union recognizes that climate should be made to impact climate change. The
change is a global problem, but it is the duty of World Bank maintains that energy policies must
industrialized countries in particular to undertake be resolved by resorting to other means of energy
concrete obligations. In 2007, the European such as nuclear energy. The OECD works closely
Union endorsed an integrated climate change with governments to help them identify and imple-
and energy policy. In accordance with this, mea- ment least-cost policies to reduce GHG emissions
sures must be taken immediately and effort and thereby limit global warming, as well as to
exerted before climate change reaches dangerous integrate adaptation to climate change into all rele-
levels. In this context, the increase in temperature vant sectors and policy areas. The 2010 report on
will not exceed the level of 2 C compared to the “Climate Change” states that its Climate Change
period prior to industrialization. The European Expert Group is available to help with negotiations
Commission report of 2008 on climate change for the post-2012 period. This group of experts
entitled “Leading Global Action to 2020 and works on issues such as those related to climate
Beyond” claims that global emissions of green- change which include technology innovation,
house gases will have to be stabilized by around reporting, and verification.
2020 and then reduced to at least 50% of the 1990 Therefore, regarding climate change, it should
levels by 2050. The same report states that if the be emphasized that achievements can only be
major producers of emission step into action, this reached on an international level with the support
target is technically feasible and economically of international and supranational agencies.
affordable. It also commits to putting the world
on track to reduce global emissions by at least
half of the 1990 levels by 2050. Developed coun- Key Issues
tries collectively will need to cut their emissions
to 30% at least of the 1990 levels by 2020 and by The “IPCC Third Assessment Report: Climate
60–80% by 2050. The EU heads of state and Change 2001” shows that since the twentieth cen-
government made a commitment in March 2007 tury, the average global temperature has increased
that the EU will cut its emissions to 30% of the from 0.5 C to 0.8 C and that it is expected to
1990 levels by 2020. This commitment will be increase from 1.4 C to 5.8 C by the end of the
achieved at the global level with the help of twenty-first century. The major effects of climate
contributions by the other developed countries. change in the most general sense are the melting of
Even if there is no reconciliation at the global polar ice, the rise of the average global air and
level, the EU commits to cut emissions by at least ocean temperatures, the rise in sea levels, the
20% of the 1990 levels by 2020. It expects the decrease of ocean pH and the reduction of oxygen
participation of all countries but particularly levels, economic devastation derived from environ-
those producing heavy carbon emissions in nego- mental changes, the warming up of ocean waters,
tiations on post-2012. the loss of homes, the erosion of land, air pollution,
The “World Development Report 2010” of the floods, drought, and diseases (Özt€urk 2002).
World Bank states that development goals are Moreover, climate change will have a negative
threatened by climate change. The effects of cli- impact on the basic elements of daily life such as
mate change are felt most heavily by poor the physical and natural environment, technology,
C 360 Climate Change
economics, agriculture and food, reduction of crop The poorest countries and communities are
yield, tourism, fisheries, drought, health, forest affected most because of their geographic loca-
fires, and clean water. tions, low income, and low institutional capacity,
Generally, industrialization is accepted as the as well as their greater reliance on climate-
major reason for climate change. Although that is sensitive sectors such as agriculture (Nath and
true, human impact should also be considered as Behera 2011). For example, climate changes
a stronger basis for accumulation of gases such as have caused huge economic losses in agriculture
carbon dioxide and methane. Therefore, it would in places such as Africa which result in hunger and
make sense to show the human impact rather poverty. On this subject, the Food and Agriculture
than industrialization as the primary cause of Organization of the United Nations (FAO) is lead-
climate change. ing international efforts to defeat hunger. Serving
Climate change may affect different places both developed and developing countries, FAO
and communities to varying degrees. Socioeco- acts as a neutral forum where all nations meet as
nomic characteristics of urban areas differ from equals to negotiate agreements and debate policy.
those of rural areas. And effects of climate According to the report of FAO “Climate Change
change in urban areas are likely to be more and Food Security in the Context of the Cancun
dangerous than in other areas. Cities will become Agreements – FAO submission to the UNFCCC,”
less comfortable places (Lindley et al. 2006) as it FAO also works on effects caused by climate
impacts infrastructure, human lives, human change. It also points to the areas where adaptation
health, personal property, environmental and mitigation activities merge with ongoing
quality, and future prosperity. While large development efforts to improve sustainable use of
populated cities such as those in south Asia are natural resources for increased production, income,
the most vulnerable, the 2008 European Commis- food security, and rural development. FAO con-
sion Report, “Adapting to Climate Change,” siders climate change as one of the most important
states that climate change will also affect threats in terms of food security which is threatened
European cities. Southern Europe and the by the loss of agricultural land. In addition to this,
Mediterranean basin area are sensitive areas in countries with water scarcity problems, it may be
with regard to high-temperature increases and even more difficult to provide security. Besides
the threat of drought. The European Union water problems between countries, issues of water
foresees that agriculture, tourism, fisheries, and sharing and distribution between sectors are likely
forestry sectors can all be affected by climate to emerge between countries.
change. Another problem encountered with climate
The social impacts of climate change vary change is desertification. In addition, incidents
according to age, socioeconomic class, occupa- of drought are likely to increase, thereby limiting
tions, and gender. The world’s poorest people agriculture and necessitating the development of
will be most affected by these changes because durable and appropriate agricultural products.
of corruption. The UNDP defines corruption as Irrigation systems will need to be changed, and
misuse of entrusted power for private gain. For farmers not prepared for drip irrigation methods
this reason, improper use of funds by administra- are likely to face economic loss. Groundwater
tors can affect poorer people by leaving them will decrease and to reach it may be a costly
victims of climate change. In the 2011 report of process (Cangir and Boyraz 2008).
the UNDP, “Adapting to Climate Change,” it A further consideration is the effect of climate
states that the least developed countries need change on human health which has risen to
most support in fighting the effects of climate a serious level in recent years. Microbes and the
change. Ironically, we have to accept that coun- distribution of infectious diseases are affected by
tries and groups which cause the least climate climatic changes. Cancer, cardiovascular, and
change will be influenced most severely by cli- respiratory diseases, allergic diseases, food- and
mate change. water-borne diseases, air pollution–related
Climate Change 361 C
diseases, epidemic diseases, malaria, dengue, Future Directions
diarrhea, and mental health problems associated
with temperature can all be fatal diseases. The The effects of climate change are not national;
lack of clean water and problems of hygiene they are global. In other words, the problem does
resulting from climate change are marked. Chil- not only concern one country, but the whole
dren, pregnant women, and the elderly population world. Therefore, participation and negotiation
are the groups most likely to be affected by these on a global level are imperative for post-2012. C
problems. For example, poverty and ill-health in At the same time, social participation is crucial in
Southeast Asia and Africa will be exacerbated. In order to minimize greenhouse gas emissions in all
addition, cities are more vulnerable to climate- development plans, programs, and projects
change-related health effects because of their whether initiated by multilateral agencies, gov-
intensive population and infrastructure, the phys- ernments, or the private sector (Braun 2010).
ical (geographical, material, and structural) attri- Global participation by all actors for reducing
butes of the built up environment, and the the effects of climate change is vital. Such
ecological interdependence with the urban eco- a situation will provide the creation of incentives
system (Bambrick et al. 2011). The 2008 report of for reducing climate change and planning the
WHO (World Health Organization) “Protecting way forward in developing countries (and
the Health from Climate Change” states that maybe for non-Kyoto members) for post-2012.
small island developing states and urban In general, for the post-2012 period, setting tar-
populations, particularly those of tropical mega gets for reducing the use of greenhouse gases,
cities, are exposed to a combination of health improving and broadening the global carbon mar-
risks such as heat waves, floods, infectious dis- ket, innovation, and technology transfer (low-
eases, and air pollution; mountain populations are carbon technology), and financing international
at increased risk of water insecurity, floods and adaptation are necessary (Derviş and Jones
landslides, and infectious disease; and the health 2009). Moreover, the experience of developed
of indigenous people in polar regions may be and developing countries shows that adaptation
affected by changes in temperature, food sources, strategies work better when there is a synergy
and livelihoods. According to the report, protec- between climate change initiatives with other
tion of human health should be the main theme of socioeconomic goals and policies (Nath and
climate change studies. Behera 2011).
There are also economic impacts of climate In order to assess the impacts of climate
change. Efforts for reducing greenhouse gas change and to develop suitable adaptation and
emissions to avoid climate change involve signif- mitigation policies, accurate climate change pre-
icant costs. Without financial input now, the cost dictions are needed at the global and, more
arising in the future will be greater and sustain- importantly, the regional and local levels (Giorgi
able development goals will not be reached. Fur- 2005). Increasingly, local governments are devel-
ther climate changes will affect long-term oping innovative policies and programs to
economic plans in certain sectors; for example, address global climate change. A growing body
tourist areas may become less attractive. In sum- of scholarship explores local government behav-
mary, climate change is a factor that may prevent ior with respect to sustainability initiatives and
the realization of sustainable development. involvement in climate change programs and net-
It can therefore be seen that humanity is the works in the United States and elsewhere (Sharp
main destructive factor in climate change. et al. 2010).
Responsibilities differ from local to international In order to reduce the effects of climate
level, but cooperation is the most important key- change, the search for new technology is continu-
word. Cooperation of actors at all levels has to be ing. Solar and wind energies can be problematic
evaluated in the context of corporate social in terms of cost and integration into the energy
responsibility. system. However, cell-to-fuel cells, biomass
C 362 Climate Change Protocol
energy, hydrogen energy, carbon capture and change in the urban environment: Assessing climate
storage, second-generation biofuels, geothermal change related risk in UK urban areas. Journal of Risk
Research, 9(5), 543–568.
power plants, and recycling plants are all exam- Nath, P. K., & Behera, B. (2011). A critical review of
ples of new fields of research. The use of cheap impact of and adaptation to climate change in devel-
and polluting energy sources like coal must be oped and developing economies. Environment, Devel-
restricted by governments who should encourage opment and Sustainability, 13, 141–162.
Özt€
urk, K. (2002). K€
uresel iklim değişikliği ve T€
urkiye’ye
alternative incentives such as those mentioned € Gazi Eğitim Fak€
olası etkileri. G.U. ultesi Dergisi,
above, as well as turning to cleaner forms of 22(1), 47–65.
transportation. However, the most important Sharp, E. B., Daley, D. M., & Lynch, M. S. (2010).
way forward is to increase general awareness of Understanding local adoption and implementation of
climate change mitigation policy. Urban Affairs
the problems, and this can best be addressed Review, 47(3), 433–457.
through education. Tanlay, I. (2010). Cancun iklim değişikliği zirvesi –
değerlendirme notu. Resource document. T€ urkiye
Odalar ve Borsalar Birliği. http://www.tobb.org.tr/
AvrupaBirligiDairesi/Dokumanlar/Raporlar/cop16.pdf.
Cross-References Accessed 23 Feb 2012.
▶ Carbon Emissions
▶ Global Warming Climate Change Protocol
▶ Greenhouse Gases
▶ Kyoto Protocol ▶ Kyoto Protocol
▶ Mitigation
▶ United Nations Intergovernmental Panel on
Climate Change
Climatic Change
▶ Climate Change
References and Readings
Mission/Objectives/Focus Areas Since its founding, just over 40 years ago, the
Club of Rome has been promoting interdisciplin-
The Club’s mission is to identify the most crucial ary analysis, dialog, and action on fundamental,
problems which will determine the future of systematic challenges which determine the
humanity and to depict and highlight, through future of humanity. The Club is recognized
integrated and forward-looking analysis, the around the world for its early work on the
risks, choices, and opportunities in order to relationship between economic growth and
develop and propose practical solutions to the the environment which was identified with
challenges identified, and to communicate such “The Limits to Growth,” a perspective which
knowledge to policy makers in the public and holds even more weight today than before.
private sectors and also to the general public in Over the years, the Club has engaged in
order to stimulate public debate and effective a series of thoughtful, interdisciplinary, and
action to improve the prospects of the future. independent analysis of many critical issues in
We are a catalyst for informed debate about the world affairs. It has clarified threats, opportu-
options and solutions and a driver of real change nities, and choices and has advanced
in the world. practical solutions by provoking debate, by
Coalition of Environmentally Responsible Economies (CERES) 365 C
briefing top leaders in government, business,
and civil society, and by disseminating publica- Coalition of Environmentally
tions – some of them best sellers – aimed at Responsible Economies (CERES)
informed opinion and the general public. Other
remarkable publications include “Factor Five” by Henry L. Petersen
Ernst von Weizs€acker and “Blue Economy” School of Management, Alliant International
by Gunter Pauli. University, San Diego, CA, USA C
At the Club’s 40th Anniversary Assembly in
June 2008, it launched a 3-year integrated
program of international research and consulta-
tion on the topic “A New Path for World Synonyms
Development.” The program will not only engage
decision makers and experts and provide CSR
them with feasible proposals for action but
will also engage with the public through
a variety of channels. It will be, in part, an Address with Web Link
“open source” program. It will undertake only
a limited amount of original research, drawing www.ceres.org/
on the wide array of available information and
research in progress. It will be implemented in
close collaboration with partner organizations, Introduction
providing a framework through which their
ideas and contributions can be integrated. CERES is a leading coalition made up of envi-
The program will focus on five “clusters” of ronmental, investor, and advocacy groups. The
related issues within the overall conceptual network comprises of over 80 organizational
framework of A New Path for World Develop- members, over 130 nongovernmental organiza-
ment: environment and resources, globalization, tions, and 75 institutional investors with over
world development, social transformation, peace $7 trillion in assets. To be endorsed by CERES,
and security. an organization must commit to a ten-point code
of conduct that is listed within the “CERES”
principles. The CERES principles are a set of
guiding values that assist organizations with
Cross-References their corporate behavior and mandate that their
members measure their performance against each
▶ Coalition of Environmentally Responsible of the principles and issue a public environmental
Economies (CERES) report on an annual basis. CERES declares to be
▶ EABIS (European Academy of Business in one of the leaders for standardized corporate
Society) environmental reporting and has developed
▶ WBCSD guidelines for sustainability. Their Global
Reporting Initiative (GRI), a voluntary standard-
ized reporting mechanism for sustainability, has
received considerable recognition.
References and Readings
Codetermination, Table 1 Employee representation on the board level in the EU (According to Fulton (2011))
Parity
No representation One third representation representation Other forms
Belgium Austria (in listed and limited Germany (listed Finland (in companies with more than
Bulgaria liability companies with more companies with 150 employees, but details are left to
Cyprus than 300 employees) more than 2,000 negotiations on company level)
Estonia Czech Republic (in listed employees) France (a variety of possibilities
Greece (except for companies with more than 50 Slovakia (in state- applies, depending on company size,
some state-owned employees) owned companies) and private or state ownership)
companies) Denmark (in all limited Slovenia (depending on company size
Ireland (except for companies with more than 35 in terms of employment and turnover,
some state-owned employees) and the existence of a two-tier board)
companies) Germany (listed companies with
Italy 500–2,000 employees)
Latvia Hungary (in companies with
Lithuania more than 200 employees and
Malta a two-tier board)
Poland (except for Luxembourg (companies with
state-owned and more than 1,000 employees and/
partially privatized or significant state ownership)
companies) Netherlands (companies with
Portugal more than 100 employees, but
Romania only external persons can be
Spain nominated)
UK Norway (in companies with more
than 50 employees)
Slovakia (in companies with
more than 50 employees and
a share capital of more than
€25,000)
Sweden (in most companies with
more than 25 employees)
about their employer’s economic situation and are in American labor laws, [. . .] the introduction of
consulted on issues regarding employment and the European model of co-determination to the
work organization. However, as Schoemann et al. U.S. is unlikely.” In the UK, the Bullock Report
(2006) have concluded, “transposition of directive of 1977 laid out widespread proposals for
2002/14/EC into national law has been minimal, if employee representation and even included direct
not incomplete.” This observation holds true until election of board members by unions. However,
today. the report was dismissed due to employer resis-
In the USA, as in other liberal market econo- tance and fell from the agenda after Margret
mies, labor law does not require any form of Thatcher‘s electoral victory in 1979.
codetermination. Employee representation on With regard to Asia, codetermination is gener-
boards is an unknown concept, though works ally weak or nonexistent, though Japan marks
councils infrequently do exist. Usually, they are a notable exception. Its unique model of codeter-
supplanted by the respective local union and are mination does not provide for mandatory partici-
not of remarkable significance since the respec- pation, but employees are informed and consulted
tive issues, e.g., salaries and working conditions, to a considerable degree, nevertheless, since they
are usually subject to collective bargaining. are regarded as a vital part of the corporate com-
Consequentially, Prenting (1992: 17) concluded munity. Thus, employee participation is based upon
that due to “the voluntary nature of collective informal social norms, and unions act as transmit-
bargaining in the United States and restrictions ters of the employees’ interests (Jackson 2005).
Codetermination 371 C
Concerning China, labor relations in general has referred to these relations as “atomistic and
have been altered dramatically due to the transfor- anomic,” because workers are only weakly linked
mation of the economic system from a planned to to enterprises and there is high turnover, and there
a rather free market economy. As Hanlin (2012) is hardly any link or bond provided by unions,
points out, a rising number of conflicts between which are extremely weak. Consequentially, the
employers and employees could be observed after respective countries do not have mechanisms
1990 since privatization has led to unemployment, such as codetermination to provide for worker C
poor working conditions, the collapse of the social representation within firms. As unions mostly
safety system once provided by state-owned enter- are politicized and controlled by the state, their
prises, rising income inequality, and a shift of intermediation at plant as well as at enterprise
power from the employees to the capital owners. level is mostly ineffective.
As a reaction, the Trade Union Law was passed by
the Chinese People’s Congress in 2001. It holds that
unions have to be set up at plant level in enterprises Key Issues
with more than 25 employees and have to be
consulted on any issue relevant to the employees. One of the key issues on codetermination is the
In case the employer violates rights regarding occu- question if it has overall positive or negative
pational health and safety, payment, and working effects on a company’s performance. Aside from
hours, the union can even ask for rectification and providing democratic processes within companies,
participate in investigations. Despite these reforms, a balance between capital and labor, and improv-
codetermination in China remains weak because of ing working conditions, which are undoubtedly
its union-centric character. Unions are not accus- beneficial from the employee perspective, there
tomed to this new and challenging task yet. More- are also reasons which support codetermination
over, Art. 4 of the Trade Union Law explicitly from the capital owners’ and employer’s perspec-
determines economic development to be the central tives. As pointed out above, it can help to reduce
mission of unions, which in many cases can be friction and dispute between management and
diametric to the tasks of worker representation labor, and thus prevent against costly strikes.
(Heuer 2005). Moreover, the possibility to participate in deci-
Concerning Africa, South Africa is the only sion-making processes can be a motivational fac-
significant country where codetermination has at tor for employees and produce innovations so that
least a legal foundation. After the end of apartheid, company performance increases.
the Labor Relations Act was introduced in 1995, However, codetermination can also be seen as
which primarily aims at establishing rights of asso- a burden on company performance. First of all,
ciation and collective bargaining. However, the there is the classical argument that worker-
attempt to strengthen worker representation has participation rights will lead to higher costs for
been largely unsuccessful due to the traditional an enterprise as employees have an interest in
confrontational stands of employers and higher wages and salaries, less working hours
employees, long-standing state opposition against and more holidays, and better working condi-
unions, and the legacy of racial discrimination. tions. Aside from these pecuniary arguments,
Some progress, though, has been made on the procedural concerns might be of even bigger
plant level. In the 1990s, companies started to importance. Codetermination, especially when it
establish “joint forums with unions, within which guarantees for veto or voting rights, can lead to
information sharing, consultation and, in some a blockade of decisions which might be necessary
cases, joint decision-making occurs (Webster and for the enterprise as a whole, but might be seen to
Macun 1998, 66).” have negative consequences for the workforce.
In Latin America, finally, codetermination is The necessity to dismiss employees in order to
very weak as labor relations overall are heavily remain competitive and survive in the market is
tilted in favor of the employer. Schneider (2009) a traditional issue in that regard. Moreover, it can
C 372 Codetermination
be questioned whether employees do have the to more groups that are affected by a company’s
necessary qualification to serve on the supervi- operations. Employees clearly are one of those
sory board, as it is the case in several European stakeholders, who are regarded as having
countries. Someone from a manual profession a legitimate interest in a company.
without a background in business administration Though the creation of a balance between
can hardly be expected to oversee the potential capital and labor, and the supervision of manage-
impact of far-reaching strategic decisions. ment by employees speak for a stakeholder
This last argument can be taken further onto model, employee board membership can also be
a macroeconomic level. Companies from coun- criticized, because it actually promotes employee
tries with no employee representation on super- self-interest. The idea of supervision, especially
visory boards might be hesitant to invest in in countries with two-tier systems, is to guarantee
countries where such codetermination rights an independent control of the management and its
exist, because they fear the powers that decisions. These decisions often evolve out of
employees can wield. After the turn of the mil- previous negotiations with labor representatives,
lennium, it was fiercely discussed in Germany, e.g., when salaries, working hours, and condi-
e.g., if the extensive codetermination laws actu- tions are concerned. The systemic problem lies
ally were a barrier to the attraction of foreign in the fact that employee representatives on the
direct investment (FDI). To address this issue, it board, in their function as supervisors, sanction
was suggested to liberalize codetermination and the deals which they or their colleagues have
provide for individual solutions to be negotiated previously negotiated with management.
between the social partners on the company level. Whereas codetermination on the enterprise
Due to resistance from the labor side, no respec- level is relevant for corporate governance issues,
tive reforms were passed, however. That codeter- it has increasingly become a CSR topic on the plant
mination might be seen as a disadvantage in level. Especially in developing and emerging coun-
international competition is supported by the tries, poor working conditions and low salaries
fact that an increasing number of companies in have led to increasing calls for improved worker
Germany have changed their legal status and participation. The obstruction of the freedom of
taken on legal forms to be found in other assembly, union work, and collective bargaining,
European countries where no codetermination which is common in states with weak legal sys-
exists. Whereas in 2006, there had been only tems, is equally criticized. Large corporations, first
17 companies with more than 500 employees and foremost, have come under pressure to permit
that resorted to such a measure, the number rose worker unionization and representation. The ISO
to 31 in 2009, according to the Hans-Boeckler 26000 as an international guideline on social
Stiftung. Taking on legal forms that are existent responsibility explicitly points out that “informa-
in other EU member countries has become tion and consultation mechanisms such as works
possible due to European integration laws. councils and collective bargaining” are vital to
Consequentially, codetermination is an impor- social dialogue and shall be introduced by compa-
tant issue in corporate governance, especially in nies. Moreover, the establishment of such councils
those countries where employee representatives are and unions must not be hindered and companies
to be found on supervisory boards. The essential are asked not to “obstruct workers who seek to
question is whether a shareholder-oriented or form or join their own organizations and to bargain
a stakeholder-oriented model of corporate gover- collectively, for instance, by dismissing or discrim-
nance is applied. The former clearly takes a position inating against them, through reprisals or by mak-
against employee representation. It pursues share- ing any direct or indirect threat so as to create an
holder profit maximization as overriding goals and atmosphere of intimidation or fear.”
assumes that employees will pursue goals, higher Furthermore, disclosure on the treatment
wages, e.g., which are diametric to this aim. The of workers and employee representation is
latter argues for extending the supervisory function increasingly expected. The Global Reporting
Codetermination 373 C
Initiative (GRI), in its section on governance, decline that is observable in industrialized coun-
demands reference to “[i]nforming and consulting tries. Thus, Jackson (2005, 419) pointedly
employees about the working relationships with remarks in his comparative study that “the size
formal representation bodies such as organization of the core model is getting smaller.”
level ‘works councils’, and representation of In developing and emerging countries, where
employees in the highest governance body.” codetermination is hardly existent, initiatives
such as the ISO 26000 and the GRI, but also C
public and political pressure will most probably
Future Directions lead to better employee representation. Though
the effective introduction of codetermination on
With regard to the future of codetermination, the enterprise level seems to be unlikely, there
national distinctions have to be made. In coun- will be improvements on the plant level.
tries where codetermination on the enterprise This does not mean that extensive consultation
level exists, it has come under increasing criti- or even voting rights will be established, but basic
cism because it is perceived as a disadvantage for principles, such as the provision of information,
attracting foreign investors. Moreover, as will gradually be introduced.
demonstrated above, companies in the EU – the Overall, despite a globalization of economic
region with most extensive codetermination structures and the attempt to foster regional
rights in global comparison – have found ways homogenization with regard to codetermination,
to circumvent national legislation in order to convergence on a single model remains out of
avoid employee representation. Due to the desire question. Moreover, codetermination will remain
for appealing to international investors and for a controversial issue of discussion on economic,
creating a more homogenous legal environment social, as well as on moral grounds.
for codetermination in the EU, it can be expected
that codetermination will be weakened on the
enterprise level in countries where it has tradi- Cross-References
tionally been strong. Nevertheless, in the very
recent past, a countertrend has been observable, ▶ Board of Directors
which has its roots in the financial and economic ▶ Collective Bargaining/Trade Unions
crisis. The seeming carelessness and risk taking ▶ Corporate Governance
by top-management in many companies have ▶ Corporate Social Responsibility
reinforced calls that labor representation on the ▶ Global Reporting Initiative
board can help to effectively constrain manage- ▶ ISO 26000
ment from pursuing excessive, short-term ▶ One Tier Board
oriented goals. ▶ Trade Union Recognition
Codetermination on the plant level will not be ▶ Two-Tier Board
affected as much, though it has to be said that the
concept in general does and will continue to
suffer from declining union membership. Some References and Readings
examples shall be given: In Germany, the rate of
unionization has declined from 36% at the begin- EU Commission (2002). Directive 2002/14/EC of the
European parliament and of the council of 11 Mar
ning of the 1990s to 19% in 2010. In the same 2002 establishing a general framework for informing
period, union membership went down from 16% and consulting employees in the European Community.
to 11% in the USA, and from 38% to 28% in the http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri
UK. Finally, in Japan, it dropped from 25% to ¼CELEX:32002L0014:EN:HTML. Accessed 14 May
2012.
17%. As codetermination – regardless of the
Fulton, L. (2011). Worker representation in Europe.
country – is bound to the work of unions, either Labour Research Department and ETUI. http://www.
directly or indirectly, it will be eroded by this worker-participation.eu. Accessed 14 May 2012.
C 374 Collaborative Advantage
strengthen local collaboration and results in an in sectors such as food, fashion, textiles, and
increased capacity to compete. automobiles. Supported by infrastructure pro-
Kaoru Ishikawa founded Quality Circles in the vided by a communist regional government,
Japanese automobile industry, with the intention industrial districts were collaborative environ-
of empowering workers whose skills were central ments; high-quality products were produced by
to the success of the company. Workers came networks and partnerships, supported by advice
together to take co-ownership of the process of from intermediaries. The culture of the region
continuous improvement. Japanese automobile was distinctive; neighboring Tuscany and Veneto
companies derived Collaborative Advantage provided very different environments for busi-
from this relationship with their workforce, and ness, with less emphasis on collective provision
the resulting reputation for quality products gave and more on individual entrepreneurialism.
them Competitive Advantage in global markets. In South Western Norway, companies around
Quality was a bottom-up process. the Odda fjord came together to work in net-
A sales outlet for the Japanese automobile firm works, with a common foundation of quality edu-
Isuzu in Thailand sought to increase the loyalty cation. Through engaging in regular dialogue,
and engagement of their employees, by they identified unexpected synergies between
supporting their education and training, raising their activities. The toxic output of one factory
their level of knowledge, and thus improving the process could be a valuable input for another
quality of service that they could offer to factory, at the other side of the fjord. The net-
customers. works were supported by projects addressing
Jagdesh Gandhi, an entrepreneurial school regional development, part of a national program
manager in India, visited Japan in 1992, was of enterprise development.
impressed by Quality Circles, and founded the Across Europe, partner organizations
Student Quality Circle movement at City concerned with work organization and innova-
Montessori School in Lucknow, India. Through tion are able to come together and collaborate
the World Council for Total Quality and Excel- on projects supported by the European Commis-
lence in Education, he supported the formation of sion. Exchanging experience on workplace inno-
national chapters in 25 countries. The network vation, they are working together to produce
offers Collaborative Advantage to participating a handbook for social partners and policy makers,
researchers and teachers and enables school stu- helping readers to produce new hybrid organiza-
dents to develop skills which give them local tions of their own. The core challenge is to
Competitive Advantage. address such a diverse audience. In each country,
In the town of Abbottabad, in the foothills of the roles of the government, public, and private
the Himalayas in the North West Frontier region sectors are differently divided, leaving distinct
of Pakistan, a new network is developing, seeking areas for corporate social responsibility at com-
Collaborative Advantage. Schools have been pany level.
piloting the use of Student Quality Circles and In Mauritius, there is a long established Qual-
observing the rapid improvement in student con- ity Circles movement, and the Mauritius National
fidence and language skills. Employers have Productivity and Competitiveness Centre sees
attended presentations and recognized that such collaborative approaches in schools as offering
skills could play a valuable part in developing enhancement of national Competitive Advan-
their businesses, which have been held back by tage. Schools are encouraged to organize Civic
problems of literacy and numeracy. Schools who Action Teams, which are in essence Student
are normally competitors have decided to collab- Quality Circles, addressing a range of problems
orate, building a new system which offers their within a wider social agenda. Despite the remote
students Competitive Advantage. location in the Indian Ocean, there have been
In the Emilia Romagna region of Italy, major developments in the Knowledge Economy
a population of 3 m gave rise to 300,000 SMEs, and Business Process Outsourcing in Mauritius.
Collaborative Advantage 377 C
Civic Action Teams, based on collaboration, can Experience of the credit crunch and global
be seen as underpinning plans for national Com- economic crisis has been that there were key
petitive Advantage. deficiencies in understanding how systems
The Wola Nani charity and trading company work, including financial market systems and
in South Africa brought together women living interconnections between organizations. Eco-
with HIV/AIDS. A range of medical and social nomic recovery depends on acting on recent les-
services are offered, and an income generation sons, such as with Enron, Lehman Brothers, and C
division is making products for sale. Papier Goldman Sachs.
mache bowls with distinctive design and decora- It is not sufficient to analyze business and
tion are made for export. Expert consultancy economic activity in terms of individual firms
advice is sought from the Faculty of Art, Design and national government policies. We also need
and Architecture at Kingston University in the to consider the meso or intermediate level, which
UK, to develop new designs and to improve pro- involves relations between firms and other orga-
duction methods. With improved medical care, nizations. There may be matchmakers who facil-
including the availability of antiretroviral medi- itate and catalyze collaboration.
cation, the women now live for many years after Emphasizing Collaborative Advantage, in the
diagnosis, and they can both develop craft skills context of corporate social responsibility, means
and take an active role in decision making. that qualitative approaches are likely to be
In Kingston, UK, the first Senior Quality Cir- needed, rather than traditional quantitative
cle is being formed. Knowledge workers at the approaches. Successful collaboration requires
university are coming together to reflect on their relational understanding and the discovery of
experience, skill, and tacit knowledge. At a time common languages which enable shared mean-
of budget cuts and restructuring in higher educa- ings. We will also encounter areas of misunder-
tion, workers need to take co-ownership of their standing and disagreement.
knowledge and consider alternative approaches
to work organization. Senior managers who are
new to the university may lack previous experi- Future Directions
ence of the culture which they have joined. The
contribution of particular individuals may only There is a case for revisiting business strategy,
come to be appreciated after they have left: the marketing, human resource management,
Senior Quality Circle enables contact to be accounting and finance, informatics, and opera-
maintained. tions management: both in practice and in how
they are taught. Wherever there is mention of
Competitive Advantage, we need to explore the
Key Issues underlying collaborative dimension. This has
been the source of the common language which
Success in business involves a twin track we use in business, which now appears
approach. Individuals and companies seek Com- unbalanced.
petitive Advantage, but this is situated in Globalization means that different markets are
a context of collaborative relationships. Compet- no longer completely separate. Collaboration has
itive and Collaborative Advantage are linked, multiple dimensions. It is not adequate to con-
each providing a backdrop for the other. centrate only on local markets and relationships.
Advantage is not secured simply by following However, international and cross-cultural collab-
textbook guidelines. It is a matter of exercising oration can be complex, as there can be areas of
judgment in practice, built up incrementally misunderstanding.
through experience. It is based on trust, used to New collaborations and business configura-
create social capital. As this develops, under- tions are needed. If they are to be sustainable,
standing is required and is tested through actions. they will need to be seen as corporately socially
C 378 Collecting
Synonyms
Cross-References
Collective bargaining; Craft union; Guild; Indus-
▶ Competitive Advantage trial union; Organized labor; Trade unionism
▶ Globalization
▶ Region
Definition
European unions from medieval craft guilds and through national pay agreements. Alternately, the
prevented craft unions representing only workers organizing model involves full-time union orga-
with specific skills. Attempts at craft unionism nizers, who create strong networks and leaders.
were absorbed into broad industrial unions, which This model is orientated more toward direct con-
organized all workers in an industry or country frontational campaigns. Many unions are a blend
regardless of skill and employment status. of both philosophies. Union leaders and key roles
Such unions possessed (and still retain) strong at national and local level are usually determined
political bargaining power on issues such as social by democratic means.
insurance, health care, and occupational safety. As In dealing with employers, unions typically
a consequence of being removed from a craft have an agreement on membership of new and
origin and traditional, Western European unions existing employees. Membership models are
were also more recognizing of the rights of normally one of the following:
management to manage and less concerned about 1. A closed shop, which employs only workers
distinctions between skilled and unskilled workers. who are already union members.
2. A union shop, which employs nonunion
Structures, Politics, and Activities of Unions workers also, but new employees must join
Unions may be organized by a particular section a union within a certain time limit.
of skilled workers (craft unions), workers from 3. An agency shop requires nonunion workers to
many trades (general unions), or by particular pay a fee to the union for its services in nego-
industry (industrial unions). At a national level, tiating their contract.
unions often unite in national federations, who in 4. An open shop does not require union member-
turn may be affiliated with international federa- ship. If a union is in place, workers who do not
tions such as the European Trade Union Confed- join benefit from the collective bargaining
eration or the International Trade Union process.
Confederation. As noted, the form of unions varies, but in
A union may be deemed a quasi-legal entity, general, all unions pursue similar activities. The
with a mandate from its membership to negotiate main activity is collective bargaining, that is,
with employers on pay and working conditions. In negotiation with employers and employer orga-
such cases, unions have certain legal rights, most nizations on pay and working conditions with
importantly the right to engage in collective unions representing employees’ interests. Unions
bargaining (see later) with employers. If employer also engage in some level of political activity,
negotiations do not reach a satisfactory outcome, which can range from lobbying interests favor-
a union can take the course of industrial action, able to members to financial support of particular
culminating in either strike action or binding arbi- candidates or political parties. Although unions
tration. In other circumstances, unions may not may have originally provided assistance to unem-
have the full legal rights to represent workers. ployed or ill members, this role has now been
Unions may also engage in broader political or assumed by the State in most jurisdictions. How-
social struggle, as is the case in many European ever, unions do still provide benefits to members
countries where unions are often closely aligned such as legal representation or loyalty schemes.
with certain political parties. They may advocate Lastly, industrial action is the primary defensive
for social policies and legislation favorable to activity of unions. This may range from work-to-
members or workers in general. rule to strike action in furtherance of objectives.
In terms of internal structure and organization,
unions can be classified by a services model or
organizing model. The services model focuses on Key Issues
maintaining worker rights, providing services,
and resolving disputes through methods other As the origins and forms of unions vary, this
than direct pressure on employers, for example, section outlines the general environment and
Collective Bargaining/Trade Unions 381 C
issues faced by unions according to broad geo- 6. Administration – in the United States, the
graphical area. National Labor Relations Board (NLRB) is
empowered to interpret labor law and decide
United States and Canada on matters of representation. The NLRB
The systems of trade unions and industrial rela- covers all sectors except agriculture, railway,
tions in the United States and Canada reflect and the airline sector. In Canada, provincial
similar values (Morley et al. 2008). The National labor relations boards fulfill a similar function. C
Labor Relations Act (NLRA) 1935, as amended According to the Bureau of Labor Statistics
in 1947, is the basis of the legal environment for (2010), 12 % of workers in the United States were
unions in the United States. In 1948, a similar law represented by unions, with the corresponding
was passed in Canada using the NLRA as figure in Canada at 31 % (HRSDC 2010). This
a model. The basic model consists of six difference can be explained through the historic
attributes: divergence of the labor relations environment in
1. Employee choice – in both countries, there is both countries from the 1960s. The New Demo-
no presumption that workers are represented cratic Party (NDP) was formed in 1961 with the
by a union. Workers determine whether they support of Canadian unions. As the NDP
wish a union to represent them, and there in no progressed, the political landscape for unions
presumption that representation will affect changed, with the result that government involve-
terms and conditions of employment. ment in bargaining, arbitration, and dispute reso-
2. Majoritarianism – the choice to be lution is more common than in the United States.
represented, and by which union, is based on For example, referral of a dispute to a third party
a majority of workers in a firm or facility. for resolution is mandatory in Canada but not
Selection is normally by means of a secret currently in the United States (Morley et al.
ballot in the USA; once 30 % of workers 2008). In both the United States and Canada,
express a wish to be represented, a ballot is work stoppages since 1970 have declined steadily
held to ascertain a majority. In Canada, (Morley et al. 2008). In the event of a union
a ballot may be replaced by evidence of signed strike, the United States allows employers to
union application forms, payment of dues, or hire temporary replacement workers under the
signed cards. provision that any strike is an economic strike –
3. Decentralization – workers in a firm, facility, one centered on the terms and conditions of
or craft within a facility comprise employment. Litigation may result to determine
a “bargaining unit.” This system means if a strike is in fact an economic strike. In Canada,
that bargaining is more decentralized with some states (Ontario and Manitoba) allow
agreements cover a single employer or replacement workers, but the two largest states
facility. (British Columbia and Quebec) do not permit
4. Exclusive representation – once a majority of replacement workers. Additionally, for a strike
workers select a union to represent their inter- to be recognized as legitimate, all states require
ests, this union represents all workers in a vote of workers.
a bargaining unit. In Canada, all workers
must pay union dues even if they are not Latin America
union members, whereas United States federal The State is (and has been) a key actor in the labor
legislation states that nobody can be forced to movement in Latin America. Unions and union
join a union. affiliation has increased during the latter part of
5. Legally enforceable – in both the United the twentieth century as democracy permeated
States and Canada, when agreements are writ- Latin American countries, but historically, the
ten, they are legally enforceable. The courts do State imposed restrictive structures on unions
not normally enforce agreements; rather, bind- (Morley et al. 2008). Labor laws limited the
ing arbitration is utilized in the main. rights of workers to organize, strike, or negotiate
C 382 Collective Bargaining/Trade Unions
collectively. Many states also had powers to remains more widespread than in the United
control unions. By the 1990s, however, countries States or Japan, for example (Morley et al.
like Mexico and Venezuela had introduced 2008). Another feature in some Western Europe
legislation to approve unions as well as engage countries is participation of workers in
in arbitration. management decision-making. This is particu-
Transition to democratic society has been dif- larly so in European Union member states,
ficult in most Latin American countries – high where employee consultation at a minimum is
poverty levels, high unemployment, economic a legal requirement in organizations with more
hardship, and high levels of external debt are than 50 employees (EU Directive 2002/14/EC).
still key issues in many economies. These issues Countries like Germany, Sweden, Belgium,
have affected the labor markets and levels of France, and the Netherlands allow some form of
unionization/collective bargaining in the region. indirect participation in decision-making, nor-
Although many Latin American countries have mally through a works council or similar
ratified International Labour Organisation committee.
treaties (even more than the United States and
Canada), the nature of their economies means Central and Eastern Europe
bargaining power of workers and unions is some- The development of former socialist countries
what diminished. Labor markets have deterio- post 1989 in Central and Eastern Europe saw
rated as the growing pains of democratization the transformation of those economies toward
become apparent. The informal (or black) eco- international trade and Western European mar-
nomic activity of the region may be as high as kets. On May 1, 2004, eight former socialist
50 % (Morley et al. 2008). This works against the countries joined the European Union – Czech
development of unions and collective bargaining. Republic, Estonia, Hungary, Latvia, Lithuania,
However, countries like Brazil, Argentina, Slovakia, Slovenia, and Poland. In 2007, Roma-
Mexico, and Uruguay have centralized collective nia and Bulgaria were also admitted. Accession
bargaining processes, which with the exception rules to the European Union specify the need for
of Uruguay involve the State. Other countries like overarching industrial relations legislation. Thus,
Chile, Peru, Venezuela, and Colombia have more all accession countries have some form of legis-
decentralized processes. lation on unions and collective bargaining. Trade
unions pre-1989 had higher membership than
Europe their Western European counterparts. Post-1989,
Western Europe unions fragmented into pro- and anticommunist
The social model in many Western European unions, which in turn led to fragmented industrial
countries is more supportive of a welfare state relations (Morley et al. 2008). Although EU
than the United Kingdom. Thus, unions have accession has been granted to most for the former
been a more powerful force in societal develop- Eastern Bloc countries, their socialist past is still
ment. Traditionally, centralized collective influential on cultural values and the fragmented
bargaining is more common and is supported by nature of trade unions may continue for some
unions, employers, and governments as a means time yet.
of achieving numerous objectives. Unions view
it as a means to control and reduce wages differ- Middle East and Asia
entials. Employers, particularly large firms, As data on unions in the Middle East is generally
benefit from less direct workplace bargaining. not available, the countries of Jordon, Saudi
Governments benefit from the ability to monitor Arabia, Syria, Turkey, and Egypt are briefly
wage agreements for inflationary pressures. described as reflective of the state of unions in
From the 1980s, pressure from employers in the Middle East. Similarly, several countries will
some countries resulted in more local bargaining, be used as representative sample of issues faced
but the coverage of collective bargaining by unions in Asia.
Collective Bargaining/Trade Unions 383 C
Middle East government’s view, and it has been used to effec-
In Jordan, the union movement is quite weak and tively ban strikes (Morley et al. 2008).
government intervention and control is normal. Similar to Syria, Egypt has a single recognized
A legal framework in the New Labor Law 1996 is confederation, the Egyptian Trade Union Feder-
the primary legislation. This law gives more ation, to which all unions must be affiliated.
power to employer organizations and limits the Labor law in Egypt allows the government to
roles of trade unions. Additionally, the main term a union illegal or render a unions charter C
union body in Jordan, the General Federation of invalid (Morley et al. 2008). Strikes are deemed
Trade Unions, had a rigid structure which does a form of public disorder and thus are illegal,
not easily permit members to change the Federa- although they do occur.
tion’s policies or leadership. Thus, unions in Thus, in general, trade unions in the Middle
Jordan do not reflect typical progress toward East are to some extent dependent on the levels of
better conditions of employment for members. democracy in the region. In all cases mentioned,
Following the discovery of oil in Saudi Arabia, the government plays a major role in the indus-
a shortage of skilled labor attracted many foreign, trial relations field by close supervising and/or
high-paid workers. This influx of expatriate controlling workers and unions.
workers remains a key feature of the labor market.
Trade unions and collective bargaining are Asia
prohibited by law, as are strikes. Employers set Unions in Japan, while present and free from
wages, and the government controls all aspects of government intervention, have been in decline
industrial relations. In 2001, the government in recent decades. The three pillars of the labor
approved the establishment of an employee’s relations system in Japan – life-long employ-
committee, which provides recommendations to ment, seniority-based pay, and enterprise unions –
employers on pay work conditions (Morley et al. have been threatened due to increased global
2008). competitive pressures on Japanese industry.
Syria operates a single union confederation, Bargaining is informal and based around these
the General Federation of Trade Unions, founded three pillars. A national labor movement (Rengo
in 1948. This confederation is closely linked to or the Japanese Trade Union Confederation) was
the ruling Baath party, and all unions must be formed in 1989 and has attempted to unify
affiliated to it. The Syrian government, while unions. Its success to date has been limited.
encouraging organized labor, restricts the politi- Korea and Taiwan share some similar charac-
cal influence and economic power of unions teristics in that they both have had considerable
(Morley et al. 2008). While strikes are permitted, industrial development. In Korea, mass industrial
they are generally discouraged. unrest from the late 1980s to the late 1990s
Trade unions in Turkey have had mixed for- resulted in increased trade union membership
tunes in the past 30 years or so. The Trade Union and a shift from unions at enterprise level to
Law of 1947 legalized unions. A confederation of representation at industry level. Bargaining in
unions (Turk-Is) was formed in 1952 and until the metal and health industries in particular
1980, union membership grew steadily. occurs at industry level (Morley et al. 2008). In
A military coup in 1980 shut down Turk-Is and 1997, a Tripartite Commission of workers,
two other union confederations. From 1986, employers, and government was formed which
a resurgence of unions saw a period of intense was the first formal recognition by the govern-
industrial conflict which resulted in several ment of a partnership approach to negotiation on
rounds of collective bargaining within the public terms and conditions. In Taiwan, prior to democ-
sector. An outcome of this bargaining process ratization in 1987, unions were for the most part
was agreement that all Turk-Is unions display arms of the state. A Council of Labor Affairs was
unity and not enter into any individual agreement. established in 1987, as were several independent
This outcome has advantages from the unions. Labor laws do allow the government to
C 384 Collective Bargaining/Trade Unions
dissolve unions or change leadership if public common than previous as the government is
order is threatened. Strikes are permitted only increasingly reluctant to attract global media
after a mediation process, and most government attention which might deter continued foreign
employees are not permitted to strike. investment.
Countries such as Malaysia, Indonesia, and
Thailand, often termed “emerging tigers,” share Africa
a common historical repressive approach to trade The diversity of the African continent implies
unions linked to political circumstance (Morley many unique features in each country. Diversity
et al. 2008). Malaysian unions are not permitted can be seen across ethnic background, historical
to bargain on issues such as promotions or lay- colonialism, political structures, and economic
offs, and bargaining at national level is unusual. growth. Historically, the formation of unions in
Strikes are legal under limited conditions and Africa took place after the Second World War.
may be prohibited by the government. Indonesia Unions were often supported by colonial admin-
repressed unions until the late 1990s and in 1998 istrators, who saw them as a means of keeping
ratified International Labour Organisation (ILO) social peace.
conventions. This has resulted in increased union Ironically, independence from colonial pow-
activity, although high unemployment levels ers reduced the independence of unions as many
limit the power of unions. A checkered history new regimes were single party (Schillinger
of military coups/democracy in Thailand in the 2005). Over time, however, many union move-
1990s has left a relatively weak and fragmented ments have contributed to political change in
union movement. Unions are more powerful in Africa. For example, in Mali, Congo, and Niger,
the state sector. unions opposed single party rule and play an
Singapore also has a somewhat repressive atti- important role in bringing about multiparty
tude to unions, as the National Trade Union Con- democracy. South African unions are often cited
gress is controlled by the government. Union as an example of the involvement in political
activities are controlled by regulation, with only change as a considerable number of postapartheid
limited collective bargaining permitted, and political leaders came from union ranks. How-
strikes are illegal in sectors deemed necessary ever, the traditional role of unions – improvement
for economic development. Industrial relations, of pay and working conditions – has been sub-
however, follow a paternalistic approach in that sumed by political concerns in many African
worker layoffs have been reduced or prevented countries. More developed economies such
through tripartite agreement (Morley et al. 2008). as South Africa, Ghana, Kenya, Libya, and
Labor in China is tightly controlled. Unions at Mauritius have more robust union movements
enterprise and industry level are state-controlled. and associated labor legislation.
All unions must deal with the All-China Federa- Structural Adjustment Programs (SAP) of the
tion of Trade Unions (ACFTU), and striking is IMF and World Bank have a serious effect on
illegal. The ACFTU is closely linked to the economic growth and recovery of many African
Chinese government. The increasing openness economies. This, is turn, has an effect on entre-
of the Chinese economy to foreign business and preneurship, business development, and employ-
investment has resulted in an increasing number ment. In a similar manner to some Latin
of unofficial workers unions (Morley et al. 2008). American economies, informal business activity
At the same time, the ACFTU actively encour- has been a hindrance to the development of
ages unions to join them and global companies unions. Recent years have seen some level of
area a particular focus for the federation, who aim increased foreign direct investment in African
to have control of all unions in non-state compa- economies, mainly in the area of natural
nies by 2010 (Economist 2008). Strikes have resources. Investments are not based on low-
become more commonplace, as workers seek to cost labor nor are labor costs significant. High
get improved wages. Repression of strikes is less capital cost implies that relatively good labor
Collective Bargaining/Trade Unions 385 C
relations are more a priority. This may lead to 1991 was based on the philosophy that workers
increased union organization (Schillinger 2005). were freely contracting individuals. This regime
placed significant obstacles in the path of unions
Australia and New Zealand and collective bargaining and denied legitimacy
For the most part of the twentieth century, con- to unions. The Employee Relations Act 2000
ciliation and arbitration between the state and the reinstated the legitimacy of unions but did not
Australian Council of Trade Unions (ACTU) was restore the arbitration system. C
the predominant feature of the union movement.
In the latter part of the century, change occurred.
While the 1980s was period of national wage Future Directions
setting, the 1990s saw a devolution to enterprise
level bargaining. The Labor government was Collective Bargaining
replaced by a coalition in 1996, who introduced Collective bargaining, while used as a synonym
the Workplace Relations Act which changed the for trade/labor unions, also refers to negotiations
industrial relations environment. The Act between employers and employees’ organiza-
curtailed the role of the ACTU in collective tions as a collective. The negotiations normally
bargaining. In place, bargaining at the enterprise focus on wage rates, working hours, holidays, and
level was by two principal means – a certified grievance mechanisms. Any resulting collective
agreement or an Australian Workplace Agree- agreement may apply to a sector, business feder-
ment (AWA). In the case of an AWA, this agree- ation, or at the national level.
ment is effectively between individual workers In line with declining union density, the focus of
and employers, with a union acting only as collective bargaining has become more
a bargaining agent (Morley et al. 2008). A certi- decentralized in recent years. This is due to factors
fied agreement refers to a collective agreement. such as devolved responsibility among global orga-
Fair Work Australia (formerly the Australian nizations, a lack of statutory regulation, and
Industrial Relations Commission) was outsourcing. Decentralized bargaining also assists
established under the Fair Work Act 2009. The employers in minimizing the influence of unions.
Fair Work Authority has a number of oversight The global economic downturn beginning in 2007
functions including minimum wages and also has had impacts on collective bargaining, as
employment conditions, enterprise bargaining, governments and employer organizations faced
industrial action, dispute resolution, and termina- turbulent economics conditions, which have in
tion of employment. Effective July 2010, the Fair turn reduced the ability of collective bargaining at
Work Act has refocused collective bargaining to a national or sector level to deliver improved pay
an enterprise base and remove individual and/or conditions. For example, collective
arrangements and AWAs. A key tenet of the bargaining at national level in Ireland has been
Fair Work Act is the concept of “good faith strained by economic events. However, the decline
bargaining,” which requires parties to make in collective bargaining at industry and national
sincere efforts in negotiations. level has been compensated for to a degree through
Similar to Australia, the New Zealand regula- an increasing number of jurisdictions with national
tory system was also based on an arbitration or industry minimum wage levels.
system for the most part of the twentieth century.
The 1970s and 1980s was a period of increasing Recognition and Legal Framework
industrial relations strife as strong unions negoti- The legal recognition of unions is an important
ated directly with employers, bypassing the arbi- factor in negotiations from a unions’ perspective.
tration process (Morley et al. 2008). A change Union recognition can be voluntary or statutory.
from a Labor to Conservative government in Voluntary recognition implies employers accept
1990 brought about a dramatic change in the collective bargaining procedures and some
labor market. The Employment Contracts Act of involvement of the state in an umpire role.
C 386 Collective Bargaining/Trade Unions
A voluntary regime exists in countries such as had a small positive effect on union membership.
Australia, New Zealand, and Ireland. Statutory The most influential factor in union density
recognition normally implies union must be rec- decline has been a global shift away from tradi-
ognized once certain conditions have been met, tional manufacturing employment to service and
for example, majority representation. The United retail sectors – which traditionally are nonunion.
States, Canada, and the United Kingdom operate The number of employees in manufacturing at
this approach. Another approach to statutory the turn of the century was approximately half
union recognition is that adopted by Scandina- that of 1950, with the numbers employed in ser-
vian countries, where an automatic right to be vice and retail sectors doubling or tripling in
represented exists (D’Art and Turner 2003). some economies during the same period. Finally,
Statutory recognition is favored by unions, but institutional factors such as the inclinations of
with the exception of the Scandinavian countries, ruling political parties can contribute to
union membership has declined (see next section) increases/decreases in union density, but this
despite statutory recognition. A debate continues has not been a major factor. The main exception
on the relative merits of voluntary versus statu- to declining union density is Scandinavian coun-
tory recognition and recognition procedures. tries, where, as noted previously, an automatic
For example, in the United States, as of mid- statutory right to union recognition exists.
2010, the Congress continues to debate the
Employee Free Choice Act, which was passed
by the House of Representatives in March 2007. Cross-References
This Act proposes some important changes. First,
it proposes to streamline union recognition by ▶ Minimum Wage
removing the need for a secret ballot. Second, ▶ Trade Union Recognition
the Act facilitates initial collective bargaining
and agreement by setting timelines for agreement
and allowing binding arbitration. Third, the Act References and Readings
strengthens the ability of the National Labor
Relations Board to seek injunctions against Bureau of Labor Statistics. (2010). Union Membership.
employers who discriminate against employees www.bls.gov/news.release/union2.toc.htm. Accessed
6 July 2010.
seeking representation. Another example of the Colling, T., & Terry, M. (2010). Industrial relations.
issues on recognition is Ireland, where Chichester, UK: Wiley.
a voluntary regime exists. The Irish Congress of D’Art, D., & Turner, T. (2003). Union recognition in
Trade Unions (ICTU) continues to strive for stat- Ireland: One step forward or two steps back? Industrial
Relations Journal, 34(3), 226–240.
utory recognition and has stated that Irish legis- Economist. (2008). Trade unions in China: Membership
lation is contra to International Labour required, 31 July 2008. http://www.economist.com/
Organisation (ILO) conventions. A complaint node/11848496. Accessed 14 July 2010.
has been lodged with the ILO to this effect. Human Resources and Skills Development Canada
(HRSDC). (2010). Union Membership in Canada, 2009.
http://www.hrsdc.gc.ca/eng/labour/labour_relations/
Decline in Unionization info_analysis/union_membership/index2009.shtml.
A steady global decline in union membership has Accessed 6 July 2010.
continued since the 1950s. This has been attrib- Morley, M., Gunnigle, P., & Collings, D. (Eds.). (2006).
Global industrial relations. London, UK: Routledge.
uted to several factors. First, the generally OCED. (2010). OECD Stat Extracts. http://stats.oecd.org/
improved economic and business environment index.aspx. Accessed 8 July 2010.
has increased the demand for labor and resulted Schillinger, H. R. (2005). Trade unions in Africa –
in improved pay and conditions. Second, several weak but feared. http://www.fesnam.org/pdf/
pre2006/reports_publication/TradeUnions_inAfrica05.
structural factors can influence union density. pdf. Accessed 8 July 2010.
Increased participation in the labor force by Trade Union Congress (TUC). (2010). TUC History.
females, minorities, and migrant workers has www.tuc.org.uk. Accessed 1 July 2010.
Combined Code (June 2008) 387 C
Code is meant to promote and to support confi-
Collective Intentionality dence in corporate reporting and governance,
being rather a “guide to the components of good
▶ Community Relations board practice distilled from consultation and
widespread experience over many years. While
it is expected that companies will comply wholly
or substantially with its provisions, it is C
Collective Responsibility recognised that noncompliance may be justified
in particular circumstances if good governance
▶ Community Relations can be achieved by other means. A condition of
noncompliance is that the reasons for it should be
explained to shareholders, who may wish to dis-
cuss the position with the company and whose
Combination voting intentions may be influenced as a result”
(FRC 2008). This edition of Combined Code
▶ Mergers and Acquisitions (June 2008) was applied to accounting periods
beginning on or after 29 June 2008 and took
effect until 28 June 2010, when the next revised
version of this Code was issued.
Combined Code (June 2008)
researchers’ interests mostly beginning in the governance is subject, in part, to federal securi-
second half of the twentieth century, but in ties laws, and, in part, to the jurisdiction of indi-
terms of recognizing the legitimacy, the moment vidual states.”
of recognition of the importance of corporate The Cadbury Code of 1992 was followed by
governance took place quite late. At the Euro- the recommendations of the Greenbury Commit-
pean level, the first significant step in this direc- tee on directors’ remuneration (Greenbury
tion could be identified in UK and is given by the Report 1995), after a review made by Hampel
issuing of the Cadbury Report in 1992 by the Committee (Hampel Committee 1998), the first
Cadbury Committee managed by Sir Adrian version of the Combined Code was published in
Cadbury (Cadbury Committee Report: Finan- 1998. Subsequently, Combined Code (1998) was
cial Aspects of Corporate Governance). The followed by further reports issued by various
major objective of this report was to find some committees like the ones chaired by Turnbull
answers to the concerns manifested by the public (Turnbull Report 1999), Myners (Myners Report
sector, but also failures of some major corpora- 2001), Higgs (2003), and Smith (2003). The sec-
tions from private sector. All these concerns ond version of the Combined Code was published
were also increased by the fraud events that in 2003 (FRC 2003).
affected the Maxwell Company, but also by the Starting from the general idea that corporate
ease with the abuses of power could be achieved governance is focused on the rights and respon-
within such large corporations. Some of the sibilities of a company’s board of directors, its
Cadbury Report’s conclusions showed that cor- shareholders, and different stakeholders, corpo-
porate bankruptcies were generated by the rate governance practices have became one of
major problems of internal control system func- the major interest for managers, investors, aca-
tioning, all these aspects being the top manage- demics, and policy regulators, and various finan-
ment’s responsibility, which not only failed to cial scandals that have shaken the global capital
avoid such problems, but in some cases, it was markets and the public confidence had deter-
proved that it had an important contribution to mined an increasing focus and preoccupation
disaster. By the end of 1992, the Cadbury over the incidence and effects of corporate
Report had been completed with a Code of fraud and fraudulent financial reporting, and
good practices, promoting the idea that the the impact of corporate governance structure
existing system of corporate governance was over the strategies, policies, and performances
weak and lacking only from a single point of of the companies. A synthesis of UK’s corporate
view, the one of transparency and accountability governance developments until the issuance of
issues (Cadbury 1992). Combined Code (June 2008) is presented in
The significance of Cadbury Report in the Table 1.
regulatory process of corporate governance The Combined Code issued in June 2008
principles is also recognised by researchers (the fourth version of the UK Combined Code)
from all over the world (Paape 2007; Abdullah was revised following the consultation
and Page 2009), because following the process during 2007, which was intended
publication of the Cadbury Report, codes of generally to reassure the Code’s content and
corporate governance practices started to prolif- impact of its recommendations, this edition
erate all over the world, many of them being applied to accounting periods beginning
being under the influence of Cadbury Code rec- on or after 29 June 2008 until 28 June 2010,
ommendations. A possible explanation of this when a new revised version of Combined
enormous influence of the Cadbury Code is Code (December 2009) was issued. A synthesis
given by Bush (2005) cited by Abdullah and of the main principles and recommendation
Page (2009), which presents as a principal of corporate governance practices included in
argument: “the relative lack of competing Combined Code (June 2008) is presented in
guidance from the United States, where Table 2.
Combined Code (June 2008) 389 C
Combined Code (June 2008), Table 1 Major benchmarks in the UK’s corporate governance developments until
Combined Code (June 2008)
Year Issuer Report Main recommendations
1992 A committee on the financial aspects of Cadbury Focus on the quality of the company’s financial
corporate governance in 1991, under the Report reporting
chairmanship of Sir Adrian Cadbury Provisions related to board composition, the
appointment and independence of non-executive
directors, remuneration of executive directors, and the C
system of controls for financial reporting process of
companies
The requirement that each company have a minimum of
three non-executive directors
1995 A committee established by the UK Greenbury Concentrated on issues related to board remuneration,
Confederation of Business and Industry Report the role of remuneration committee in establishing the
on corporate governance remuneration packages for the executive directors,
requirements concerning the disclosure of directors’
remuneration, service contracts and remuneration
policy
1998 A committee established for the Hampel It was intended to make a revision of the corporate
revision of the corporate governance Report governance system in the UK, trying to combine,
system in the UK converge, and clarify the recommendations of Cadbury
and Greenbury Reports
Comparing to the Cadbury and Greenbury “box-
ticking” approach, the Hampel Report is relied more
on broad principles and a “common sense” approach
1998 Committee on Corporate Governance Combined Combined the recommendations and principles
from the Committee’s Final Report and Code outlined in the Cadbury, Greenbury, and Hampel
from the Cadbury and Greenbury Reports (1998) Reports based on “comply or explain” approach
established by London Stock Exchange London Stock Exchange adopted the Combined Code
and required listed companies to make corporate
governance statements and disclosures, the general
recommendation being to conform to it
1999 A committee established by London Turnbull The report is focused on the issues of internal control
Stock Exchange under the chairmanship Report and risk management
of Nigel Turnbull of The Rank Group plc. Starting from the directors’ obligations under the
Combined Code, related to keeping good internal
controls in their companies, this report emphasizes the
board’s responsibility for ensuring that an internal
control system is implemented and requires companies
to report about their internal control systems and risk
management
2001 A commission established by HM Myners Focus on institutional investors, by taking the
Treasury under the supervision of Paul Report approach of asking whether institutional investors
Myners. were acting in the best interests of their beneficiaries
2003 A commission established by UK Higgs Reviewed the role of non-executive directors and of the
Government, chaired by Derek Higgs. Report audit committee, trying to contribute toward enhancing
the existing version of the Combined Code
This report claims more severe criteria related to
board composition and the evaluation of directors’
independence
2003 Financial Reporting Council Smith In the light of financial scandals of Enron and Arthur
Report Andersen, focus on the independence of the auditors,
role of the audit committee especially in the process of
monitoring the financial reporting and internal control
systems in the best interest of shareholders
Its recommendations were incorporated in the next
version of the Combined Code (2003)
(continued)
C 390 Combined Code (June 2008)
The main findings of this review report are syn- Combined Code. (1998). The combined code: Principles
thesized in the 2009 Review of the Combined of good governance and code of best practice derived
by the Committee on Corporate Governance from the
Code: Final Report, available on FRC’s website. committee’s. Final Report and from the Cadbury and
Greenbury Reports. London: Gee Publishing.
Financial Reporting Council. (2003). The combined code
Cross-References of corporate governance. London: Accounting
Standards Board, Financial Reporting Council.
Financial Reporting Council. (2008). The combined code
▶ Agency and Corporate Governance of corporate governance. London: Financial
▶ Agency Theory Reporting Council. www.frc.org.uk
▶ Corporate Governance Greenbury Report. (1995). Study group on Directors’
Remuneration. Report of a study Group chaired by
▶ Corporate Governance Reporting Sir Richard Greenbury, July. London: Gee Publishing.
▶ Enron Hampel Report. (1998). Committee on Corporate Gover-
▶ European Corporate Governance Institute nance: Final report, January. London: Gee Publishing.
▶ Evolution of Corporate Governance Reports in Higgs Report. (2003). Review of the role and effectiveness
of non-executive directors, January. London.
the UK and Ireland House of Commons Treasury Committee. (2009). Bank-
▶ Financial Reporting Council (UK) ing crisis: Reforming corporate governance and pay in
▶ Greenbury Report (UK) the city, 15 May 2009. London: House of Commons,
▶ Hampel Report (UK) and CSR The Stationery Office.
Myners Report. (2001). Institutional investment in the
▶ Higgs Report (UK) and CSR United Kingdom: A review. London: HM Treasury.
Paape, L. (2007). Corporate governance: The Impact on
the role, position, and scope of services of the internal
References and Readings audit function. Doctoral Thesis, ERIM Ph.D. Series
Research in Management. Rotterdam School of
Management (RSM) Erasmus University, Erasmus
Abdullah, A., & Page, M. (2009). Corporate Governance Research Institute of Management (ERIM).
and Corporate Performance: The UK FTSE 350 Com- Smith Report.(2003). Audit Committees Combined Code
panies. Edinburgh: The Institute of Chartered Accoun- Guidance, June. London: Financial Reporting
tants of Scotland. Council.
Berle, A. & Means, G. (1932). The Modern Corporation Turnbull Report. (1999). Internal control – guidance for
and Private Property. United States: Transaction Directors on the combined code. London: Institute of
Publishers. Chartered Accountants in England and Wales,
Berle, A. A., & Means, G. C. (1991). The Modern Corpo- September 1999.
ration and Private Property. Revised Edition 1967.
Harcourt. Brace&World, New York
Bush, T. (2005). Divided by Common Language: Where
Economics Meets the Law – US vs Non-US Reporting
Models, London: Institute of Chartered Accountants of
England and Wales (ICAEW). Combined Code on Corporate
Cadbury Code. (1992). Report of the committee on the
financial aspects of corporate Governance: The code
Governance (Revised June 2008)
of best practices. London: Gee Professional
Publishing. ▶ Combined Code (June 2008)
Communicating with Stakeholders 393 C
mutuality between those involved in the commu-
Command nication process. It also implies a less mechanis-
tic view of communication, which seems a better
▶ Management fit for the realm of human communication. The
latter point is particularly relevant in the context
of corporate social responsibility (CSR), as this
concept is fundamentally about corporations C
Commercial Organizations negotiating their social relationships and han-
dling the externalities they incur for society and
▶ View on the Ground: CSR from a Capabilities the environment. Ultimately, a corporation that
Approach wants to succeed with CSR has to communicate
with its stakeholders, groups, or individuals “that
can affect or be affected by the realization of an
Commitment organization’s purpose” (Freeman et al. 2010,
p. 26). CSR can include the process of mapping
▶ Trust and evaluating expectations and demands from
such stakeholders, as well as the formulation and
implementation of actions and policies that
address the expectations and demands (Ihlen
Common Good et al. 2011). Communication is at the heart of
this process since it helps the corporation to
▶ Community Relations understand which expectations exist and which
demands stakeholders are making. Communica-
tion is also absolutely necessary when corpora-
tions want to share their views of CSR and how
Communicating with Stakeholders they manage the externalities they create. When
a corporation is communicating with stake-
Øyvind Ihlen holders, it must be thought of as a two-way pro-
Department of Media and Communication, cess that involves the use of symbols, including
University of Oslo, Oslo, Norway language, to influence or share an idea or
a perspective, and/or to learn more about the
ideas and perspectives of stakeholders.
Synonyms
responsibility of corporations and hence also environment, relations that have both ethical
linked to CSR. This entry will concentrate on and strategic implications. The success of the
the CSR dimension relating to communication organization is dependent on how it relates to
with stakeholders and ask some specific ques- key groups, such as customers, employees,
tions like: What does communicating with stake- unions, suppliers, communities, politicians, and
holders mean? Why does it matter? How can it be owners. Stakeholder theory functions as a useful
done? Then the last two sections will address heuristic when an organization wants to map its
some issues that are not discussed in the main external and internal relations and can help
section, as well as specify future directions for secure that key groups are not forgotten. Norma-
research on the topic of communicating with tive stakeholder theory also argues that managers
stakeholders. must keep the support of stakeholder groups, and
that the organization should be the place where
What? stakeholder interests are maximized over time
The definition section above belies the fact that (Freeman et al. 2010). Still an essential and recur-
stakeholders and communication are defined in ring problem discussed elsewhere in this ency-
a bewildering number of ways and that a number clopedia is how to prioritize between different
of different theories are built around these stakeholders given that resources are scarce.
notions. Some think of communication as Communication is key in the endeavor
a process, others as a product (oral or written). described above. You cannot really learn about
Communication has also been seen as that which the perspective of others without communicating
makes up public life, exemplified with the notion directly or indirectly with them, and others can-
of the public sphere. Yet others have focused on not truly grasp your perspective unless you have
the technology involved when communicating communicated directly or indirectly with them.
and on how this influences both the process and Direct communication can take the form of stake-
the product (Cobley 2008). It is important to holder meetings, written statements posted on
remember that it is not possible for corporations websites, or communication in social media for
to not communicate with stakeholders, since that matter. Indirect communication can be
silence can also be seen as a form of communi- thought of as communication through the news
cation. Communication is implicated in CSR and media (although the mass media itself can of
business strategies whether the corporation likes course also be considered a stakeholder). Corpo-
it or not. It is also important to emphasize that rations will typically use a mix of different media
communication and action are interrelated and that differs in the degree that they allow for two-
co-construct one another. Communication is way communication. The goal is not to commu-
a form of action. It can also constitute corporate nicate to but rather with stakeholders since
practice and the meaning of CSR and stakeholder feedback is beneficial. The goal of
a corporations’ relationship to its stakeholders. the communication process can be located along
Said differently, communication can have a continuum according to the degree of persua-
a performative function, creating the effect that sion that is attempted. Sometimes a corporation
it names. might choose to listen and consult on issues, other
Another premise for this entry is that commu- times it might actively seek to influence stake-
nication with stakeholders has an ethical poten- holder thoughts and actions.
tial. CSR communication can in general breed
skepticism and be perceived as self-serving and Why?
manipulative. On the other hand, it can be As posited above, a corporation communicates
maintained that communication is necessary to with stakeholders whether it intends to or not.
ensure stakeholder participation. Basically, the Silence on the topic of CSR is also a form of
stakeholder concept points out that organizations communication, either a signal that the corpora-
have important relations to their social tion does not care, or that the corporation is not
Communicating with Stakeholders 395 C
sophisticated enough to pay attention. Research dispose an oilrig at sea and for its relations to the
shows, however, that most of the major corpora- military regime in Nigeria. In hindsight, Shell
tions in the world report on CSR issues (KPMG concluded that it had lost touch with social expec-
2008). It can be said that this is the ethically right tations and failed to recognize how more stake-
thing to do, but corporations typically engage in holders wanted to have a say about its way of
CSR and communication with their stakeholders conducting business. The point is that in order to
as a way of reaching organizational goals. As will maintain legitimacy, corporations need to iden- C
be pointed out later, an argument has been made tify and react to the social norms and expecta-
that the latter type of motives cheapens the moral tions. This is something that can only be done by
value of CSR and stakeholder communication. communicating with stakeholders. Communicat-
CSR is, nonetheless, often seen as a form of risk ing with stakeholders can ideally improve corpo-
management, or a part of reputation management rate decision-making, stakeholder engagement,
and ultimately profit making. Some define repu- and corporate governance. New issues that oth-
tation as the long-term collective judgments erwise might be ignored can be catapulted to the
observers have of an organization based on forefront as a result of communicating with stake-
assessment of the corporate financial, social, holders. Such communication can also help cor-
and/or environmental impacts (Barnett et al. porations make sense of issues and be of value
2006). In other words, CSR is sometimes directly when a corporation wants to strategize about the
linked to reputation. And although it has been same issue.
methodologically difficult to link reputation Finally, communicating with stakeholders can
with profit, many argue that a good reputation be recognized as an ethical duty when corporate
boosts sales, attracts investors and employees, actions affect stakeholders. It has been pointed
cushions against crises, and curries positive out that corporations have a responsibility to
media coverage. On the other hand, as some address and seek to rectify the externalities they
scholars have pointed out, “CSR can work, for create, and this would necessarily entail commu-
some people, in some places, on some issues, nication as well. Corporations must use commu-
some of the time” (Newell 2005, p. 556). Neither nication in order to map and evaluate problems
adhering to CSR nor communicating with stake- and solutions, as stakeholders perceive them.
holders is a quick fix for corporations bent on This duty is also said to spring from the very
improving their profits. Ultimately, however, fact that it is the society and the society’s infra-
communicating with stakeholders is also structure that have made it possible for corpora-
a matter of surviving, that is, it is a matter of tions to earn a profit.
earning legitimacy. Business must answer the
big question concerning how this institution How?
serves society. When communicating with stakeholders, an
It is also beneficial for corporations to recog- obvious first step is to get an idea about whom
nize that what is considered ethical corporate you are going to address. Corporations first need
behavior is a social construct. This also means to map their stakeholders and prioritize between
that it is a construct that is changing over time. them as pointed out above. Next, the type of
During one period of time some pollution from overall communication strategy has to be
industry plants seemed to be an acceptable price decided, certain communication principles
to pay for prosperity. These days, this type of should be implemented, and rhetorical strategies
thinking does not have the same resonance in and media types have to be chosen.
Western countries. Another example is Shell’s The overall communication strategy can be
annus horribilis, 1995, which illustrates the dan- considered as one-way or two-way. The corpora-
ger of not keeping abreast with changes in the tion can choose to inform stakeholders about the
public view on CSR. The company was shaken corporate view on CSR and about what actions
by international reactions when it attempted to are taken in this regard, or the corporation can
C 396 Communicating with Stakeholders
seek out stakeholder feedback on the same issue of good CSR communication. Transparency can
and the CSR actions. The degree to which the foster trust, respect, fairness, and a sense of pro-
corporation opens up and engages with stake- cedural justice. Corporations should have clear
holders in this regard is also a matter of impor- and visible missions, policies, procedures, and
tance. The attempt to get stakeholders to be guidelines. They should also provide honest
involved through frequent, systematic, and pro- information about aspects of their business that
active dialogue can help build mutually benefi- can affect stakeholders, including risks related to
cial relationships (Morsing and Schultz 2006). If their products or services. Transparency must
the dialogue process is transparent and stake- include financial performance, as well as trans-
holders feel that the corporation responds con- parency about the social and environmental per-
structively, dialogue can increase corporate formance. The aim is to give stakeholders an
legitimacy and trust. In other words, dialogue opportunity to make decisions about purchases,
with stakeholders is preferred and it is also employment, and/or investments based on their
a key word that occurs frequently in corporate own values (Ihlen et al. 2011).
rhetoric on CSR (Ihlen et al. 2011). An overarching goal of communication with
Communication theory proposes several ways stakeholders is to create trust. In some literature,
for a dialogue to work for all those involved. It it is argued that corporations can build trust by
has, for instance, been argued that all relevant discussing problems and dilemmas they encoun-
stakeholders must be included in the dialogue, ter in their CSR work when they communicate
and that it should be possible to discuss all types with stakeholders. The rhetoric should be based
of issues. Furthermore, it is pointed out that stake- on proof through numbers and statistics were
holders should be able to present critical and available in terms of numbers and statistics, as
alternative views, and that all stakeholders should well as examples of outcomes and impacts. Cred-
be able to influence the structure, process, and ible third parties should attest to the success or
outcome of the dialogue. Finally, the principle of lack of success. In most cases, a low-key
transparency must be met. The latter point would approach to CSR communication seems advis-
mean, for instance, that the corporation is open able. That is, stakeholders can react negatively
about its motives for the dialogue, but also that if the corporation flaunts its efforts. Again, how-
stakeholders have access to information about the ever, some research indicates that stakeholders
outcome of the dialogue (Pedersen 2006). tolerate the profit motive, as long as they also
A pointed criticism of corporate dialogue see an ethical motive at the same time. Strength-
efforts is that they are only conducted to let the ening trust and credibility is also something that
stakeholders provide supportive and positive is done through the creation of “common dwell-
comments. The normative dialogue ideals ing places” between the corporation and its stake-
described above ask that corporations actually holders. This could, for instance, include arenas
risk something, that they open up the where the demands from normative dialogue the-
decision-making process and set judgments and ory are met (Ihlen et al. 2011).
assumptions under scrutiny (Bohm 2008). Corporations can choose from a plethora of
Critical feedback from stakeholders might be media types for communication with stake-
unpleasant, but if the corporation does not engage holders, including, for instance, nonfinancial
in dialogue it also risks only asking questions that reports, advertising, homepages, blogs, and
it would like to hear. The corporation can end up social media. Particularly the advent of the latter
only engaging itself rather than follow a course has created new possibilities for dialogue. This
that will help it handle public pressure, social can allow corporations to develop their CSR
change, and complexity. strategies and practices more in line with the
Other normative demands include that com- expectations expressed by their stakeholders. In
munication has to be honest, reciprocal, and addition, corporations can of course attempt to
open. Transparency is another important feature use the traditional mass media channel. Again,
Communicating with Stakeholders 397 C
research has shown that a heavy reliance on such a one-way affair. Some dialogue is also carried
communication and choosing a self-indulgent out to co-opt NGOs and critical stakeholder
celebratory rhetoric in these media can create groups. The purpose in such instances is to
negative feedback (Ihlen et al. 2011). privatize the debate and keep it out of the public
Some researchers have suggested that corpo- sphere. In other instances, stakeholders might
rations should use an inside-out approach when feel that the dialogue is only window dressing.
communicating about CSR. The communication The corporation might be pursuing a predefined C
process should first involve the employees, and goal that stakeholders have no real influence
secondly outside expert stakeholders, that is, crit- on. Furthermore, it is often the corporation that
ical stakeholders, the media, and local decision lays down the premises for the dialogue: who is
makers. A corporation is not likely to build going to discuss what issues in what timeframe.
a good reputation by communicating about CSR Second, another reason why CSR communication
directly with the general public. Instead, corpo- in particular is viewed with skepticism is when
rations should rely on the third party strategy, stakeholders perceive a discrepancy between
whereby NGOs, employees, or public officials the verbal and the physical corporate CSR
declare their support for the corporations’ efforts. actions. Corporate discourse also creates
Information can also be made available to the expectations that the corporation needs to ful-
greater public through Internet sites designed fill. A fundamental task for management and
for those that are particularly interested (Morsing communicators alike is to attempt to close
et al. 2008). The latter point that the general gaps that exist between announced policy
public might not be much interested in CSR com- and implemented policy. Here, however, it is
munication can also be a challenge for stake- also possible to hold the view that corpora-
holder dialogue, in general. Dialoguing with tions should be given some leeway, as aspira-
corporations can be perceived as tiresome and tional talk also has the potential to bring about
time-consuming, at least in the traditional form social change. This is also in line with the
of a stakeholder meeting. There are indications, mentioned point that there is no simple or
however, that a declared intention and invitation clear-cut distinction between talk and action
to engage in dialogue in itself is considered (Ihlen et al. 2011).
favorably. Third, there are some systemic and ethical chal-
lenges that arise for corporations and their
stakeholders. It could be argued that corpora-
Key Issues tions are located in an economic system that
necessarily has corporations reduce every-
Above, two issues for communicating with stake- thing around them to tools. Corporations are
holders are touched upon, namely, the matter of driven by an economic rationality where
who counts as stakeholders and how to prioritize ethics have to be profitable if it is to be taken
between them, as well the fact that the stake- into account. The value system is extremely
holders might not be as interested in communi- limited and it is hard if not impossible to move
cating with the corporation as the latter is. Here beyond an instrumental perspective. This also
are three other issues that arise from CSR com- puts the corporation at rhetorical disadvantage
munication and corporate attempts to communi- when seeking to communicate with stake-
cate with stakeholders: holders (Ihlen et al. 2011).
First, the corporate tendency to instrumentalize the
dialogue to serve corporate self-interest leads to
criticism. Stakeholders might feel that the dia- Future Directions
logue is only serving the purpose of informa-
tion mining to give the corporation the upper Much more research could be conducted on the
hand. The learning process can be perceived as way symbols are used in the communication of
C 398 Communications Strategies
Cross-References
a community of interest, but its members are, in needs to be managed strategically. Whereas tradi-
actual fact, engaged practitioners. tional forms of knowledge management placed
In addition to the above elements, communi- greater emphasis on information systems, the com-
ties of practice have three dimensions that allow munities of practice model focuses on people and
practice to be the source of coherence in a given on the social structures that enable organizational
community: mutual engagement, a joint enter- members to learn with and from each other
prise, and a shared repertoire of (Wenger (Wenger 2006). In contemporary organizations,
1998). In a community of practice, practice is knowledge is a valuable resource and, in many
not just an aggregate of people or a network cases, the key to success; it must not therefore be
defined by a common goal, but it resides in left to chance. Managers are becoming increasingly
“the relations of mutual engagement by which aware of the need to understand the types of
[people] can do whatever they do” (1998, p. 73). knowledge that will confer ▶ competitive
Mutual engagement is therefore fundamental to advantage to their companies. Cultivating
creating meaningful relationships and learning, communities of practices in strategic areas is
as it connects people in ways that can become hence an effective way to manage knowledge as
deeper and more abstract, creating a “tight node an asset. This is particularly the case in times of
of interpersonal relationships” (1998, p. 76). rapid change where organizations frequently
Not only do communities of practices arise from restructure their relationships in response to the
a commonly shared goal, but they also generate demands of shifting markets (Wenger et al. 2002).
relations of mutual accountability among According to Wenger (2006), the growing
participants. These relations do not stem purely interest in the notion of communities of practice
from conformity, but they are linked to the as a means of developing strategic capabilities in
members’ ability “to negotiate actions as organizations is due to three reasons: First, com-
accountable to an enterprise” (1998, pp. 77; 82). munities of practice allow for collective respon-
Relations of mutual accountability endow sibility for knowledge management; second, they
communities of practice with their character of create a direct link between learning and perfor-
a joint enterprise which both engenders and direct mance, because members of communities of
social energy, and which encourages new ideas practice are also members of teams and business
and projects (Wenger 1998, p. 82). Communities units; third, communities of practice are not
of practices also have a shared repertoire which is restricted to formal structures: They create
developed over time. It consists of words, organic connections among people across orga-
routines, tools, ways of thinking and acting, nizational and geographic boundaries. As noted
stories, gestures, symbols, genres, and concepts. by Wenger (2006) “. . .the knowledge of an orga-
The shared repertoire also includes the discourse nization lives in a constellation of communities
through which members create “meaningful of practice each taking care of a specific aspect of
statements about the world” and styles through the competence that the organization needs.”
which they express their membership and identi- Communities of practice have also been found
ties as members (p. 82–83). This shared reper- to be a means of developing and maintaining
toire is adopted in the course of the community’s long-term “organizational memory” (Hedberg
existence and becomes an integral part of 1981), defined by Conklin (1997) as a type of
its practice. memory that “extends and amplifies” organiza-
tional knowledge “by capturing, organizing, dis-
seminating, and reusing the knowledge created
Key Issues by its employees.” In order to understand the role
of communities of practice in preserving organi-
The communities of practice approach has been zational memory, Conklin (1997) describes two
embraced by business organizations following the kinds of knowledge found in organizations: for-
realization that knowledge is a critical asset that mal and informal. Formal knowledge is found in
Communities of Practice 401 C
books, manuals, documents, and training courses, create loyalty to a brand or service. Furthermore,
and it is easily and routinely captured in organi- a growing trend is observed for organizations to
zations. By contrast, informal knowledge join forces with competitors to take advantage of
includes “ideas, facts, assumptions, meanings, markets opportunities that engender complex
questions, decisions, guesses, stories, and points knowledge. Mergers, joint ventures, and alliances
of view,” which are hard to capture and sustain. depend on trust between the parties involved
It is the kind of knowledge that can be captured which, in turn, can be cultivated through C
and maintained through the mutual exchanges of interorganizational communities of practice
communities of practice. It is for this reason that (Wenger et al. 2002, p. 221).
Wenger et al. (2002) describe communities of As concluded by Wenger et al. (2002, p. 232),
practice as “the social fabric of learning organi- business organizations are in an ideal position to
zations” According to Senge (1990, p. 3), learn- take advantage of the benefits of communities of
ing organizations are: practice as they have both the resources and the
motivation to attain new knowledge to keep
. . .organizations where people continually expand
their capacity to create the results they truly desire, abreast of ever-changing markets. As they put it:
where new and expansive patterns of thinking are
nurtured, where collective aspiration is set free, Firms that understand how to translate the power of
and where people are continually learning to see communities into successful knowledge organiza-
the whole together tions will be the architects of tomorrow – not only
because they will be more successful in the mar-
Acting as a living curriculum and engaging ketplace, but also because they will serve as
a learning laboratory for exploring how to design
participants in a process of collective learning, the world as a learning system.
communities of practice are critically important
to foster learning organizations. Mutual engage- The communities of practice concept has
ment among participants generates a shared rep- been, nevertheless, regarded with reservation by
ertoire of ideas, which in turn consolidates some scholars. For example, Kimble and Hildreth
learning and enhances organizational memory. (2004) argue that, given the self-directed and
There is also evidence that sponsorship and self-motivated nature of communities of practice,
support of communities of practice can improve they can emerge and disappear over time. This
organizational performance. According to Lesser can be a problem if the organization becomes
and Storck (2001, p. 831), a community of prac- reliant on the work of these groups for its devel-
tice can operate as “an engine for the develop- opment. Moreover, as noted by Hislop (2004),
ment of social capital,” and the social capital due to their strong sense of internal identity,
inherent in communities of practice can lead to communities of practice might not be effective
behavioral changes that may positively influence in sharing knowledge with people outside their
business performance. These authors’ claims are boundaries. From a similar perspective, Vaast
based on a study of seven business organizations (2004) found in one of her case studies of public
in which communities of practice were found to and private sector organizations in France that the
have created value for the participating internal sense of identity of a community of prac-
companies. tice can make employees outside the group feel
Communities of practice can also operate at marginalized.
consumer level, as business need knowledgeable Wenger et al. (2002, pp. 139–159) themselves
consumers, and the latter, in turn, benefit from draw attention to the dangers of overidealizing
companies that understand their needs (Wenger the idea of communities of practice. Like all other
et al. 2002). An increasing number of consumer human institutions, communities of practice can
communities are emerging in the United States, “hoard knowledge, limit innovation, and hold
for example, with focus on topics such as travel, others hostage to their expertise.” They illustrate
parenting, musical interests, and fitness activities. this point with the example of medieval guilds
These types of communities have the potential to which turned into exclusive cliques when they
C 402 Communities of Practice
made membership a right which was passed on by disciplinary- and industry- focused communities,
fathers to sons only. The guilds excluded women, with 24,000 active members supporting project
which defeated the idea of participation so central teams. Services provided by the communities
to communities of practice. Wenger et al. (2002) included the creation of guidelines for work prac-
further note that in contemporary times problems tices and procedures; publication of technical
can emerge with communities of practices at documents; access to expert advice; and career
three levels: single communities, constellations development. McDermott and Archibald (2010,
of communities, and organizations. At a single- pp. 85–86) identify four principles for a more
communities level, the domain may not arouse strategic establishment of communities of prac-
passion in all members, or members might fail to tice in business:
communicate with each other. With regard to 1. Focus on issues important to the organization.
constellations of communities, rigid boundaries 2. Establish community goals and deliverables.
of practice may emerge through the use of tech- 3. Provide real governance.
nical jargon, specialized methods, and custom- 4. Set high management expectations.
ized environments. This can make The concept of communities of practice can be
communication with other communities difficult, also applied beyond organizations (Wenger et al.
and misunderstandings might arise. At an orga- 2002). The complexity of markets and learning
nizational level, there is a risk of rigidity, espe- systems in the knowledge economy have created
cially when a practice is successful, and a trend whereby communities “weave” broader
a community tightly knit; members tend to value webs forged by relationships and
become reluctant to seek other practices. Com- exchanges that operate beyond organizational
munities of practice can also generate increased settings. This creates an “extended knowledge
structural complexity, which poses new manage- system” which includes suppliers, distributors,
rial challenges as they create multiple centers of customers, and communities outside the organi-
power based on knowledge. As concluded by zation. These stakeholders provide fertile ground
Wenger et al. (2002, p. 154) communities of for the emergence of “inter-organizational com-
practice can be “irrational, counterproductive, munities of practice” (Wenger et al. 2002,
political and rampant with suspicion and con- p. 221), with strong potential for knowledge
flict.” Nevertheless, if members are aware of exchange. For example, Toyota has encouraged
these risks, it is likely they will be able to manage the creation of knowledge-sharing networks
these problems effectively. This can itself be among its suppliers, and Hallmark has facilitated
transformed into a new learning experience for the formation of communities of practice among
the group. its retailers.
Despite its limitations, communities of prac-
tice remains a relevant concept in contemporary
times. Research by McDermott and Archibald Future Directions
(2010, p. 84) reveals, for example, that commu-
nities of practice continue to “thrive” in contem- More recently, work on communities of practice
porary business organizations. However, these has broadened the focus of learning theory from
communities operate differently from their “fore- merely acquiring new knowledge to a changing
bears,” in that they have lost their informal char- relationship of participation in the world. As
acter. They are now an “actively managed part of stated by Wenger (2004, p. 1), referring to his
the organization, with specific goals, explicit project “Learning for a Small Planet”:
accountability, and clear executive oversight.”
For example, at the engineering company Fluor, We cannot address today’s challenges with yester-
day’s perspectives. We need new visions of what is
global communities of practice have replaced the possible. We need new models to learn how to
company’s distributed functional structure. At learn at multiple levels of scale, from the personal
the time of their study, the company had 44 to the global. Increasing our capacity to learn—
Community Activism 403 C
individually and collectively—is taking on Kimble, C., & Hildreth, P. (2004). Communities of prac-
a special urgency if we see ourselves caught, as tice: Going one step too far? In Paper presented at the
I believe we are, in a race between learning and the 9e colloque de l’AIM, France, http://halshs.archives-
possibility of self-destruction. ouvertes.fr/docs/00/48/96/32/PDF/Kimble_2004.pdf.
Accessed 3 Jan 2011.
This is particularly relevant within the context Lave, J., & Wenger, E. (1991). Situated learning. Legiti-
of the ▶ sustainability debate which requires new mate peripheral participation. Cambridge: University
of Cambridge Press.
visions and new models to address global envi-
Lesser, E. L., & Storck, J. (2001). Communities of practice
C
ronmental problems. Sustainability also requires and organizational performance. IBM Systems
the creation of new conceptual discourses to Journal, 40(4). Retrieved 23 May 2012, from http://
encourage “new ways of looking at the world” www.research.ibm.com/journal/sj/404/lesser.html
(Wenger 2004, p. 2). This broader conceptualiza- McDermott, R., & Archibald, D. (2010). Harnessing your
staff’s informal networks. Harvard Business Review,
tion of communities of practice can be applied 88(3), 82–89.
within the context of international development, Seely Brown, J., & Gray, S. E. (1995). The people are the
in view of a growing recognition of the benefits of company. Fast Company Retrieved 23 May 2012, from
knowledge for developing nations (Wenger et al. http://www.fastcompany.com/online/01/people.html
Senge, P. M. (1990). The fifth discipline: The art and
2002, pp. 228–229). The communities of practice practice of a learning organization. New York:
approach can provide a new paradigm for inter- Currency Doubleday.
national development transforming the world Vaast, E. (2004). The use of intranets: The missing link
into a giant “learning system.” For example, between communities of practice and networks of
practice? In P. Hildreth & C. Kimble (Eds.), Knowl-
development agencies such as World Bank now edge networks: Innovation through communities of
see their role as convenors of global communities practice (pp. 216–228). Hershey: Idea Group.
of practice, rather than just providers of top-down Wenger, E. (1998). Communities of practice: Learning, mean-
knowledge for developing nations. ing and identity. New York: Cambridge University Press.
Wenger, E. (2004). Learning for a small planet: A
research agenda. www.ewenger.com/research/index.
htm. Accessed 23 May 2012.
Wenger, E. (2006). Communities of practice: A brief
Cross-References introduction. Retrieved from http://www.ewenger.
com/theory/ Accessed 2 Dec 2010.
▶ Competitive Advantage Wenger, E., Mcdermott, R., & Snyder, W. (2002). A guide
▶ Corporate Social Responsibility to managing knowledge: Cultivating communities of
practice. Boston, MA: Harvard Business School.
▶ Social Capital
▶ Sustainability
Community
References and Readings
▶ Community Relations
Black, L. D. (2006). Corporate social responsibility ▶ CSR and Catholic Social Thought
as capability: The case of BHP Billiton. Journal of
Corporate Citizenship, 23(Autumn), 25–38.
Conklin, E. J. (1997). Designing organizational memory:
Preserving intellectual assets in a knowledge econ- Community Activism
omy. Retrieved 23 May 2012, from http://citeseerx.
ist.psu.edu/viewdoc/download?doi¼10.1.1.2.8218& Pauline Collins
rep¼rep1&type¼pdf. School of Law, Faculty of Business, University
Hedberg, B. (1981). How organizations learn and unlearn.
In P. C. Nystrom & W. H. Starbuck (Eds.), Handbook of of Southern Queensland, Toowoomba,
organizational design (pp. 3–27). New York: Oxford. QLD, Australia
Hislop, D. (2004). The paradox of communities of
practice: Knowledge sharing between communities.
In P. Hildreth & C. Kimble (Eds.), Knowledge
Synonyms
networks: Innovation through communities of practice
(Vol. 36–46, pp. 36–46). Hershey: Idea Group. Grassroots; Social activism; Social movements
C 404 Community Activism
Moyers has developed a theory of social activ- It would appear that worldwide there is greater
ism named “The Movement Action Plan: MAP” demand for more meaningful forms of democracy
that assists activists by providing an underlying than simply the ballot box. Collectivist values that
theory to social action to enable the mainte- give voice to citizens from the local to the global
nance of energy for activist participation. MAP level are manifest. Overcoming the marginalization
provides guidance on how activists can gain of those who engage in community activism and
acceptance from the majority of ordinary recognizing the important contribution they make
citizens for the need for such change agents to to the advancement of ideas and outcomes for
perform a responsible and integral role in people is still necessary. What is certain is the
society as it adopts social change, or in some phenomenon of community activism will not dis-
cases, resists it. appear. In fact, with the use of technology to link
Theories behind motivation for community ever expanding “communities” through email, the
activism and social movements abound and ability to distribute messages on issues and to raise
range from crowd theory (Le Bon 1895); theory awareness using social networking and other Inter-
of masses (Kornhauser 1959); rational choice net sites is sped up. However, the question of
theory (Olson 1965); resource mobilization whether the Internet has opened a new space for
C 406 Community Giving
political discourse and democratic opportunities is In S. L. Kaplan, & K. M. Baker (eds), Bicentennial
highly debatable, with research showing a tendency Reflections on the French Revolution. Duke University
Press.
for the Internet to be a reflection of the world and, if Mattox, H. E., (1998). The Boston Tea Party, 1773. In
anything, perhaps a slightly more conservative J. E. Findling, & F. W. Thackeray (Eds.), Events that
political world. Nevertheless, issues such as changed America in the eighteenth century (Chap. 5,
concern for the environment, since the 1990s, 209 pp.). Greenwood Press.
McAdam, D. J., McCarthy, D., & Zald, M. N. (1988).
have become universal and cut across all Social movements. In N. J. Smelser (Ed.), Handbook
boundaries activating communities around the of sociology. Newbury Park, CA: Sage.
world at the grassroots level and globally. Green McAdam, D. J., McCarthy, D., & Zald, M. N. (2005).
politics is well suited to market consumerism, and Social movements and organization theory. Cam-
bridge: Cambridge University Press.
while it may be driven by self-interest, consumer Meikle, G. (2002). Future active media activism and the
activism in support of environmental protection is Internet. London: Routledge.
undoubtedly on the increase. Melucci, A. (1989). Nomads of the present: Social move-
ments and individual needs in contemporary society.
Philadelphia, PA: Temple University Press.
Moyer, B., McAllister, J., Finley, M. L., & Soifer, S. (2001).
Cross-References Doing democracy. Gabriola Island: New Society.
Naples, N. A. (1998). Community activism and
▶ Affirmative Action feminist politics: Organizing across race, class,
and gender perspectives on gender. New York:
▶ Community Routledge.
▶ Community Relations Oberschall, A. (1973). Social conflict and social move-
▶ Dame Anita Roddick ments. Prentice-Hall.
▶ Enlightened Self-interest Offe, C. (1985). New social movements: Challenging the
boundaries of politics. Political Science Review, 6(4),
▶ Human Rights 483–499.
▶ Social Dialogue Olson, M. (1965). The logic of collective action.
New York: Shocken.
Riano, P. (Ed.). (1994). Women’s participation in communi-
cation: Elements for a framework. Thousand Oaks: Sage.
References and Readings Sharp, G. (1970). Exploring nonviolent alternatives.
Boston: Porter Sargent.
Alinsky, S. (1971). Rules for radicals: A pragmatic primer Shaw, R. (1999). Reclaiming America. Nike, clean air,
for realistic radicals. New York: Random House. and the new national activism. London: University of
Gamson, W. A. N. (1968). Power and discontent. Home- California Press.
wood, IL: Dorsey Press. Tilly, C. (1978). From mobilization to revolution. Addi-
Guber, D. L. (2003). The grass roots of a green revolution son-Wesley/University of Minnesota.
polling America on the environment. Cambridge: The The Bastille and Boston Tea party are historical events – if
MIT Press. source books are required refer to:
Habermas, J. 1988 (original 1963). Theory and Practice. Touraine, A. (1985). An introduction to the study of social
Beacon Press. movements. Social Research, 52, 749–788.
Habermas, J. (1985). The theory of communicative action White, J., Hunt, S. A., Benford, R. D., & Snow, D. A.
(original 1981, 2 vols.). Beacon Press. (1994). Identity fields: Framing processes and the
Hill, K. A., & Hughes, J. E. (1998). Cyberpolitics. social construction of movement identities.
Citizen activism in the age of the Internet. Lanham: In E. Laraña, H. Johnston, & J. R. Gusfield (Eds.),
Rowman & Littlefield. New social movements: From ideology to
Kornhauser, W. (1959). The politics of mass society. The identity (pp. 185–208). Philadelphia: Temple Univer-
Free Press, Glencoe. sity Press.
Laclau, E., & Mouffe, C. (1985). Hegemony and socialist
strategy: Towards a radical democratic politics. Lon-
don: Verso.
Le Bon, G. (1895). The Crowd: A study of the popular
mind. New York: The Macmillan.
Lipsky, M. (1968). Protest as a political resource. Ameri- Community Giving
can Political Science Review, 62, 1144–1158.
Lüsebrink, H.- J., & Rolf, R. (1997). The Bastille: A
history of a symbol of despotism and freedom. ▶ Corporate Giving
Community Relations 407 C
several films of the 1980s and early 1990s (e.g.,
Community Relations Edward Lewis in Pretty Woman, Lawrence Gar-
field in Other People’s Money, Sherman McCoy
Gloria Zúñiga y Postigo in The Bonfire of the Vanities), but its iconic
The University of Texas at Arlington, Arlington, symbol is the cold-blooded corporate raider
TX, USA depicted in the character of Gordon Gekko in
Wall Street and most particularly his signature C
line: “Greed is good.” In response to this negative
Synonyms perception on the part of the public, the corporate
world turned to the development of efforts in the
Associations of trust; Collective intentionality; direction of public relations, such as reporting
Collective responsibility; Common good; Com- their plans and activities to the public, press con-
munity; Edith Stein (on community); Employee ferences, press releases, and image strategies
participation; Intersubjectivity; Labor force; such as charitable donations, legislative lobby-
Management-consumer relations; Management- ing, and socially responsible advertising. How-
employee relations; Management-host commu- ever, public relation efforts “that enhance the
nity relations; Positive Externalities; Social quality of the relationship of an organization
capital; Social collaboration; Social cooperation; among key stakeholder groups” (Clark, 376) are
Social factor of corporate responsibility; Social not necessarily equivalent to developing commu-
object nity relations since public relation efforts do not
amount, in principle, to a burden of responsibility
that extends beyond shareholders. Indeed, public
Definition relations might be at odds with mutual interests
with the community at large.
The matter of community relations is often con- Let us consider the case of British Petroleum
fused with public relations, which is a marketing (BP). According to a report by Adam Ma’Anit in
function of a company. One reason for this con- the October 2010 issue of the New Internationalist,
fusion is that the rise in the 1980s of concerns that BP’s health and safety record included a 2005
we now classify as falling under the heading of explosion at its Texas refinery site that “killed 15
corporate social responsibility preceded our workers and injured over 100” and “record fines
complete understanding of what constitutes cor- over leaks and poor maintenance in Alaska where
porate social responsibility, its scope, and its two major spills in 2006 led to widespread con-
constitutive concepts. Although we are still cern about the expansion of oil exploration in the
demarcating the terrain of corporate social fragile Artic.” Thus in 2007, newly appointed BP
responsibility and this encyclopedia indeed is CEO Tony Hayward reversed “his predecessor’s
a contribution to this end, we now have greater much lauded commitment to end the company’s
clarity of important distinctions such as that financial support of politicians” and “was able to
between community relations and its conceptual secure permits to expand its Artic operations in
neighbor public relations. the Beaufort Sea and become the largest lease-
It is also historically interesting to note that the holder in the Gulf of Mexico.” We could specu-
term public relations also became part of the late that Hayward’s expansion plans may have
corporate language in the 1980s as corporations had the interests of the shareholders of BP in
became aware of the importance of corporate mind as a direct result of increased revenues for
image and managerial transparency due, in part, his company. However, Hayward did not take
to the stereotype of corporate mentality in popu- into consideration the stewardship that profit
lar culture as one of unrestrained greed. Indeed, seeking entails. Profits are not the result of
the perception in popular culture of this negative zero-sum gains. If this were the case, market
image is reflected in the flavor of the characters of exchanges would be unsustainable. Indeed,
C 408 Community Relations
competitive market participants have the incen- other communities such as those spatially imme-
tive to offer what others want and to provide it diate to the operations of the firm (e.g., for BP,
without deception. Those who do not play by these would be the Gulf cities, ecosystems in the
these rules will typically lose. Ma’Anit recalls Gulf) to the most distant though not least affected
that during the presidential campaign, Obama (e.g., consumers of gasoline and other petrol
had been “vociferously against drilling, yet after derivatives, the British society and its reputation,
assuming the presidency he made a dramatic and so on).
u-turn” and announced a massive expansion of This genuine regard for community is not only
offshore drilling. Why the sudden change of subtly presupposed in Friedman’s corporate
heart? Ma’Anit reports that, “Obama had been profit commandment as suggested here, but it
one of the top recipients of BP ‘donations’ in serves as the framework for Adam Smith’s notion
the previous year.” of the invisible hand. Indeed, it is not from the
Indeed, as Milton Friedman reminds us, it is benevolence of the baker that we receive our
the social responsibility of business – “to use its daily bread. Of course, the baker’s fundamental
resources and engage in activities designed to concern is profits, for otherwise, he would be out
increase its profits.” But, let us also recall that of an income. However, if the baker’s only con-
Friedman adds that this must be the case so long cern were profits, say, for example, if he did not
as profit-increasing activities “stay within the take pride in his product and arranged with the
rules of the game, which is to say, engages in local mayor to have the only bakery permit in
open and free competition without deception or town, then this purely self-serving approach
fraud.” And it is this last part which is indeed would not work out well for him or the consumers
community minded. The explanation is simple: of his product in the end. Although Adam Smith
a company can increase profits without the moral did not actually reach the specific articulation of
limitations that Friedman articulates, but if it does the notion of community and it would take more
not consider the interests of shareholders in the than one and a half centuries later before Edith
long run, colludes with government instead of Stein would make her contributions in this
competing genuinely and fairly and sells what it regard, he addressed the need for society, and
cannot deliver, then the company is not meeting the motivation for this need is our need for appro-
its responsibility toward shareholders or bation and sympathy from society. In his Theory
employees, its most immediate communities. of Moral Sentiments, Adam Smith describes sym-
While Hayward’s achievement of expanding pathy as our “fellow-feeling with the sufferings”
BP’s operations indeed was directed at increased of others (43). We strive to better our condition,
profits, this narrow end served as a blinder to he says, in large part to belong in community and
other important considerations. Is BP equipped be “taken notice of with sympathy” (50). Every
with the health and safety precautions that will man “prefers himself to all of mankind, yet he
not put BP employees at risk? Has BP corrected dares not look mankind in the face, and avow that
the problems that affected the operations in Texas he acts according to this principle.” If he wants to
and Alaska? Is BP playing the rules of the game be accepted in community, then man – the parent,
fairly? Can BP compete without manipulating the the baker, the CEO – must temper his actions
American government? The point is that to such that these do not act against the interests of
understand the stewardship that profit seeking others. For otherwise, Smith tells us that “in the
entails is to understand community. When the race for wealth and honours, and preferments, he
long-run effects of business operations are indeed may run as hard as he can, and strain every nerve
mindful of the immediate communities of con- and every muscle, in order to outstrip all his
cern to any corporation – that is, those constituted competitors. But if he should justle, or throw
by employees and shareholders – then playing the down any of them, the indulgence of the specta-
rules of the game of competition fairly, without tors is entirely at an end. It is a violation of fair
deception or fraud, will in the end also benefit play, which they cannot admit of” (83). So while,
Community Relations 409 C
arguably, Smith would agree with Friedman’s with regard to the communities in which the
corporate profit commandment, he would also corporation participates. Such community rela-
add that it is self-regulated by another internal tions are not motivated by profit maximization
mechanism that is even more gratifying than self- ends alone nor guided by narrow strategies that
service and this is the fellowship of community. improve only corporate image. Nonetheless,
For example, Smith argues that community relation efforts are not obstacles to
The product of the soil maintains at all times the the maximization of profits either. In fact, mind- C
number of inhabitants which it is capable of fulness to community relations directs corpora-
maintaining. The rich only select from the heap tions to considerations that are most compatible
what is most precious and agreeable. They con-
with profit maximization in the long run. But in
sume little more than the poor, and in spite of
their natural selfishness and rapacity, though they order to understand the nature of community
mean only their own convenience, though the sole relations more perspicuously, we must now turn
end that they propose from the labours of all the to the task of addressing the notion of community
thousands whom they employ, be the gratification
in greater philosophical depth.
of their own vain and insatiable desires, they divide
with the poor the produce of all their improve-
ments. They are led by an invisible hand to make
nearly the same distribution of the necessities of Introduction
life, which would have been made, had the earth
been divided into equal portions among all its
inhabitants, and thus without intending it, and The most thorough study of the phenomenon
afford means to the multiplication of the species. of community was advanced by Edith Stein
(184–185, italics mine) (1891–1942), a philosopher who studied under
This is the regulatory service of the invisible Edmund Husserl at the University of Göttingen
hand, one which would not work in commercial in Germany. Her contributions to the study of the
pursuits if it were not nested in the notion of phenomenon of community were preceded by
community. a study of the phenomenon of empathy, which
So if they are not the same as public relations, culminated as the subject of her doctoral disser-
then what are community relations? As we have tation in philosophy titled On the Problem of
seen, community relations are not defined by the Empathy. The word “empathy” must be under-
marketing function of a company nor by public stood as Einf€ uhlung, a term belonging to the
relation efforts whose main goal is to serve the tradition of nineteenth-century German phenom-
interests of the company. The reason is that neither enology and brought to notoriety by Theodor
is reconcilable with the compelling partiality Lipps at the University of Munich. Accordingly,
toward fellow members that defines community. empathy (as Einf€ uhlung) means in-feeling or
Thus, to act in community or in communion with inner awareness (Sawicki, 123). This is not an
others is to act in fellowship with those communi- intellectual awareness of our own consciousness
ties that constitute the corporation (the board of but an awareness of our feelings within the con-
directors, employees, shareholders) as well as text of a conscious experience, which opens
those with whom it enters into business relations a bridge to the affective experience of others. In
(suppliers, contractors, consumers, city, and fed- other words, empathy (as Einf€ uhlung) describes
eral governments). Just like individuals, corpora- the capacity that human beings have to recognize
tions enjoy various layers of community relations. and thereby share the emotions that another sen-
The effect that a corporation may have across tient being is experiencing. It is not merely
several layers of communities gives rise to a call a detached agreement with the feelings of others,
for responsible stewardship of the actions and as it is the case with the phenomenon of sympa-
decisions taken by the directors of a company. thy, but, rather, it is the sharing of the lived
In summary, then, community relations are experience of others.
demarcated by actions and communications that The question is this: how is it possible to
are characterized by fellowship and stewardship access the consciousness of another person? Her
C 410 Community Relations
teacher Husserl had advanced an answer that far” (38). As Edith Stein puts it, we see the mem-
she did not find completely satisfactory, so she bers of a community as subjects and not as
pursued this investigation in two essays. The first objects. We can grasp this distinction from our
titled “Sentient Causality,” and the second own experience of community in friendships and
titled “Individual and Community.” Together, family, as well as in sports teams bound by cama-
these constituted what would have been her raderie and in classrooms in which the students’
Habilitationsschrift, which is the thesis that learning is also the teacher’s goal. Moreover, we
a scholar submits after years of work following find community also in some working environ-
the receipt of a Ph.D. in pursuit of the Habilita- ments. Google is often hailed as an environment
tion, the highest academic qualification in that fosters community in many respects (healthy
Germany and some European countries. These lunches, gyms, play areas), and since what brings
essays have been published in a book titled workers to Google is the opportunity to take part
Philosophy of Psychology and the Humanities, in innovation, then the goals of the company are
volume VII of the Collected Works of Edith also the goals of each person. Typically, commu-
Stein. It is here that she brings together the nities are small scale, with persons engaged face
notions of empathy (as Einf€ uhlung) and commu- to face, and the role structures of their relations
nity. Stein scholar Mary Catharine Baseheart emerge spontaneously and are maintained by
observes that “For her, the knowledge of empathy custom.
(as Einf€uhlung) was a valuable key to unlock the The second kind of social order is associa-
secrets of personhood and to clarify theoretical tion. This is the relationship in which we support
knowledge not only of the individual person but the goals of the group insofar as this permits us
also of community” (163). And Baseheart adds to pursue our own ends. Hence, the relations of
that the starting points of her investigation on association are typically contractual and entered
community are “real community structures such into by persons who may not share the same
as families, nations, and religious communities, beliefs, but they find an instrumental value in
which we encounter in our surrounding world” cooperating as a group to achieve individual
(164). ends. We pay dues for memberships at the
Stein distinguishes two kinds of social orders. gym, for example, because by supporting the
The first kind is community proper, and it is purpose of its existence, we are also seeking to
characterized by solidarity, which occurs when gain personally. But we do not really care if
we make the ends of the community our own. The every member actually becomes fit. In this
notion of solidarity is often associated with the sense, other people are seen as objects by
views of thinkers such as Durkheim and Marx. means of which we achieve our ends. Political
However, their understanding of solidarity as associations are no different than the gym exam-
mechanical solidarity and socialism, respec- ple. In her writings on the state, Stein makes
tively, do not coincide with Stein’s. Hers is clear that the state is not a community even if
more akin to an older tradition: Catholic social our language sometimes seems to suggest this
thought. (See “▶ CSR and Catholic Social with expressions to describe the state such as our
Thought” entry in this encyclopedia). Accord- nation, national solidarity, or the people’s
ingly, the term solidarity is understood as republic. For Stein, the state is an instrument
a character of a community that is made possible for accomplishing those ends beneficent to indi-
by the recognition of the individuality and viduals that only a political body could bring
interdependence among individuals and the about. We could think, for example, of freedom
resulting duties that emerge from such made possible by the provision of public goods,
a recognition. In Sollicitudo Rei Socialis, John such as roads and the protection against foreign
Paul II explains that solidarity “is not a feeling aggressors.
of vague compassion or shallow distress at the The main difference between these two forms
misfortunes of so many people, both near and of social organization is that in community we
Community Relations 411 C
participate in affective acts with other sentient solidarity that brings a community into being.
beings, which lead to the formation of an experi- An example of this temporal nature of commu-
ence stream shared in common. According to nity is as follows. One person embraces a mother
Edith Stein, this is how we apprehend value. who is in tears in an act of communion when told
She points out that value apprehension is not an that she has just lost a child at war. Although both
intellectual recognition of a moral fact, after are strangers, this act is characterized by genuine
which we adopt an affective attitude about it. empathy (as Einf€ uhlung, per the earlier explana- C
Rather, it is the other way around. It is by means tion). During those brief moments of the
of our affective capacity that we are able to embrace, a community came into being and then
apprehend value, and then we can form an intel- ceased to exist.
lectual recognition and articulation of the value In the context of a corporation, temporal
that we have experienced. We observe, accord- communities are just as frequent. A charity
ingly, members of a community respond with the event participation or donation exemplifies an
same emotional attitude to the same objects, and act of community, as much as a short-term con-
through these experiences of union and cohesive- tract with a corporate partner or supplier, if this
ness in apprehension of things in the world, we is characterized by fellowship and solidarity.
are able to recognize the bonds of solidarity that These temporal communities do not present
tie them together. It is by means of the aesthetic a problem but, instead, are sources of social
quality of the accepted shared values among indi- capital formation. But there are exceptions,
viduals that the collective personality of such as when a corporation moves its operations
a community is formed. Each member is not from one city to another, or from one nation to
only a contributor to the aesthetic of the commu- another, because these leave the constituents of
nity but also shaped by the community. Stein the host city or nation with feelings of loss.
observes that we cannot know ourselves fully Indeed, the most difficult challenges are the sev-
until we are in community. Different levels of ering of the interdependencies previously
community relations shed light on different established and demarcating the boundary at
aspects of ourselves that would go unnoticed to which such interdependencies will cease. Per-
ourselves otherwise. Friends will point out to us haps because of such challenges, there are strong
our eccentricities. Family members will remind pressures against corporate relocation as it is
us of our history of weaknesses and strengths. often judged to be an act that is inconsistent
Although we might find all of this annoying, it with corporate citizenship. The term corporate
helps us see ourselves from a perspective other citizenship is often used by corporations to
than our own. So community can indeed help us describe its commitment to corporate social
in our quest for virtue by showing us more clearly responsibility. But the metaphor of corporate
the task ahead in our character formation. This citizenship indeed supports the image of
task involves practical choices along the way, and a permanent member of the society in which it
toward this end, there are three issues that we has established residence. This is a problematic
need to take into account. expectation in the same way that it would be to
expect that no member of a society should ever
migrate to other lands in search of greater oppor-
Key Issues tunity. After our values for life and procreation,
liberty seems to be a third value that is similarly
The Temporal Nature of Communities shared by all human beings. It would be against
Communities are not necessarily infinitely endur- the idea of community and healthy community
ing entities, and often they have a beginning and relations to force a corporation to stay simply on
an ending with only a brief existence in between. the basis of self-regard concerning employment
It is not the duration that characterizes an act of and income. And it fails to recognize that com-
communion but its quality of fellowship and munities are not always infinitely enduring.
C 412 Community Relations
the team, and I will do my best for my league. In community, it would seem that Facebook does
Stein’s framework, however, this can be an asso- not, in principle at least, aim at building commu-
ciation and not necessarily a community since nity relations. It is an association in which the
the reciprocity shown by all members of the common end is social networking but the goals of
league could be self-serving. I want to win, and others are not one’s own necessarily.
to do this I need to do my best for the league. What is technology carving out for future
There is a difference, Stein argues, between community relations? Not only corporations but
directing mental states at perceived common universities and retail stores that already have
goals and doing this as part of communal direct contact with their user communities have
sharing. joined the Facebook bandwagon. The goal seems
Nonetheless, let us assume for the sake of to be the cultivation of good will and a modern
argument that bowling leagues are communities public image for the institution. We could
and not mere associations and that Putnam has even speculate that community relations is
indeed identified a worrisome decline in commu- a sophisticated stage in human organizations
nity relations and social capital. In this case, there that might only start as associations. The emer-
is another consideration that Stein anticipates. gence of firms, too, had the character of associa-
She points out that social organizations are not tion insofar as the entrepreneurs benefitted from
purely of one kind or another, but usually some having continuous availability of labor and econ-
combination of both community and association. omies of scale that resulted from the workers
This means that while a bowling league could be know-how of their business, and the employees
a true community, it could also be no more than also benefitted from having steady wages and
an association, or any point in between. Even if other benefits instead of discrete contracts for
bowling leagues are on the decline because they specific tasks and constant bidding for new con-
no longer provide the community relations that tracts. Now, as such associations form into com-
they once offered, this does not mean necessarily munities, then the benefits multiply. So perhaps,
that combined with all other communities that are we are bowling alone but we seem to be also
also on the decline (voters, marriage, and so on), opening new horizons for community develop-
community relations and social capital are on the ment. And perhaps, the benefits of these changes
decline as well. The trend may be that some will spill over into old and decaying communities
communities have ceased to be socially benefi- and give them new life, such as online voting and
cent, even if temporarily so, and others have avatar bowling leagues to replace voting pre-
taken their place. The growing popularity of tech- cincts and traditional bowling leagues.
nologically based social networks, such as
Facebook, suggests that this is at least
a possibility. In today’s digital age, technology
has served both human relations of association Cross-References
and community. But they also present disadvan-
tages for building community. While at one end ▶ CSR and Catholic Social Thought
of the spectrum, we could place iPods on the basis ▶ Economic Sociology on CSR
that they tend to isolate individuals from the ▶ Employee Participation
human social world around them (not to discredit ▶ Externalities
the aesthetic enhancement that they provide, of ▶ Healthcare and Social Benefits
course), at the other end of the spectrum, we ▶ Human Resource Management
could place Facebook because it provides the ▶ Institutes of Directors and CSR
means for any person to engage hundreds and ▶ Outsourcing
even thousands of other people as friends. This, ▶ Social Accounting
however, may be too rushed a judgment. If we ▶ Social Entrepreneurship
apply the distinction between association and ▶ Trust
Company Directors and CSR 415 C
References and Readings Zúñiga y Postigo, G. (2010, February 11–12). The middle
point between iPods and Facebook: Lessons in com-
Baseheart, M. C. (1992). Edith Stein’s philosophy of com- munity and value from Edith Stein. Unpublished paper
munity. The Personalist Forum, 8(1), 163–173. presented at the Edith Stein Project Conference,
Benedict XVI. (2009). Caritas in veritate. Città del University of Notre Dame.
Vaticano: Vatican Encyclical, Libreria Editrice Zúñiga y Postigo, G. (2012). Corporate social responsibil-
Vaticana. http://www.vatican.va/holy_father/benedict_ ity and Christian social thought. In S. O. Idowu, N.
Capaldi, et al. (Eds.), Encyclopedia for corporate
xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_
social responsibility. London: Springer.
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caritas-in-veritate_en.html
Clark, C. E. (2004). Difference between public relations
and corporate social responsibility: An analysis. Pub-
lic Relations Review, 26(3), 363–380.
Durkheim, E. (1982). The rules of sociological method
(trans: Halls, W. D.). New York: Free Press.
Friedman, M. (1970). The social responsibility of business Community-Based Social Marketing
is to increase its profits. The New York Times.
John Paul II. (1987). Sollicitudo Rei Socialis. Vatican ▶ Corporate Social Marketing
City: Encyclical, Libraria Editrice Vaticana, http://
www.vatican.va/holy_father/john_paul_ii/encyclicals/
documents/hf_jp-ii_enc_30121987_sollicitudo-rei-
socialis_en.html
Ma’Anit, A. (2010). That petrol emotion. New Interna-
tionalist, 437, 20–23. Company Directors and CSR
MacIntyre, A. (2006). Edith Stein: A philosophical pro-
logue (1913–1922). Lanham: Rowman and Littlefield. Ahmed El-Masry1 and Nahla Kamal2
Narveson, J. (2002). Collective responsibility. Journal of 1
Plymouth Business School, Devon,
Ethics, 6, 179–198.
Pettit, P. (1994). Liberal/communitarian: MacIntyre’s Plymouth, UK
2
mesmeric dichotomy. In J. Horton & J. Mendus ALROWAD, Dokki, Giza, Egypt
(Eds.), After MacIntyre: Critical perspectives on the
work of Alasdair MacIntyre (pp. 176–204).
Cambridge: Polity Press.
Putnam, R. D. (1995). Bowling alone: America’s declin- Synonyms
ing social capital. Journal of Democracy, 6(1), 65–78.
Sawicki, M. (1997). Empathy before and after Husserl. Corporate control; Corporate governance;
Philosophy Today, 41, 123–127. Director’s duties
Sawicki, M. (2003). The Humane Community: Husserl vs.
Stein. In R. Feist & W. Sweet (Eds.), Husserl and Stein
(Vol. 31, pp. 141–154). Washington, DC: The Council
for Research in Values and Philosophy. Definition
Smiley, M. (2010). Collective responsibility. In E. N.
Zalta (Ed.), The Stanford encyclopedia of philosophy
(Spring 2011 Ed.). http://plato.stanford.edu/archives/ It is quite difficult to find a universally accepted
spr2011/entries/collective-responsibility/ definition for CSR; each author provides
Smith, A. (1981). An inquiry into the nature and a definition according to his field of research,
causes of the wealth of nations. Indianapolis: Liberty preferences, and understanding of CSR. When
Fund.
Smith, A. (1984). The theory of moral sentiments. India- there are different views concerning the meaning
napolis: Liberty Fund. of CSR, debate on its significance in strategy
Stein, E. (1989). On the problem of empathy (The collected formulation and stockholder management will
works of Edith Stein, Vol. III, trans: Stein, W.). be complicated and turn on the assumptions
Washington, DC: Institute of Carmelite Studies.
Stein, E. (2000). Philosophy of psychology and the about and around the nature and significance
humanities (The collected works of Edith Stein, of CSR. The words of Idowu and Filho seem
Vol. VII, trans: Baseheart, M. C. & Sawicki, M.). important to remember, “What falls under the
Washington, DC: Institute of Carmelite Studies. umbrella of CSR in one country may perhaps be
van Staveren, I. (2009). Communitarianism and the
market: A paradox. Review of Social Economy, of little or no significance in another” (Idowu and
LXVII, 25–47. Filho 2010).
C 416 Company Directors and CSR
A broader definition refers to it as a means by sustainability; in addition, the top 250 companies
which companies can manage and influence the of fortune 500 has adopted CSR as a mainstream
attitudes and perceptions of their stakeholders, practice (Mitra 2011). The codes of contract
building their trust and enabling the benefits of governing social, environmental, and ethical
positive relationships to deliver business practices were also signed or developed by more
advantage and more effective management of than 1,000 corporations in UK and Europe. Such
risk, helping companies to reduce avoidable companies understand that understanding and
losses, identify new emerging issues, and reporting on CSR is a key component in reducing
use positions of leadership as a means to gain risks. Karen Bergin, the Senior Director of
competitive advantage by influencing new Corporate Affairs and Citizenship, at Microsoft
regulation to strengthen competitive advantage. Corporation states that corporations (Transpar-
CSR could be done on a voluntary or mandatory ency International 2009) have accountability
action. Usually, it is cited as a concept whereby toward their societies in which they work due to
companies integrate social and environmental the following reasons: First, the corporation’s
concerns in their business operations and in most vital asset is its people, all of whom are
their interaction with their stakeholders on part of that society; second, the key stakeholders
a voluntary basis. Within such a broad definition, of the corporation such as customers, partners,
the discussion of how company directors should and investors who expect responsible leadership
understand CSR is not about whether CSR and active participation. And lastly, corporations
activities should be voluntary or not; the debate can vigorously learn through CSR, for instance,
should be about where on the legislation scale the gathering direct feedback from people in
indicator should be set, should it be more toward societies around the world about the corporate
no legislation or more toward total legislation. products.
As Philip Jennings, the General Secretary of Because the world had witnessed chaotic
Union Network international, noted: stock markets, credit crisis, and a global
Companies and governments overwhelmingly economic recession, as a result, climate change
want the public both to believe in the ethical and wider issues of CSR were starting to climb
corporation and at the same time do not want to the corporate agenda. This was clear, at least
provide new legal backing for tighter ethical in a European context, in the supplement
behaviour. But the ethics genie is out of the bottle
and its operational principles are providing difficult accompanying the Observer and Guardian
to control. Another big change is that workers and newspapers’ in March 2004 conference on
citizens as stakeholders can now be involves “Business and Society” (one of a growing
directly with powerful corporations. (Hopkins number of sophisticated conferences supporting
2007, p.27)
the CSR cause). That supplement highlighted
that boards of directors should be capable
of demonstrating that any voluntary action they
Introduction support will eventually improve shareholder
value; in addition, they have to recognize how
Since the beginning of 1990s, corporate social their social and environmental influences can
responsibility has gained an importance as improve or jeopardize shareholder value.
a concept. A lot of corporations have focused In 2005, a CSR salary survey illustrated that
their attention on CSR’s triple bottom line: many corporations are assigning specialist
people, planet, and profit. Corporation’s success officers to develop and implement clear CSR
and influence on its customers as well as the strategies, due to the significant growth of the
world depends on these economic, social, and importance of issues such as governance,
ecological principles. A recent study by KPMG environmental management, social equity,
showed that CSR reporting has changed from and employee and community (Sullivan and
purely environmental to concentrating on Sambunaris 2005). According to Tom Leathes,
Company Directors and CSR 417 C
the director of Acre Resources, “CSR has gone Even though corporations should watch costs
from something that was a bit fashionable to and spending during a recession, a recession
something that is much more broadly accepted. might not be the time to limit corporate CSR
Some companies have whole teams doing this budget. According to Howard, corporations
now—we have just been working with Sky, should put into consideration how they are
which has a team of 20–30 people dedicated to going to keep their staff and their customers.
it” (Hanson 2008). According to Leathes, CSR Identifying the position of the corporation is C
cannot only be found in large companies such as even more relevant in a recession, because such
BT, the Body Shop, and Marks & Spencer, who CSR can create long- and short-term value for
have been hiring CSR specialists for a number of companies. CSR offers an opportunity for
years, but also there have been a growing number corporations of all sizes. According to Leathes,
of smaller companies taking them on. corporations gain competitive advantage through
The chief executive of Business in the developing a strong CSR program and
Community (BITC), Stephen Howard, has also incorporating it into their brand and marketing.
observed that there has been an increase in Customers are much more conscious of
the number of businesses working with that environmental and social issues. They are
organization. BITC gives support and advice to searching for corporations who can make this
help corporations enhance the impression they easy for them. However, Leathes emphasizes
have on society and the environment. According that assigning a CSR officer is more relevant for
to Howard “CSR is getting more boardroom some companies than others. According to him, it
attention; universities now run degree courses is inexperienced to state that any company which
in CSR” and “like the evolution of the HR does this is likely to notice a huge increase in
professional, we are seeing the evolution of the sales. Several oil and tobacco corporations have
CSR professional” (Hanson 2008). an enormous social and environmental influence.
In addition to climate-change agenda, there are In particular, corporations with bad reputations
other factors which are accountable for the rise of like oil and tobacco companies showed an
CSR as a boardroom issue, for instance, the finan- interest in carrying CSR activities to change
cial scandals at Enron and WorldCom and lzately their negative images. Some corporations such
Societe Generale, as well as so-called labor abuses as BP and Shell were able to successfully
at Nike and Gap (Hanson 2008). Corporations are alter their image through emphasizing their
increasingly using CSR as an instrument to deal environmental and social initiatives, while
with risk and reputation: Questions about how the same strategy has backfired for others such
companies are fulfilling their environmental and as Monsanto and Exxon. According to Karen
social responsibilities are asked by wider stake- Bergin, Senior Director of Corporate Affairs
holder groups such as local authorities, public and Citizenship, Microsoft Corporation, the
bodies, customers, and prospective staff. Howard solution lies in making sure that CSR activities
states that “It is an issue that is here and now, so are aligned with the corporation, which will
businesses need to look at how they are going to guarantee its effectiveness and sustainability
respond.” However, Leathes highlighted that areas (Hanson 2008).
like marketing, HR, finance, and IT are considered The responsibility for corporate governance
to be more entrenched compared to CSR and the company’s CSR policies and objective
budgets and team sizes which are still relatively should probably fall in the hands of someone with
underdeveloped. In addition, most of CSR full knowledge of the company’s positive and
heads do not report directly to the chief executive negative influences on society as well as having
or other main board director, although that posi- a proper understanding of present and potential
tion seems to be changing (see – reference to risks faced by the company. We can argue that
“▶ Chief Sustainability Officer” (Bhattacharya such person should be capable of influencing the
et al. 2011). company’s strategic planning, which ultimately
C 418 Company Directors and CSR
indicates that the participation of the board is incentives must be established. Culturally, that
essential for a successful establishment of the means corporations should focus on long-term
CSR function in corporations. CSR issues are sustainable performance rather than short-term
immediately placed at the core of business strat- cost cutting views. The corporation should
egy, as a result of, having the board administering consider the set of incentives, which will provide
the incorporation and execution of CSR in with the best coordination between profit
a corporation. In addition, legislation in many maximization and CSR performance. To ensure
countries holds the same belief, in which direc- success, corporations should imply the same
tors hold the responsibility for the environmental techniques it uses when it deals with any other
and social consequences of corporate decision. strategic component of a business; measuring and
The combined code on corporate governance assessing the performance are handled according
makes it obvious that CSR is crucial. It states that to a well-known formal strategy (Financial
directors “should set the values and standards of Reporting Council 2003).
the company and ensure that it meets its
obligations to shareholders and others”
(Financial Reporting Council 2003). The board Key Issues
must be in charge of the establishment of
corporate values and standards, looking at The Role of Directors
corporate responsibility in a strategic way, being A company director is a member of the Board of
constructive about regulations, aligning Directors whose responsibility is to add value
performance management, establishing a culture to the corporation through both performance
of integrity, and making use of internal control to (direction) and conformance (control).
ensure accountability. On the other hand, Performance involves establishing the mission,
a board’s role is to administer rather than values, and strategic direction of the corporation;
managing; therefore, they have to delegate. the influence of these on both stakeholders and
Assigning the CSR accountability to an existing the natural environment should be considered
board member and devoting a committee by a socially responsible director. Conformance
completely to CSR, or the entire board can be involves, firstly, accountability through
included in CSR decisions, are examples of establishing internal policy and procedures and
various techniques used by corporations to place devoting to both internal and external rules
CSR role in the board. The same techniques could and procedures such as laws and, secondly,
be applied at the executive level, for instance, transparency through reporting to stakeholders;
the executive committee members could be high levels of each should be supported by
accountable for CSR supervision, a new member a socially responsible director. Ensuring that
could be assigned to the executive committee the corporate’s purpose and values are consis-
with CSR responsibilities and expertise, or tent with or support CSR might be an active
engaging the whole executive committee on responsibility played by the company director.
CSR decisions. The same foundation can be Also, the company director can guarantee that
applied to the whole corporation through central- a socially responsible manner is used in strategy
izing or decentralizing, directing one department creation through establishing policies and
with CSR responsibilities, or allocating them procedures and the implementation of that strat-
according to different criteria such as geographic egy. There is an agreement that the stakeholders
locations and business divisions and deciding on should be taken into consideration when
whether to use cross functional interaction or company directors make decisions. According
not. No matter what structure the corporation to the International Corporate Governance
choice, the dedication from the board should Network (ICGN 1999), “it concurs in the view
be accompanied by responsibilities down the that active corporation between corporations
hierarchy. To achieve this, a set of correct and stakeholders is essential in creating wealth,
Company Directors and CSR 419 C
employment and financially sound enterprises Company directors’ roles and responsibilities
over time.” An executive (or inside) director are highly codified and extensively researched,
and a nonexecutive (or outside) director are the and therefore, the directors’ perspective of the
two categorizes usually used for company place of the CSR within their professional duties
director. The first refers to an employee of the might be developed from a number of sources
corporation such as the chief executive officer such as legislation and case law; international,
(CEO), while the latter refers to an employee regional, and national guidelines; reports on C
from outside the corporation. A nonexecutive CSR and corporate governance; professional
director is hired to add an external opinion on associations (Institutes of Directors); corporate
issues of strategy, performance, resources, constitutions and codes of conduct; and
and standards of conduct and evaluation of professional and academic literature. The
performance to the board. Nonexecutive direc- legislative frameworks within which the
tor is hired based on his/her courage, wisdom, corporation works are the main influences on
and independence. The nonexecutive director how those opinions are formed. Such frameworks
is divided also in two categories: independent not only differ from one country to another, but
directors and nonindependent directors. also they differ between states of the same
The board is an ongoing body that creates country. Other influences include the boardroom
a series of decisions. “The directors’ perceptions demographics and culture, the corporations’
of the success or otherwise of a decision will history of CSR, and the persons’ values and
feedback into the decision-making process, and experiences. Therefore, a director might have,
as such will form part of the information or to some extent, a different perception of CSR
experience that is used in making later when the director acts on multiple board
decisions.” There are two specific characteris- positions. The company directors’ perception of
tics of board decision making: Firstly, acting as CSR is a broad one; the perception of one director
agents, the decision makers are making could fall somewhere inside the whole array of
a decision on behalf of the principles (owners possibilities from seeing CSR inappropriate
of the corporations) rather than making through to a passionate obligation to community
a personal decision. Secondly, two stage pro- and the environment. It is persistent that
cesses are used to reach a decision: The board executive directors perceive CSR differently
papers are read by individuals before meetings than nonexecutive directors. However,
and make an early decision, and then, the group academics did not reach an agreement on what
decision-making processes are used by the board they perceive differently. For instance, Ibrahim
to make last decision through consensus or et al. states that “overall, outsiders are less
majority vote. As such, both individual and economically driven and more philanthropically
group decision-making philosophies are perti- oriented than insiders,” while Wang and Coffee
nent to the directors’ perception of CSR. It is found in their study that “increasing the number
crucial that pathologies do not affect the group of outsiders on the board may actually have little
decision-making process, such as group think- effect on philanthropic behaviour” (Idowu and
ing. That is why the board should have a various Filho 2010).
group of people to expand the range of
experiences, values, and risk perception that Establishing a CSR Strategy
will be carried to the meeting and inform the At times, executives find it difficult to establish
discussion. Board demographics and CSR a CSR strategy; however, social media platforms
research have been done extensively. can be essential resources for corporations looking
For instance, male board members are less likely to contribute to their societies and develop into
than female board members to encourage better corporate citizens. Discovery Communica-
charitable community service and cultural tions, for instance, are relying more on social media
activities (ICGN 1999). in their CSR efforts, in which they use social
C 420 Company Directors and CSR
a way such that the long-term destiny of the Earth 3. Producing environmentally friendly products,
and society is optimized, i.e., in capitalist econo- employing ethical work practices, and indulg-
mies, at least how much can be left to the invis- ing in corporate philanthropy always adds
ible hand? costs, and the extra costs of producing such
Since firms make products using resources for “ethical” products do not command increased
the benefits of customers, they have two broad prices from consumers.
strategic challenges: to maximize profitability in The first of these statements is not contentious.
the short run and to remain in existence in the The second is contentious, but an analysis of the
long run by ensuring that the products they pro- literature indicates that management action
duce, and the assets they use to produce them, beyond compliance is necessary for some firms
remain of relevance to society, i.e., if firms wish to remain in business (Kagan et al. 2003; Lynch-
to survive, their assets and/or products must be Wood et al. 2009; Porter and Kramer 2002).
regenerated before they become obsolete Kagan et al. use the concept of the social license
(McGahan 2004). Hence, Kodak moved from which argues that firms are constrained in their
chemically based photography to digitally based activities by the expectations of society. Lynch-
photography. Thus, firms compete in the present, Wood et al. categorized the drivers of the social
but also must make strategic choices about the license as the potential of the impact of a firm’s or
nature of the future and their role in that future. industry’s activities, customer interest and
Competition has both an operational dimension power, and corporate visibility and community
(present orientation) and a strategic dimension pressure. Those firms that have social license
(future orientation). In this section, we explore pressures have to invest beyond legal compliance
the competitive and complementary factors that activities. This investment is part of their com-
affect the corporate social responsible (CSR) petitive behavior. However, as Gunningham and
behavior of firms. his colleagues have observed, the precise bound-
aries of the social license are ill defined. This lack
of definition is confusing to some managers. Por-
Introduction ter and Kramer (2002, p. 57) have noted that firms
feel obliged to give to charity to appease potential
Friedman (1970) publicized his analysis of “the critics but are often unhappy in this giving, “exec-
social responsibility of business” in an article in utives find it hard, if not impossible, to justify
the New York Times Magazine. In this article, he charitable expenditures in terms of bottom line
outlined his concept that the social responsibility benefits.” Thus, there is evidence that firms have
of business in a free enterprise system, including to make judgments, irrespective of altruism, of
providing employment, eliminating discrimina- the extent of their beyond compliance activities
tion and avoiding pollution, was a distraction to remain a viable competitor in an industry.
from the business of maximizing shareholder Thus, observers and managers find it difficult to
wealth. judge the value “of beyond compliance” activity
These ideas can be encapsulated as follows: in terms of actual or perceived rewards. Husted
1. The role of firms is to obey the law, and and de Jesus Salazar (2006) cite the example of
government should legislate to ensure firms’ Merk, who in 1987 made a drug, Mectizan, avail-
behavior is controlled to meet the norms of able to third world counties free of charge, which
society. gained it some reputational benefits and boosted
2. Firms’ managers have no responsibility to employee morale but was judged by analysts to
do more than the law requires or to go “beyond have cost more than any achieved or anticipated
compliance.” Indeed, the argument of payoff. Porter and Kramer (2002, p. 58) criticized
Friedman is that managers have a duty not to “diffuse and unfocused” charitable donations and
carry out activities that reduce shareholder argued that the assertions of Friedman were true
wealth. when “corporations’ contributions are unfocused
Competition 423 C
and piecemeal.” This leads into a discussion of made; this he argues is more effective in terms
the concept of strategic corporate social respon- of process efficiency that “end of pipe” capture
sibility, as a proactive competitive weapon, not as and disposal. He produced evidence that pollu-
a series of activities constrained by formal regu- tion prevention can increase productivity effi-
lation or by the social license. ciency as well as reducing compliance and
Husted and de Jesus Salazar (2006) used eco- liability costs. Product stewardship goes beyond
nomic arguments to demonstrate that strategic pollution prevention in the manufacturing pro- C
behavior by firms to conduct activities that cess and argues that every step of designing,
aligned society benefits with firm benefits pro- producing, using, and disposing of should be
duced more benefits for both the firm and society considered when judging the environmental
than firms that were either behaving altruistically, impacts of products. The drivers for sustainable
but without a strategic focus, or that were behav- development provide firms with the opportunities
ing egoistically and conforming to minimum to innovate with both product and process design
legal compliance. This analysis, however, relies and develop blue ocean strategies (Kim and
on the assumption that there is an alignment Mauborgne 2005), i.e., the opportunity to operate
between both social benefit generation and profit in markets that are free from competition, at least
maximization. The evidence from the literature is in the short run.
that such alignment exists at least within the Porter and Kramer (2002) also emphasized the
context of the USA experience. These ideas are importance of a strategic framework for corpo-
illustrated with a discussion of firm strategic rate philanthropy. Unfocused charity giving
behavior with respect to the natural environment as outlined by Porter and Kramer is analogous
and corporate philanthropy. to employing poor quality control in
Hart (1995) observed that the standard design a manufacturing process; it is an unnecessary
school model (SWOT) developed in strategic waste of money. They discussed a number of
management discusses economic, political, case studies in which they illustrated how firms
technological, and sociological factors as part of can improve their competitive context by the use
its analytical template. However, while the natu- of philanthropy to improve the factors that make
ral environment could be considered within these up their corporate context. Corporate context is
descriptors, Hart advocates that any firm should defined by the variables that make up Porter’s
consider its strategic position in a way that diamond model: demand conditions, related and
explicitly take account of the impact and poten- supporting industries, factor conditions, and firm
tial future impacts of their activities on the natural rivalry.
environment. This is based on the premise that There are a number of case studies that support
the consumers of a firms’ products will expect the strategic opportunities of proactive environ-
that firms behave in ways that are mindful of the mentally focused CSR. Porter and van der Linde
natural environment. It is therefore in firms’ (1995) challenged the idea that environmental
interests to satisfy the desires of their consumers regulation would add costs to products and in
with respect to the tangible and intangible fact suggested that it was a driver for promoting
benefits associated with their products. Hart cost efficiency and a spur for innovative firms to
argued that firms can develop three generic natu- find new ways of differentiating products; their
ral environmental strategies: pollution preven- argument was supported with cases. Orsato
tion, product stewardship, and sustainable (2006) indicated that firms which pursue environ-
development. Pollution prevention has two mental strategies can improve both their relative
aspects: working to make present process more market position and their resource effectiveness.
efficient and hence less polluting and developing For sustainable advantage, it is also important
new process and products that will lead to “zero that the market positions taken by firms are diffi-
emissions.” Hart’s concept of pollution preven- cult to imitate, because, as Orsato (2006) has
tion involves preventing waste materials being observed, a first mover advantage in obtaining
C 424 Competition
ISO 14001 certification, for example, was ini- start on technology development and experience
tially a differentiating feature but was subse- with filters” (p. 145).
quently eroded to become a “license to operate” A survey study conducted by Brammer and
for certain firms as the number of firms gaining Millington (2008) supports the ideas of Porter
certification in particular sectors increased – an and Kramer. They found that the relationship
order-winning criterion becomes an order- between financial performance and level of char-
qualifying criterion (Hill 2000). Berry and itable donations was U-shaped, suggesting that
Rondinelli (1998), again using case examples, these philanthropic initiatives had to exceed
have indicated that firms that adopted ecologi- a threshold value to have any impact, investments
cally sensitive policies became more efficient. below a threshold involving costs but generating
They suggest that no benefits: “this suggests that it is the consistent
Many companies including 3M, DuPont, Allied application of a strategy of social sensitivity that
Signal, Amoco and Monsanto have discovered ultimately pays off in financial terms” (p. 1340).
that environmental costs can be replaced by reve-
nues through sale of waste by-products, clean tech-
nologies or unused pollution allowances (p. 9).
Key Issues
Furthermore, they observe that large firms led
the way in proactive ecologically sensitive strat- In capitalist society, competition is considered to
egies but predicted that small and medium firms be a framework that facilities the allocation of
would follow the lead and will “adopt pollution goods and services in an efficient way that is fair
prevention practices when they can easily obtain to the buyer and seller – the invisible hand con-
information about them, learn to apply life cycle cept. However, the invisible hand principle does
analysis, and get technical assistance.” An anal- not take into account the welfare of those not
ysis by Lynch-Wood et al. (2009) would not seem engaged in the buying and selling transaction
to support this latter contention concerning small- and cannot take into account the drivers for
and medium-sized firms in the UK. A case study socially responsible behavior by corporations.
on five firms carried out by Sharma et al. (1999) The invisible hand is complemented by the social
indicates that Canadian firms in the oil industry license in moderating the behavior of firms so as
who responded early to environmental concerns to protect the welfare of society. The strategic
regarded such concerns as opportunities, whereas behavior of firms can increase both the level and
firms who responded when their identity had been effectiveness of CSR activity. However, there are
defined and established regarded them as threats. some important limitations to these ideas: The
Rugman and Verbeke’s (2000) concluded that lack of perfect knowledge of CSR issues by
firms can deal with government regulation stra- firms, consumers, and society makes the devel-
tegically by adopting policies around ecological opment of effective competitive and social con-
issues that influence to their benefit government straints to firm behavior difficult to quantify; the
policy on legislation. Ng (2006), too, has indi- relative power of the social license to regulate in
cated that by being aware of government policy different kinds of industry; and the applicability
on future regulation, firms that are strategically of the ideas discussed in this article outside USA
aware and suitably resourced are able to antici- contexts to other contexts with varying degrees of
pate and encourage regulation, so that by cultural and economic differences to the USA.
investing in cleaner technologies before any
anticipated regulation is enacted, they can gain
first mover advantages. In her work, Ng (2006) Future Directions
detailed how Peugeot-Citroen’s (PSA) introduc-
tion of filters for diesel engines gave marketing By definition, competition can only work in soci-
and technological first mover advantages: “In eties where competition is a part of the economic
addition to the free publicity, PSA got a head system. In all societies, there is some regulation.
Competition 425 C
This regulation can be environmentally tough or only they would recognize as giving any benefit.
environmentally weak. Equally, nonlegal con- This is an unlikely scenario; it would require that
straints on companies can differ from country to the firm would be the only entity capable of
country. Matten and Moon (2008) have distin- recognizing the advantages of their activities. It
guished between explicit and implicit CSR and would also require the firm to have some sort of
suggest that firm behavior with respect to CSR market domination so that its actions would not
differs in different countries. Their work suggests make it vulnerable to other firms not indulging in C
that the social license and strategic behavior with these activities. In a similar vein, other strains of
respect to CSR will differ in different countries. research could usefully explore whether all firms
This is an area for useful future research. It is can afford long-term strategic CSR behavior that
particularly important to understand the chal- reduces short-term profits for long-term benefits.
lenges facing a world where the competitive
behavior of firms in one culture, or indeed the
different behavior of the same multinational firms
Cross-References
in different cultures, can affect the welfare of the
earth. This understanding is important if ambi-
▶ Business Case for CSR
tious goals to maximize the welfare of all human
▶ Business Strategy
societies are to be met as outlined in the following
▶ Cause-Related Marketing
quote from the Cambridge University-based
▶ Competitive Advantage
Prince of Wales’s Corporate Leaders Group on
▶ Corporate Social Entrepreneurship
Climate Change website: (http://www.cpi.cam.
▶ Corporate Social Responsibility Strategy
ac.uk/pdf/Copenhagen%20Communique%20-%
▶ Definitions of Social Responsibility
20English2.pdf, accessed 14 September, 2009).
▶ Friedman, Milton
Lifecycle analysis (i.e., the impact of all phases of ▶ Kaizen
the product life on the natural environment, design ▶ Philanthropy
to disposal) will be important in product
development.
▶ Responsible Competitiveness
The goal of sustainable development will be ▶ Strategic Corporate Social Responsibility
promoted by firms having long-term visions related ▶ Unknown Stakeholder
to particular “clean” technologies, but these suc-
cessful technologies will need to be embraced by
the wider community; this is the only way for
world economies to develop and grow without References and Readings
adversely affecting the planet.
Berry, M. A., & Rondinelli, D. A. (1998). Proactive cor-
The motives for firms engaging in CSR behav-
porate environment management: A new industrial
ior remain incompletely understood; indeed, the revolution. The Academy of Management Executive,
multidimensional nature of CSR increases this 12(2), 38–50.
challenge. Do any firms exhibit truly altruistic Brammer, S., & Millington, A. (2008). Does it pay to be
different? An analysis of the relationship between cor-
behavior according to the definition of truly altru-
porate social and financial performance. Strategic
istic corporate behavior given by McWilliams Management Journal, 29(12), 1325–1343.
and Siegel (2001, p. 117): “Here, we define Frank, R. H. (2004). Microeconomics and behavior
CSR as actions that appear to further some social (4th ed.). New York: McGraw-Hill.
Friedman, M. (1970, September 13). The social responsi-
good, beyond the interests of the firm and that
bility of business is to increase its profits. The New
which is required by law?” This would mean York Times Magazine, pp. 122–126.
adopting product designs, processes, and policies Hart, S. (1995). A natural-resource-based view of the firm.
that were of no interest to potential consumers, Academy of Management Review, 20(4), 986–1014.
Hill, T. (2000). Manufacturing strategy: Text and cases
communities, legislators, etc. Thus, firms being
(3rd ed.). Burr Ridge: McGraw-Hill.
truly altruistic would have to be in environments Husted, B. W., & de Jesus Salazar, J. (2006). Taking
where they could sacrifice profits to do things that Friedman seriously: Maximising profits and social
C 426 Competitive Advantage
make employees more committed to the company, ethical uncertainties relating to the industry and
as well as driving innovation, in the knowledge role within which they work (Treviño et al. 1999).
that there is a safety net of an effective compliance Therefore, training is required to ensure all
program, which will “prevent them, from inadver- employees become aware of regulatory require-
tently engaging in impermissible conduct” (Ford ments governing their behavior for them to be
2008, p. 50). Key aspects of an effective compli- able to take responsibility for conducting their
ance program are outlined below. daily business behavior in an ethical and compli-
ant way. Such training will allow them to become
more likely to ask the right types of questions
Key Issues before conducting in ethically ambiguous or
noncompliant behavior (Treviño et al. 1999).
Key Characteristics of an Effective This leads to them being more likely to take
Compliance Program personal responsibility and accountability for
Governance their own understanding and application of ethics
Collins (2008) asserts that an effective compli- and regulation, ultimately allowing them to make
ance program requires a top-down approach better decisions (Treviño et al. 1999).
beginning at board level, to ensure directors It is also more likely that employees will
understand their legal obligations. Only when report noncompliant behavior if they are
directors have compliance on their agenda will aware of the difference between compliant and
managers follow suit and filter their priorities noncompliant conduct. A system of reporting
down to the staff on the ground, who service within any organization is a key component
customers, clients, suppliers and partners on within a compliance and ethics program (Treviño
a daily basis. Treviño et al. (1999) concur with et al. 1999). Yet, it is also important to recognize
this argument, stating that “if executive leaders that it is neither necessary nor practical for
value and pay attention to ethics, so do supervi- employees to be trained as experts on the law
sory leaders” (1999, p. 142). (Frulla and Rubin 2007). Lastly, an effective
The board should be aware of any legal risks in compliance and ethics training program should
the countries in which it operates and subsequent be conducted internally, preferably by the
control measures in place to mitigate those risks company’s compliance professionals rather than
(Collins 2008); have knowledge of ongoing mon- external consultants, as this shows employees
itoring activities, which ensure quality assurance that leadership “really cares about ethics”
and the results of those activities (Collins 2008); (Treviño et al. 1999, p. 147).
and be aware of any compliance violations
(Treviño et al. 1999), which is dependent on an Quality Assurance
awareness of compliance and ethics at all The ultimate objective of an effective quality
employee levels, not just directors and senior assurance program is to prevent any failings and
management, as most daily transactions with violations by, firstly, producing data that provides
stakeholder are conducted at grass roots level. a good foundation for effective oversight and,
This is particularly pertinent for senior managers secondly, providing “reasonable assurance of
and directors as, very often, they are at risk of continuous improvement in quality performance”
criminal liability (Paine 1994). Managers who (Collins 2008, p. 22). Another way to ensure
fail to provide systems that enable ethical con- quality assurance measures are in place is by
duct are as much to blame as those who know- compliance professionals reviewing documented
ingly conduct unethical behavior (Paine 1994). policies and procedures of the business, to ensure
they correctly reflect the activities of the business
Training and are understandable and accessible to all
Employees should not be expected to be naturally employees (Frulla and Rubin 2007). Lack of
aware of all the various laws and regulations or oversight of quality assurance by managers may
Compliance/Legal Compliance 431 C
result in employees resorting to carelessness or and regulatory restrictions around lobbying activ-
even misrepresentation in order to boost their ities, which require such activity to be vetted
sales figures when they are under pressure to before it is pursued (Frulla and Rubin 2007). An
drive performance (Paine 1994). This was cer- important aspect in promoting an ethical business
tainly the case before the subprime mortgage environment is to persuade the business that eth-
crisis, whereby huge numbers of individual loan ical action is consistent with the goals and long-
managers were irresponsibly providing huge term success of the business (Parker 2000; Ford C
mortgage loans to low-income borrowers who, 2008). Promoting a compliant and ethical culture
on paper, were clearly not in a position to ever within the organization is dependent on the com-
pay back the loans. pliance program instilling in its employee’s, at all
It is also important not only for quality assur- levels, personal responsibility and accountability
ance measures to be in place, but that managers (Frulla and Rubin 2007).
testing the controls in place are not discouraged As it has been established that the promotion
or punished for raising issues about any gaps of an ethical culture is important for
identified during the control’s texting exercise implementing an effective compliance program,
(Paine 1994). Lastly, though it can be considered different approaches for invoking an ethical
somewhat extreme, the compliance unit within culture at the organizational and personal level
a business can decide to conduct an internal within a company shall now be explored.
audit “if it has concerns about prior conduct or
simply wants assurance that its activities have Approaches to Compliance Programs
been in compliance with applicable law” (Frulla Principle Versus Rules-Based Compliance
and Rubin 2007, p. 66). Two of the most common approaches to compli-
ance have been identified as the “compliance-
Promotion of an Ethical Culture based” or “rules-based” compliance program,
Perhaps the most important aspect of the compli- which focuses on the punishment of rule breakers,
ance program is the need for the program to instill and the “principles-based” or “values-based” pro-
in the company an ethical culture or climate as gram, which encourages ethical conduct rather than
“ethics/compliance management is first and punishing nonethical conduct with penalties for
foremost a cultural phenomenon” (Treviño et al. wrongdoers (Treviño et al. 1999; Paine 1994).
1999, p. 145). A study conducted by Treviño et al. (1999),
which surveyed over 10,000 employees at six
To achieve desired outcomes, concerns for ethics
and legal compliance must be baked into the large American companies from various industries,
culture of the organization. Therefore, attention found that the implementation of a formal ethics or
to the ethical culture should come first in any compliance program impacted employees’ atti-
corporate ethics/compliance effort. (Treviño et al.
tudes and behaviors less than promoting an envi-
1999, p. 145)
ronment which focused on values and ethics. An
Depending on the type of industry the business environment that enforces strict obedience to
is engaged in, companies may choose to focus on authority damages a company trying to instill
different aspects of regulatory requirements a culture of compliance and ethics (Treviño et al.
within their ethical culture. For example, 1999) and responsibility (Paine 1994) in its
a company that has close business partnerships employees the most. Further, the application of
with governments may choose to focus on “Gift detailed requirements does not encourage firms to
Rules,” which govern conduct for company apply ethical judgment, nor does it tackle compa-
employees providing travel and entertainment, nies who seek to avoid adherence to regulatory
such as business lunches with a government offi- requirements through loopholes (Ford 2008).
cial (Frulla and Rubin 2007). Other companies in These assertions are corroborated by Fiorelli
industries such as the production and sale of (2007) who claims that a rules-based program
alcohol and tobacco may need to focus on legal does not give employees the tools to handle
C 432 Compliance/Legal Compliance
change, fosters a “tick box” mindset, and does not culture” (1994, p. 106) and stresses that it is rare
enable employees to understand the rationale that the actions of a lone individual will influence
behind the rules. Further, strict programs with the company’s decision making. Paine agrees
a checklist approach such as these actually that a principles-/values-based approach is the
allow employees to “play the system” by finding most effective approach to a compliance and
loopholes behind the rules, an aspect that ethics program, as simply “providing employees
a principles-based program focusing on the pro- with a rule book will do little to address the
motion of ethical values would avoid (Fiorelli problems underlying unlawful conduct” (1994,
2007; Ford 2008). Paine (1994) also asserts that p. 106). Further, a rules-based program does not
“overemphasis on potential sanctions can be encourage employees to think for themselves nor
superfluous and even counterproductive” (1994, promote commitment to morally and ethical
p. 111) as employees may rebel against such exemplary behavior (Paine 1994). Treviño et al.
programs that stress discipline and punishment. conclude that it is important to design an ethics
She concludes that “an integrity strategy is program that is founded on shared organizational
broader, deeper, and more demanding than values and encouraging employees to act on their
a legal compliance initiative” (1994, p. 111). “ethical aspirations” (Treviño et al. 1999).
A compliance approach to ethics also overempha-
Such programs motivate employees to be aware of
sizes the threat of detection and punishment in
ethical or legal issues, report bad news to manage-
order to channel behavior in lawful directions.
ment, report ethical or legal violations, and refrain
The underlying model for this approach is deter-
from engaging in unethical or illegal conduct.
rence theory, which envisions people as rational
(Treviño et al. 1999, p. 139)
maximisers of self-interest, responsive to the per-
sonal costs and benefits of their choices, yet indif-
ferent to the moral legitimacy of those choices.
(Paine 1994, p. 110) Autonomy Versus Interdependence
On the contrary, a compliance program that Compliance practitioners identify explicitly with
rewards ethical conduct is important for business and, at the same time, identify with
a broader ethical community of other compliance
employees’ commitment and leads to higher like- professionals, regulators and stakeholders in
lihood employees will report ethical violations order to play a transformative role within the
(Treviño et al. 1999, p. 143). A values or princi- organization. This conception recognizes the
ples-based program, then, “forces agency on interdependence between compliance advisor and
corporate client. (Parker 2000, p. 339)
firms, making them active participants in defining
the compliance processes that will best address The traditional ethical position of corporate
their particular business risks and situation” counsel has been either complete moral indepen-
(Ford 2008, p. 60). Such a program can result in dence from their clients’ compliance or obliga-
increased ethical responsibility and compliance tion to morally connect to their clients
(Ford 2008) and more positive relationships with (Parker 2000). However, these two positions are
employees, whose awareness of ethics and com- inadequate (Parker 2000) as “each assumes
pliance becomes higher, as they are more likely to a conception of professional autonomy that is
report violations to management (Treviño et al. either unattainable or unrealistic” (Parker 2000,
1999). p. 340). A compliance professional can be auton-
a values-based approach should produce better omous in two ways: either they become “adver-
outcomes than an approach that is oriented toward sarial advocate who zealously advances clients’
legal compliance, despite the fact that most com- ends” (2000, p. 342) or they become
panies emphasize a legal compliance approach. an “influential independent counselor” (2000,
(Treviño et al. 1999)
p. 342) who encourages the company to become
Paine (1994) also asserts that a culture of socially responsible. Either way, the compliance
ethics and compliance throughout the whole professional is autonomous and independent
company will “define an organisation’s operating from responsibility (Parker 2000).
Compliance/Legal Compliance 433 C
In reality, however, compliance professionals However, the regulatory environment in which
see themselves as corporate citizens whose businesses operate today is quickly moving away
values are embedded within the culture and pol- from a deregulatory and self-regulatory approaches,
itics of the corporation, while they are tasked with and as such, businesses can no longer afford to take
ensuring the company is legally and ethical com- the risk that any employee is engaging in unethical
pliant (Parker 2000). This position is neither behavior due to increased scrutiny from govern-
autonomous nor independent from the company. ments and regulators (Frulla and Rubin 2007). C
Further, due to the increasing enforcement powers Therefore, a compliance or rules-based compliance
of regulators in the UK, certain compliance pro- program, whereby the legal and compliance pro-
fessionals in the UK, such as the Data Protection fessionals are taking more control for policing their
Officer, must be registered and approved by the businesses, may be more appropriate in a heavily
FSA and can be criminally convicted if their com- regulated regulatory environment.
pany fails to be compliant. Therefore, these pro- Further, Trevino et al.’s study showed that
fessionals can never be autonomous from a rules-based program could also result in posi-
a company’s legal and ethical compliance. tive relationships with employees (Treviño et al.
A compliance professional’s role, then, is to 1999). They also assert that a rules-based pro-
“push legal and ethical values so far down into gram can exist in conjunction with a values-
organizational everyday life” (Parker 2000, based approach. Therefore, the best program for
p. 346) by maintaining a set of interconnected and a compliance and ethics organization to adopt in
loyal relationships with regulators and organiza- the current regulatory environment is one which
tions (Parker 2000). For this reason, the compliance includes both rules-based and principles-based
professional cannot be seen to be autonomous or elements (Ford 2008), embedded within
detached from the business (Parker 2000). a values-based approach, while also being
“backed up with accountability systems and
discipline for violators” (Treviño et al. 1999).
Future Directions
Fiorelli, P. (2007). Beyond compliance? Journal of Health American system in the UK, Australia, and
Care Compliance, July, 21–24, 69–71. Canada. The Australian, UK, and Canadian
Ford, C. (2008). New governance, compliance, and
principles-based securities regulation. American systems are referred to as principles-based,
Business Law Journal, 45(1), 1–60. whereas the USA governance system is referred
Freeman, R. E. (1984). Strategic management: to as rules-based. In this vein, a rules-based sys-
A stakeholder approach. London: Pitman Publishing. tem requires companies to comply, whereas
Frulla, D. E., & Rubin, C. A. (2007). Financial institution
compliance with government ethics laws. Community a principles-based system allows companies to
Banker, March. either comply or explain why they have not. In
Paine, L. S. (1994). Managing for organizational integrity. this way, there is more flexibility in
Harvard Business Review, 72(2), 106–117. the principles-based system compared to
Parker, C. (2000). The ethics of advising regulatory
compliance: Autonomy or interdependence? Journal the rules-based system. The Australian
of Business Ethics, 28(4), 339–351. Stock Exchange (ASX) (2007) guidelines
Treviño, L., Weaver, G., Gibson, D., & Toffler, B. L. explain: “Disclosure of a company’s corporate
(1999). Managing ethics and legal compliance. governance practice, rather than conformity
California Management Review, 41(2), 131.
with a particular model is central to the ASX
Corporate Governance Council’s approach.”
Comply or Explain
Key Issues
Suzanne Young
La Trobe Business School, Ongoing debate about which system is better is
La Trobe University, Melbourne, VIC, Australia evident and increasingly seen with the advent of
the GFC. Clarke (2007) criticizes the rules-based
system in arguing that rules can set a lower base
Synonyms level as they require all members to act according to
minimum standards of practice, which to gain
Governance principles; If not why not; Voluntary broad acceptance however become minimum
acceptable practice. In setting minimum standards
of practice he claims, it simply leads to the creation
Definition of new and imaginative ways to get around the
rules, whereas a principles-based system, in not
The comply-or-explain governance approach setting standards, encourages improvement over
is a system where governance principles are time in order to meet the expectations of the stake-
codified and companies listing on respective holder community at large.
stock exchanges are expected to comply with The right mix of rules and principles is still up
them and if not provide full explanations about for debate along with whether principles could be
why not. Principles are general guidelines of broadened to include more direction on behav-
best practice, rather than exact provisions that iors, culture, leadership, values, and ethics.
must be adhered to. It is also referred to the In Australia in 2002 (revised 2007) to enhance
“principles-based” approach or “if not why not” and strengthen the principles around governance,
approach. the Australian Securities Exchange (ASX)
introduced guidelines – notwithstanding that
these are not mandatory, listed companies must
Introduction disclose the extent they are followed. These
include:
The comply-or-explain approach is used by • Statements of matters reserved to the board
listed companies that operate within the Anglo and delegated to senior management
Comply or Explain 435 C
• Disclosure of directors’ performance • Structures for shareholder dialogue such as
evaluation investor relations departments, meetings
• Independence of directors and chair between independent directors and major
• Separation of CEO/chair shareholders, and the AGM
• Nomination committee to be comprised of • Institutional investors to use a considered
three directors with majority independent approach to voting, attendance at AGMs,
• Establishment of code of conduct and and making available voting choices to clients C
disclosure of practices (including trading in The Financial Services Authority Listing
company securities) Rules (UK) obliges companies listed on the UK
• Establishment of audit committee (mandatory stock exchange to comply with the Combined
for top 300 listed companies) Code, or explain why it is not complied with. In
• Audit committee be comprised of only explaining the approach, the preamble of the
nonexecutive directors, with the majority Code states:
independent, an independent chair and be at
The Code is not a rigid set of rules. Rather, it is
least three persons (mandatory for top 300
a guide to the components of good board practice
listed companies) distilled from consultation and widespread experi-
• Safeguarding of integrity of financial ence over many years. While it is expected that
reporting companies will comply wholly or substantially
with its provisions, it is recognized that
• Making balanced and timely disclosure of all
noncompliance may be justified in particular cir-
material matters effecting company cumstances if good governance can be achieved by
• Disclosure of communications strategy with other means. A condition of noncompliance is that
shareholders, encouraging participation at the reasons for it should be explained to share-
holders, who may wish to discuss the position
general meetings, and use of electronic
with the company and whose voting intentions
communication may be influenced as a result. This ‘comply or
• Establishment of policies on risk oversight explain’ approach has been in operation since the
and management Code’s beginnings in 1992 and the flexibility it
offers is valued by company boards and by inves-
• Remuneration to be sufficient and reasonable
tors in pursuing better corporate governance.
and disclosure of structure
• Remuneration committee be established Flexibility is apparent in the principles-based
The UK Combined Code (2008) similarly pre- system with companies able to adapt their gover-
scribes best practice governance in structural nance system to suit their own situations. Hence,
areas such as: this points to the evolving nature of governance
• CEO/chair separation and need for customization by the firms. It is
• Balance of independent executive important that firms understand their environment,
directors (with 50% independent and both internal and external, and map the implica-
nonexecutive) tions of environmental change on their governance
• Director appointment frameworks. As emphasized clearly in the ASX
• Board committee structures corporate governance principles and recommen-
• Delegation procedures dations (2007, p. 3), “corporate governance prac-
• Board information provision and induction tices evolve in the light of the changing
• Board evaluation procedures circumstances of a company and must be tailored
• Director reelection and board refreshing to meet those circumstances.” It goes on to state:
• Director remuneration including linking
performance to rewards and remuneration Effective “if not, why not” reporting practices
involve:
policy
• Identifying the Recommendations the company
• Responsibility for financial information and has not followed;
internal control systems • Explaining why the company has not followed
• Relationship with auditors the relevant Recommendation;
C 436 Compulsory CSR Regulatory Framework
• Explaining how its practices accord with the 2008 financial turmoil seeming to originate in
‘spirit of the relevant Principle, that the company the USA under the regulatory approach, questions
understands the relevant issues and has consid-
ered the impact of its alternative approach. continue to arise as to whether more regulation is
the answer.
The comply-or-explain approach is a voluntary In moving the debate beyond the principles
approach which Solomon (2007) in talking about versus rules approach, governance advisors and
the UK principles-based approach links improved regulators need to look at how firms can be pro-
practices. She argues that there is a persisting vided with more guidance in operationalizing the
belief that genuine changes in corporate ethicality key principles that underline governance effec-
and attitude can only be achieved through tiveness, such as disclosure, remuneration,
a voluntary framework, which allows individuals independence, stakeholder involvement, and
to think about issues at hand. transparency.
But we often find that companies tend to use
boilerplate explanations in explaining why they
differ from the principles. With the advent of the
GFC, we have seen calls for better disclosure in References and Readings
explaining variations to the application of the
principles of governance codes, in explaining Australian Stock Exchange (ASX). (2007). Corporate gov-
risks, and in how decisions are made, to assist in ernance principles and recommendations (2nd ed.).
Australia: ASX Corporate Governance Council.
increasing trust and shareholder dialogue and Cadbury, A. (1992). The financial aspects of corporate gov-
knowledge. As the Combined Code states in its ernance: The code of best practice. London: Gee
preamble: Publishing.
Clarke, T. (2007). International corporate governance:
Whilst shareholders have every right to challenge A comparative approach. Oxon: Routledge.
companies’ explanations if they are unconvincing, DiMaggio, P. J., & Powell, W. W. (1983). The iron cage
they should not be evaluated in a mechanistic way revisited: Institutional isomorphism and collective
and departures from the Code should not be auto- rationality in organizational fields. American Sociol-
matically treated as breaches. Institutional share- ogy Review, 48, 147–160.
holders should be careful to respond to the Fama, E., & Jensen, M. (1983). Separation of ownership and
statements from companies in a manner that sup- control. Journal of Law and Economics, 26, 301–325.
ports the ‘comply or explain’ principle and bearing Greenbury, R. (1995). Directors’ remuneration: Report of
in mind the purpose of good corporate governance. a study group chaired by Sir Richard Greenbury.
They should put their views to the company and be London: Gee Publishing.
prepared to enter a dialogue if they do not accept Hampel, R. (1998). Committee on corporate governance -
the company’s position. Institutional shareholders final report. London: Gee Publishing.
should be prepared to put such views in writing Robins, F. (2006). Corporate governance after Sarbanes-
where appropriate. Oxley: An Australian perspective. Corporate Gover-
Companies and shareholders have a shared nance, 6(1), 34–48.
responsibility for ensuring that ‘comply or explain’ Solomon, J. (2007). Corporate governance and account-
remains an effective alternative to a rules-based ability (2nd ed.). England: Wiley.
system. Satisfactory engagement between com- Sundaramurthy, C., & Lewis, M. (2003). Controls and
pany boards and investors is therefore crucial to collaboration: Paradoxes of Governance. Academy of
the health of the UK’s corporate governance Management Review, 28(3), 397–415.
regime. Although engagement has been improving Young, S. (Ed.). (2009). Contemporary issues in interna-
slowly but steadily for many years, practical obsta- tional corporate governance. Melbourne: Tilde Univer-
cles necessitate a constant effort to keep the sity Press.
improvement going.
practiced by everybody. When generally there is who later committed suicide. In 2003, a man, who
thriftiness and dislike of wastefulness, business refused to support his parents, struck them during
people would create products that are economic a fight and he landed in jail for a year.
in production and of quality and reliable in use. In modern Singapore, the Maintenance of
This would also lead to a more careful economy Parents Act which has been around since 1996,
with robust finances and consequently profitable allows parents to go to the Family Court and sue
businesses and nations. A high level of savings and their children for financial maintenance. How
reduced borrowing leads to more financially stable best to use this act to get children who dump
organizations and nations (Ang and Low 2012). their elderly parents in hospitals or nursing
homes to do their filial duty and help pay for
their parents’ care? The law is a very blunt instru-
Key Issues ment. Can the law really be used to enforce filial
piety? Can the law alone be used to address the
The key issue here is how to effectively, hence underlying problems that cause some children to
successfully, pass on or transmit the Confucian abandon their parents to begin with? The children
ethics and values so that these become common may argue that housing prices has risen as high as
practices, each individual/business person would ever, and medical costs too as well as the general
be socially responsible in their business transac- living costs are going up all the time, is it any
tions and to their business associates/partners/sup- wonder that some children end up dumping their
pliers and customers and to the society at large. parents in nursing homes and hospitals? Instead
In this modern society, it is very difficult for of trying to find ways to tackle the root of the
people to adopt Confucian ethics because so problem, can the Government use other way
many things have changed over a period of resolve this filial piety issue?
2,000 years. For example, filial piety and respect- Another related issue is how to make Confu-
ing the elders are now a very difficult thing to cian ethics appealing and attractive to the youn-
practice even in Asia for reasons that most par- ger generations so that these values and practices
ents are working, and that most often they are – seen as refreshing and relevant, and not seen as
both not at home with the children due to work. archaic or irrelevant – can be applied, and busi-
The time the parents spend with the younger nesses be more socially responsible. Perhaps,
children are not enough to create strong bond educating the younger generation in Confucian
among family members. The children are mostly ethics can also be done, say, through the Chinese
looked after by maids, child care centers and nurs- clan associations (as in the case of Taiwan and
eries, in-laws/family members or relatives. This Singapore) with support and/or even funds from
means that parental guidance and direct coaching the Government. Businesses can also sponsor and
are becoming lesser and have been replaced by run training courses in Confucian ethics and cor-
some other people available at the time. porate social responsibility to promote such con-
China is promoting piety on the airwaves such cepts, applications, and practices.
as televised ads that show the crestfallen face of
an elderly woman waiting to have dinner with her
grown children as each one of them calls to say Future Directions
they are just busy. If carrots and model citizen
campaigns do not work, then there is always the Current literature and books in Confucian ethics
bamboo rod. Adults who do not support their are not many, if not rare, not completed, and very
parents face the prospect of several years in jail much fragmented in many ways. More literature
under Chinese law, although courts prefer and books should be written about Confucian
a mediated solution when possible. For example, ethics in such a way that the benefits of applying
a woman was sentenced to 8 months in prison in these ethics can be better understood and
2000 for refusing to support her mother-in-law, realized.
Conscious Consumption 443 C
However, expansion in the study linking Con- Low, K. C. P. (2009). The way of Dragon – Some strategic
fucian ethics and the stakeholder theory is a good leadership ways. Leadership and Organisational Man-
agement, 2009(2), 40–59.
start. Besides, the Rectification of Names can also Low, K. C. P., & Ang, S. L. (2011). Confucian ethics and
be extended to discuss CSR roles and responsi- the stakeholder theory in business. i-manager’s Jour-
bilities of the various stakeholders. There should, nal on Management, 5(4), 8–20.
nonetheless, be more research on how Confucian Low, K. C. P., & Ang, S. L. (2012a). Filial piety and
corporate social responsibility. In S. O. Idowu (Ed.),
businesses operating in China, Japan, Korean, Encyclopaedia of corporate social responsibility. Hei-
C
Singapore, Vietnam, and other Confucian coun- delberg/New York: Springer.
tries, can practice Confucian Ethics and CSR. Low, K. C. P., & Ang, S. L. (2012b). Ageism. In S. O.
Understanding the foundational concepts that Idowu (Ed.), Encyclopaedia of corporate social
responsibility. Heidelberg/New York: Springer.
construct Confucian ethics and CSR is vital for Low, K. C. P., & Ang, S. L. (2012). Filial piety and good
businesses. In time to come, more and more peo- leadership’ e-leader. In Chinese American Scholars’
ple would get to know more about Confucianism Association: CASA conference, 4–6 June 2012 Berlin.
and Confucian ethics and with this, more and Low, C. C., & Associates (Edited and Trans.: 1995).
Confucius-sage of orient. Singapore: Canfonian.
greater understanding of Confucian ethics and Matsushita, K. (1994). Not for bread alone. New York:
CSR can be achieved. Then, more convincing Berkley Books.
CSR practices in accordance to Confucian ethics Tsai, C. C., & NG, E. T. (1992). Da Xue, the great
and practices can be applied. learning. Singapore: Market Point Design.
Wang, G. (2004). Confucianism. In F.-J. Richter & P. C. M.
Mar (Eds.), Asia’s new crisis: Renewal through total
ethical management (pp. 51–62). Singapore: Wiley.
Yutang, L. (Ed.). (1994). The wisdom of Confucius.
Cross-References New York: The Modern Library.
Yutang, L. (Ed.). (1994). The wisdom of Confucius. New
York: The Modern Library.
▶ Ageism
▶ Filial Piety and CSR
▶ Gender Equality
▶ Stakeholder
▶ Stakeholder Theory
Confucian Foundations on Ethics
▶ Trust and CSR
▶ Confucian Ethics
Ang, S. L., & Low, K. C. P. (2012). The Chinese and their Confucian Morality in Business
motivation-The Brunei case study. Journal of
Research in International Business Management,
2(2), 039–050. ISSN: 2251-0028. Available online ▶ Confucian Ethics
@http://www.interesjournals.org/JRIBM Copyright
#2012 International Research Journals.
Chai, S. C., Lai, P., & Sia, Y. H. (1994). Analects of
Confucius. Beijng: Sinolingua.
Lin, Y. (Ed.). (1994). The wisdom of Confucius. New Connected Reporting
York: The Modern Library.
Low, K. C. P. (2006). Father leadership – The Singapore
▶ Integrated Reporting
case study. Management Decision, 44(2), 89–104.
Low, K. C. P. (2008a). Value-based leadership: Leading,
the Confucian way. Leadership & Organisational
Management Journal, 2008(3), 32–41.
Low, K. C. P. (2008b). Confucian ethics and social
responsibility – The golden rule and responsibility to
Conscious Consumption
the stakeholders. Ethics & Critical Thinking Journal,
2008(4), 46–54. ▶ Responsible Consumption
C 444 Consensus
▶ Consumers’ Protection
▶ Greenpeace (NGO)
Consumer Protection
Consumer Rights
▶ Consumers’ Protection
Constitutional Dialogues
▶ Partnership
Consumer-Driven Corporate
Responsibility
Synonyms
Consumer Advocacy Groups
CDCR; Model of Consumer-Driven Corporate
▶ Consumers’ Protection Responsibility
Consumer-Driven Corporate Responsibility 445 C
Consumer-Driven
Corporate Increase
d consum
Responsibility, demand er
for CSR
Fig. 1 The Model of
Consumer Driven = CSR ad
opted
Corporate Responsibility by the co
mpan y
C
er
CSR being adopted by = increasing numb
of co ns um er s
sed
company leads to increa demanding CSR
customer base
er base
= profitability Increased custom
sustainability in the future. This is beneficial not can also be achieved. They further address the
only to the environment, but also to the organiza- long-terms versus short-term focus and consider
tion, for it cannot operate tomorrow without the both the internal and external aspects affecting
resources it has today. As this is directly relevant the sustainability performance of a company.
to the performance of the bottom line, then, there This certainly leads to a more comprehensive
is no dichotomy between the environmental and model of CSR and sustainability than those seen
financial performance of the company as they are before. However, the model is still solely norma-
mutually exclusive; the environmental perfor- tive; it focuses on why a company should act in
mance of the company in the present day ensures relation to its social and environmental responsi-
the financial performance of the company tomor- bilities but does not provide a pragmatic enough
row and vice versa (Aras and Crowther 2009). approach of how a company can achieve sustain-
The bottom line is further impacted by the envi- ability. Further, though it does address to some
ronmental aspect, firstly, in that the company has extent how sustainability can be achieved, it is
to make sure that the company is not prohibited not representative of the current drivers for CSR
by large monetary fines from government bodies as evidenced in the contemporary practices of
for not complying with environmental regulation companies, which ultimately relates to the ways
and, secondly, by the consumption practices of in which CSR can achieve short-term profit for
the ever-increasing “green” consumer base. This the company. The model of CDCR, then, is more
assertion corroborates the principles of the Pyra- successful in addressing both how a company can
mid of CSR, which also stresses the importance achieve short-term profit by implementing
of the bottom line of financial performance as socially and environmentally practices (i.e., by
a prerequisite for ethical behavior thereafter. producing ethical products and demonstrating
However, though the Pyramid stresses the finan- ethical behavior that appeals to consumers) and
cial aspect as integral to a concrete model of long-term sustainability (i.e., by conducting its
CSR, it does not provide an explanation of how business in an environmentally friendly manner
financial performance can actually lead to the in response to consumer demand for CSR).
corporation’s sustainability by ensuring that
money is invested in socially responsible behav- CSR 2.0
ior and sustainable behavior, i.e., by investing in “CSR 2.0” (Visser 2010) outlines five principles of
renewable energy resources and other socially the “DNA” of (C)(S)(R)(2)(0). (C)onnectedness
responsible activities (Aras and Crowther 2009). urges company practice to break the hegemony of
Instead, the Pyramid merely asserts that the busi- shareholders and instead embrace a multi-
ness must stay profitable only because it is the stakeholder approach to business relations;
raison d’etre of the corporation to do so and not (S)calability critiques the pilot projects and best
because it has a direct impact on ensuring sus- practice programs of CSR and sustainability that
tainability. Further, the Pyramid asserts that the many companies often demonstrate, as they are
corporation can always achieve profitability, often very small scale over a small duration of
despite relying on the other factors of CSR in time, rather than being cross-market, long-term
the other tiers, as the financial layer is the foun- goals; (R)esponsiveness calls for a bolder response
dation of the Pyramid. However, Aras and to the community needs, which replaces simple
Crowther’s model asserts that profitability is philanthropy programs that are based on their
predicated upon the other factors of CSR and so own terms to drastic response to climate change,
the financial success of the company and its such as the Prince of Wales’ Corporate Leaders
actions of CSR exist in a continuum. Group on Climate Change (The Prince of Wales
Aras and Crowther (2009) stress the Corporate Leaders Group on Climate Change is
importance of the financial performance of the a campaign for carbon emission reduction of
company in ensuring that the social and environ- 50–85 % by 2050.); Duality (2) challenges the
mental goals (and sustainability on the whole) notion of “either/or,” i.e., having to make the
Consumer-Driven Corporate Responsibility 449 C
choice between being either socially responsible or of how Visser claims CSR should be
not and instead CSR 2.0 affirms there can be both implemented, it is still too normative in its
economic responsibility and social responsibility; approach. It lacks the capability of providing
and lastly Circularity (0) is founded upon a pragmatic tool that companies can use to imple-
Hawkens’ (1994) model of sustainability, which ment CSR into its everyday practices. Yet, there
assumes three basic rules of sustainability, that are many similarities in the approaches taken by
waste equals food, nature runs from current solar CSR 2.0 and CDCR, as both encourage a multi- C
income, and nature depends on diversity. Using stakeholder approach to business relations; call
this notion, CSR 2.0 would depend on businesses for the company to respond more to its stake-
constantly feeding and replenishing its own social holders; abolish the notion that companies have
and human capital through education, training, to make the choice between being either socially
community nourishment, and employee well- responsible or profitable; encourage a shift from
being. The shifting of CSR 1.0 to 2.0, then, will specialized CSR aspects of the company to CSR
move from being paternalistic to collaborative, risk being fully integrated into the company; and
based to reward based, image driven to perfor- allow for ethical behavior to be at the core of
mance driven, specialized to integrated, standard- the company’s business values (Visser 2010).
ized to diversified, marginal to scalable, Western to However, the model of CDCR provides a more
global, and from a luxury product to an affordable evocative model, which specifically demon-
solution for those who most need improvements to strates the business model that the company can
their quality of life (Visser 2010). Visser further adopt, at any stage of its life, to ensure all of the
asserts the future of ethical business will not above is achieved.
include CSR departments or ethical products
which consumers choose over another less-ethical
product as the core business values of the company Future Directions
and its products will be ethical, socially responsi-
ble, and sustainable. Therefore, the mission state- Making a comparison between the model of
ment and the company goals will be founded upon CDCR and other well-known CSR models is an
ethical behavior within the triple bottom line, so important step in assessing the credibility of
the future model of CSR will cease to resemble CDCR and its importance in addressing the gaps
Carroll’s Pyramid which is “no longer fit for pur- within other CSR models. Yet, only further
pose” (Visser 2010, p. 10). Instead, this new model research on the model of CDCR will enable
will, firstly, change from “Corporate Social a full assessment of its applicability and further
Responsibility” to “Corporate Sustainability and development of the model, which should be pur-
Responsibility” and, secondly, change in appear- sued in two ways.
ance from a rigid pyramid structure to something Firstly, the model should be examined in light
akin to DNA structure; a of the recent global financial crisis, to assess
spiralling, interconnected, non-hierarchical levels, whether consumers continue to demand and are
representing economic, human, social and envi- prepared to pay for CSR in times of economic
ronmental systems, each with a twinned sustain- recession. An example of where this could be
ability/responsibility manifestation: economic
sustainability and financial responsibility; human
contradicted is the success of Ryanair, an Irish
sustainability and labour responsibility; social sus- low budget airline operating within Europe,
tainability and community responsibility; and envi- which is notorious for its lack of consideration
ronmental sustainability and moral responsibility. for its employees, community, environment, and
(Visser 2010, p. 10)
even treatment toward its customers. Its chief
The underlying message behind CSR 2.0 is executive, Michael O’Leary, famously declared
that CSR should be an integral part of the change during the UK recession in 2009 that he wished to
that is needed to enable sustainability of our charge passengers for using the toilet onboard the
planet (Visser 2010). Though I agree with much aircraft (BBC News Online 2009). Yet, it has
C 450 Consumer-Driven Social Justice
remained profitable in a tough economic environ- Campbell, J. L. (2007). Why would corporations behave
ment because the consumer demand within the in socially responsible ways? Academy of Manage-
ment Review, 32(3), 946–967.
travel sector during the recession was solely for Carroll, D. (1991). The pyramid of corporate social respon-
low cost, regardless of the social and environ- sibility: Toward the moral management of organisational
mental reputation of the company. Further, con- stakeholders. Business Horizons, 34(4), 39–48.
sumer demand for CSR is dependent on a number Crane, A., & Matten, D. (2007). Business ethics (2nd ed.).
Oxford: Oxford University Press.
of factors, including national economic stability Frederick, W. C. (2006). Corporation, be good!
and the social and financial circumstances of the Indianapolis: Dog Ear Publishing.
individual consumer. For example, Sabapathy Freeman, R. E. (1984). Strategic management:
(2007) asserts that ethical consumption is A stakeholder approach. London: Pitman Publishing.
Sabapathy, J. (2007). Ethical consumption. In W. Visser
a phenomenon most associated with those who et al. (Eds.), The A to Z of corporate social responsi-
have high levels of income, education, and polit- bility. Chichester: Wiley.
ical awareness in post-industrialized countries. Stieb, J. A. (2009). Assessing Freeman’s stakeholder
Secondly, the success of model can only theory. Journal of Business Ethics, 87(3), 401–414.
Visser, W. (2005). Business frontiers: social responsibil-
really be comprehensively assessed once it has ity, sustainable development and economic justice.
been implemented in a company. This will allow Hyberabad: ICFAI University Press.
an examination of its pragmatism and identify Visser, W. (2010). CSR 2.0: The evolution and revolution
areas of opportunity in which the model can be of corporate social responsibility. In M. Pohl & N.
Tolhurst (Eds.), Responsible business: How to manage
further developed and enhanced, before it is a CSR strategy successfully. Chichester: Wiley.
more widely adopted. As yet, this assessment
cannot be made as it is not known that Other Resources
the model has been implemented within BBC News Online. (2009). Ryanair mulls charge for
a company, and its potential success can only toilets,27 February 2009. Available at http://newsvote.
be conceived theoretically. bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/1/hi/
business/7914542.stm?ad¼1
Cross-References
Consumer-Driven Social Justice
▶ Business Case for CSR
▶ Fair Trade
▶ Carroll, A.B.
▶ Climate Change
▶ Consumerism
▶ Corporate Social Responsibility Consumerism
▶ Normative Versus Instrumental Corporate
Responsibility Ioanna Papasolomou
▶ Philanthropic CSR Department of Marketing, School of Business
▶ Philanthropy Head, University of Nicosia, Nicosia, Cyprus
▶ Pyramid of CSR
▶ Stakeholder Theory
▶ Sustainability and Sustainable Development Synonyms
symbols.” Products are used as devices by people efforts appear to have tracked each other for the
to communicate to others their social standing, last three centuries.
wealth, and power. Therefore, the literature suggests that there is
an apparent parallel growth in both marketing and
consumerism although this does not necessarily
Key Issues demonstrate causality. There is a possibility that
the growth of materialism emerged as a natural
Marketing and Consumerism development from the increase in human prosper-
The discussion in this section is based on the first ity which encouraged the growth in the use of
definition of consumerism according to marketing and consumerist behavior.
which, consumerism is associated with an If consumers appear to choose excessive mate-
overemphasis of advertising and selling aimed at rial consumption, then there is a need to educate
manipulating consumers and enticing them into them in relation to the fact that this does not nec-
overconsuming. In relation to the benefits or not essarily lead to higher levels of satisfaction. There-
of consumerism and the development of the con- fore, enhanced levels of communication and
sumer society, there are two opposing perspectives. education with consumers may lead to changes in
The first is based on the belief that marketing is not consumer behavior and, hence, consumerism.
responsible for the emergence of a materialistic
society. The second is that consumerism has Empirical Evidence on Consumers’ Attitudes
a detrimental impact on consumers and the society Toward Consumerism
at large (Abela 2006). Abela (2006) claims that Many studies have been conducted in order to
consumerism is associated with reduced personal understand consumers’ attitudes toward marketing
well-being and that the rise of consumerism paral- and consumerism and the degree to which con-
lels the rise of modern marketing to a remarkable sumers have expressed dissatisfaction with market-
extent. This view is congruent with Packard’s ing activities. For the discussion in this section,
(1957) argument that consumers are manipulated consumerism is defined as “a multitude of group
by business. The existing literature also suggests actions concerned with such issues as consumer
that there is a causal relationship between advertis- protection laws, the availability of product and
ing and materialism (Zinkhan 1994), and several price information, fraudulent and deceptive busi-
studies have drawn a relationship between watching ness practices and product safety” (Cravens and
television and television advertising with high Hills 1973, p. 164). Hence, consumerism deals
levels of materialism especially among children with consumer issues regarding a range of market-
(Kinsey 1987). Even though it is possible that ing-related areas. Due to the fact that marketing is
humans have a tendency toward materialistic a function that is reflected more vividly on organi-
behavior whenever they are given the opportunity, zational activities and practices, these in turn are
it cannot be ignored that the growth of consumerism seen as clues by consumers as to how ethical and
is in parallel to the growth of modern marketing. socially responsible marketers and their companies
O’Shaughnessy and O’Shaughnessy (2002, are. Consumerism issues usually relate to the mar-
p. 545) argue that “marketing does not create or keting mix elements. For example, an organiza-
invent wants.” Instead they posit that “material- tion’s product policy is often under scrutiny in
ism became part of the human condition relation to safety, labeling, and obsolescence
long before the first advertising executive.” issues. Pricing policies are often under intense crit-
The historical evidence indicates that the growth icism usually in periods of economic recession or
of consumer culture is paralleled to a remarkable inflation. Promotional tools, especially advertising,
extent by increases in the sophistication and is often attacked for using false and misleading
intensity of marketing efforts over a 300-year information, exaggerating the product’s benefits,
period. The rise of consumerism and the increase using psychological positioning to differentiate
in the quantity and sophistication of marketing products, using deceiving claims, puffery, and
Consumerism 453 C
emphasizing materialism. Finally, the distribution identified some degree of discontent among con-
policy is usually criticized for aggressive in-store sumers in Singapore, India, Nigeria, and Kenya
merchandising and the lack of quality information in relation to marketing and consumerism.
to evaluate price/quality relationships between Recently, a study carried out in New Zealand
brands and, finally, for giving too much power to revealed that marketing managers should con-
distributors to the detriment of consumers. tinue to remain proactive in their responses to
Several studies conducted over the last 20 years consumer discontents. C
aimed at revealing consumers’ attitudes toward
marketing and consumerism issues. These studies Consumerism and Corporate Social
have been carried out to both developed and devel- Responsibility
oping nations. A common characteristic is that they The consumer movement has evolved into
all showed a high level of consumer discontent a powerful force in many developed countries.
with various aspects related to marketing. In gen- Organizations in these countries are under
eral, the studies showed that consumers feel that constant pressure to demonstrate social responsibil-
organizations do not deal effectively with cus- ity in addressing the needs of the society. The term
tomers’ complaints which are associated with the “consumerism” is linked to the behavior of organi-
quality of products, their reliability, and safety zations and the expectations of the society. Corpo-
aspects. One study carried out identified that there rations should identify and define their purpose and
are significant differences in the attitudes held objectives in a way that align with the expectations
toward advertising and consumerism of those of society. If businesses are not meeting the cus-
born from 1946 to 1964 to those born from 1965 tomers’ and society’s expectations then the cus-
to 1974 in the USA. The latter group had more tomers and the society at large may lose trust
favorable attitudes and considered marketers to be subsequently leading to the firm’s loss of market
more socially responsible. The focus of subsequent share, market position and customer loyalty.
studies on consumerism shifted to cross-cultural Heightened corporate responsibility emerged
comparisons of the USA with other countries. as a phenomenon in the 1980s and early 1990s
These studies revealed that there are common pat- when corporations such as Cadbury’s, Brook
terns of concern about marketing and consumerism Bond, and Co-operative were increasingly
among respondents in the USA, Venezuela, Nor- adopting ethical consumerism in their purchasing
way, England, and other countries. Among the and supply policies. In addition, food retailers such
problems highlighted by these studies are: high as Tesco, Sainsburys, and Safeway have played
prices, lack of product quality, lack of adequate a crucial role in the green consumer revolution.
repair and maintenance services, deceptive adver- Consumers of the 1990s are claimed to be
tising, and inadequate handling of complaints. caring, environmentally and socially aware, and
A cross-national study investigating consumer atti- demand a say in the production, processing, and
tudes toward marketing practices, consumerism, resourcing of the products they regularly
and governmental regulations in Australia, Canada, purchase. The increasingly well-informed con-
England, Israel, Norway, and the USA uncovered sumer exercises pressure upon marketers for
negative attitudes toward marketing. fairly traded products, for guarantees of the eth-
A number of cross-cultural studies also found ical claims marketers make about their products,
mixed views about consumer attitudes regarding for safe products, for concern about the potential
marketing and consumerism. For example, one damage of manufacturing processes on the envi-
study showed that consumers in Hong Kong were ronment, and for the careful disposal of waste.
more favorable in their attitudes toward market- This awareness demonstrates a concern for Third
ing than those in the USA. Another study World issues which come into the spotlight as
revealed that Australian consumers were unfa- a result of the media coverage, from the work of
vorable in their attitudes toward marketing special interest groups, from the increased
except for retailing. Darley and Johnson (1993) amount of information available, and an
C 454 Consumerism
emphasis on human rights and the quality of life about health, animal welfare, environmental
of the people living in third world countries. protection, and ethical trading. At the same time,
Ethical Consumerism: According to Strong green consumerism motivates consumers to
(1996), ethical consumerism is a marketing con- become more actively ecologically and ethically
cept which has emerged only recently in the UK, aware. As a result, an increasing number of con-
but like green consumerism, it is a source of sumers move away from leading a life of excessive
gaining a competitive advantage for organiza- consumption and materialism toward more endur-
tions that are socially and ethically conscious. ing values such as respect, compassion, and empa-
The emergence of ethical consumerism has been thy. At the same time, the business sector has
supported by a number of features: the evolving become more responsive to consumerism. This is
caring consumer of the 1990s; pressure group manifested in the wide acceptance and practice of
support for Third world countries; fair trade societal and sustainable marketing across the busi-
issues endorsed by media interest; heightened ness sector. The increasing acceptance of consum-
corporate responsibility; and supplier power. erism by managers and corporations is founded on
These factors have led to wider availability of its positive role on society and the economy. Con-
fair trade products and increased quality of sumerism has the potential to play a constructive
alternative products. In addition, studies have role in building a sustainable business environ-
shown that an increasing number of consumers ment by emphasizing, for example, consumer
of the 1990s were exhibiting a caring, environ- awareness, fair trading, codes of conduct, and
mentally and socially caring attitude. These envi- ethical business practices. It encourages managers
ronmentally and ethically conscious consumers to think beyond the narrow boundaries of generat-
have shown increased demand for fairly traded ing short-term sales and profits. It motivates them
products, which constitutes a challenge for to adopt a sustainable approach to production
producers who claim to be producing such prod- which is not at the expense of the standard of living
ucts. The increased demand for fairly traded of future generations. An underlying factor of such
products was conducive for the development of provision includes fair trading, providing for the
the “Fair Trade Label” introduced by the Fair needs of the least advantaged in society,
Trade Foundation, an independent fair trade and adopting a people-orientated marketing
validating body that is supported by many approach.
charities. Strong’s study revealed that consumers
were not solely interested in price, quality,
delivery, and environmental issues but were also Cross-References
concerned about the ethical dimension of the
marketing exchange. This finding highlights the ▶ Communicating with Stakeholders
importance of managers realizing the power of ▶ Consumers’ Protection
ethical consumerism which drives consumers ▶ Corporate Codes of Conduct
toward brands with an ethical marketing focus, ▶ Corporate Social Marketing
if they do not want to lose market share. ▶ Corporate Social Responsibility
▶ Sustainable Consumption
Future Directions
References and Readings
Undoubtedly the consumers of the twenty-first
century is becoming more caring and socially Abela, A. (2006). Marketing and consumerism:
aware, moving toward a more responsible and A response to O’Shaughnessy and O’Shaughnessy.
European Journal of Marketing, 40(½), 5–16.
responsive attitude to issues which do not directly
Ahuvia, A. C., & Wong, N. Y. (2002). Personality and values
concern them such as Third World exploitation. based materialism: Their relationship and origins. Jour-
There is evidence of increased consumer concern nal of Consumer Psychology, 12(4), 389–402.
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Cravens, D. W., & Hills, G. E. (1973). The eternal triangle: Definition
Business, government and consumers. In B. B. Murray
(Ed.), Consumerism (pp. 37–54). Pacific Palisades:
Goodyear. As a critical facet of social policies, any society
Darley, W. K., & Johnson, D. M. (1993). Cross-national must promote, and as a basic component of pro-
comparison of consumer attitudes towards consumer- tection programs, consumer protection (CP) is
ism in four developing countries, The Journal of a set of regulations and laws regarding the public
Consumer Affairs, 27(1), 37–54.
Day, G. S., & Aacker, D. A. (1997). A guide to consum- and private initiative designed to ensure and con- C
erism: What is it, where did it come from, and where is tinuously improve consumer rights. In its com-
it going? Marketing Management, 6(1), 44–48. plexity, the definition emphasizes the correlation
Galbraith, J. K. (1969). The affluent society (2nd ed.). between two main issues. On one hand, the com-
London: Heinemann.
Gilbert, D. (1999). Retail marketing management. prehensive set of “Consumer Protection Laws,”
Harlow: Financial Times, Prentice Hall. which were conceived to guarantee the right
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and the impact of advertising aimed at children. data in the marketplace, to forbid activities that
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(2008). Principles of marketing, Fifth European edn. businesses and to deliver additional protection for
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Social Psychology, 40(October), 636–647. ensure market transparency and trade systems.
O’Shaughnessy, J., & O’Shaughnessy, N. J. (2002). Given this complexity, CP term covers aspects
Marketing, the consumer society and hedonism.
European Journal of Marketing, 36(5/6), 524–547. of “Consumer rights” (consumers have rights as
Packard, V. (1957). The hidden persuaders. London: initiators of consuming activity), “Consumer
Longman. interests” protected on the markets through com-
Strong, C. (1996). Features constributing to the growth of petition among businesses, “Consumer activism”
ethical consumerism – A preliminary investigation.
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Yani-de-Soriano, M., & Slater, S. (2009). Revisiting Drucker’s uals, and nonetheless “Consumer organizations”
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Introduction
evaluate their quality. Furthermore, since involves numerous aspects as well as responsibil-
a product life-cycle research and development ities incumbent on sides, the State and any trader
stages, through various marketing techniques and/or producer. Concluding, consumers’ infor-
and means, consumers are continuously “per- mation represents one basic objective of CP
suaded” by creating them needs, expectations, programs.
desires, and tastes. The experience gathered in this field allows
Therefore, the issues that stand to be the sub- mapping information for consumers into four
ject of CP programs are extremely diverse, and major categories:
could refer to many economic, social, and even – Information on products consumers are made
political matters. Also, given the problematic aware of the nature of the product, its price,
nature of consumption and, especially, of its man- origin, provenience, periods, packaging sys-
agement, it is obviously that inclusion of such tems and features, storage and keeping sys-
programs aiming consumer protection is State’s tems, etc.
responsibility, which should ensure, through its – Information of the market – referring, in par-
social policy, terms and means of achievement. ticular, to the various actors and theirs rela-
This objective’s fulfillment requires solving the tions on the market, the agents involved,
following problems: prices’ systems, provided services, bonuses
– Ensure the balance between supply and in the acquisition area.
demand, and further, purchasing activities – Information on distribution channels –
– Businesses focus, through various means and concerning the structure and frame of goods
appropriate policies, toward production of circulation, goods networks, operating units
demanded goods, thus contributing to the localization and schedules, etc.
smooth functioning of market mechanisms – Information on consumers’ needs – aiming to
– Import of goods which support the balance clarify, both in terms of quantity and quality,
between needs and resources consumers’ needs and requests.
– Providing the market with qualitative goods On the market, consumers are provided with
and services – activity involving all businesses information on goods and services through adver-
participating in goods’ circuits tising and labeling systems. Given the way con-
– Ensure a prices’ system according to market sumers’ information unfold, in most countries are
requirements and product quality, which brought up serious misgivings related to the
proved to be the most controversial and above-mentioned systems and their usage. This
discussed area both in terms of time specific- matter is because advertising purposes, with no
ity, as well as the social protection programs regard to its form or content, is focused solely on
Including such issues in social protection pro- selling the good or providing the service, which,
grams, and implicitly in CP programs, involves unfortunately, is incompatible with fair and just
solving both fundamental matters related to pric- information of consumers. Very often, advertis-
ing, financial policies, and the impact of costs’ ing and labeling to have sole aim sales’ enhanc-
trends on consumers’ needs and requests. In ing and strengthening, doing nothing but
terms of market transparency, good information aggressively seeking to inoculate with prefer-
for consumer, as a potential customer, are ences for the good or service a company is inter-
involved. Unfortunately, this normal market fea- ested in.
ture can often be avoided or restricted using var- From this perspective, by its very nature, CP
ious methods related to certain interests. movement has two aspects: first, CP is sensed as
Therefore, designing and implementing informa- a “battle” urging consumers to express their dis-
tion systems for consumers and defending tools satisfaction with goods and services they are
and techniques against aggressive trade policies offered, and second, CP can be envisaged as an
promoted by the economic bidders on the market action or a set of actions springing from
is another complex area of CP process, which awareness abusive practices on the market.
Consumers’ Protection 457 C
Consumers’ Protection,
Fig. 1 Factors influencing GOVERNMENT
consumers’ protection Legislation and Institutions
(Source: Dinu 1999) Laws and Regulations
Checking and control
Punitive measures
C
BUSINESSES CONSUMERS
Quality Health protection
Reliability Security
Factors Safety
Maintainability influencing
Cost Affordable prices
consumers’ Environment protection
Warranties protection Quality of life
UNIONS NGOs
Social monitoring Information
Support actions Education
Promoting activities Training
Representation
Concluding, all these relationships among busi- is the use, manufacturer being subordinated to
nesses and consumers are subject to CP pro- user’ needs.” In a modern form, it can be said
grams. In terms of the complex issues involved that the purpose of economic activity is to allo-
in an effective system of protecting consumer cate resources as efficiently as possible in order to
rights, Government bodies or NGO’s should con- meet and fulfill consumer needs. Such action
sider coherent policies. Both governments and leads directly to the idea of consumer sover-
other bodies active in CP determine their specific eignty, for consumer is the individual ultimately
structures and areas for the protection programs: deciding resources’ allocation. This idea has,
• Improving people’s spending and consump- nonetheless, political, moral, logical, and even
tion through State’s social policies economical support. Moreover, the literature
• Ensuring qualitative goods and services sold states that, as in politics, democracy means
on the market voters’ sovereignty, in economy and business,
– Providing prices’ system according to mar- democracy means consumers’ sovereignty based
ket demands and products quality on their capacity and possibility of choosing.
– Developing a useful information system for The concept of “consumer rights” has its ori-
consumers gin in the “Charter of Consumer Rights” deliv-
– Protecting consumers against aggressive ered by the former president of USA, J. F.
commercial practices and fake advertising Kennedy, in March 1962, as an address to the
As depicted in Fig. 1, responsible for con- American Congress. Although the Charter has
sumers’ protection are public institutions (govern- not been finalized, it remains important through
ments) and, due to the complex nature of CP, other shaping the fundamental rights of consumers (the
factors that influence it by various means and ways. right to choose freely, the right to information,
A glimpse in the history of CP brings us to the right to petition and hearing, the right to
Smith’s words “the final product unique purpose protection). It also serves as a reference model
C 458 Consumers’ Protection
in developing CP laws that occurred in the sev- – Establishing national priority systems
enth and eighth decades in the USA and other according to economic and social circum-
countries of the American Continent (Canada, stances specific to level of development, pop-
Mexico) and Europe (Belgium, France, ulation characteristics, and needs
Germany, Sweden). – Promoting and protecting consumers’ eco-
For the last decades, consumer protection nomic interests
issues represent the focus of economic and judi- – Ensuring consumer access to accurate infor-
cial world theories and practices. The issues, mation, allowing them to choose according to
more complex in content and especially through their personal desires and needs
the solutions claimed, relate research on the the- – Developing and providing consumers’ educa-
ory of CP in various international and global tion systems
communities, Governments and NGOs, to the – Mandatory complying with laws and regula-
practice of establishing the measures and guide- tions of the countries all companies,
lines needed to create the necessary and appro- manufacturing or commercial, do business
priate legal and institutional frameworks, hence with
providing consumers’ protection. Into such – Obligatory complying with the international
a context, the global community, through its standards of CP
highest forum – the United Nations (UN) – – Establishing nationally organizations able cre-
found it necessary to discuss the issue of struc- ate and apply CP policies according to the
tures inferred by consumer protection, adapted by country’s laws
the resolution no. 39/248, on April 8, 1985, – Ensuring consumers and other representative
“Guidelines on Consumer Protection.” groups or associations the freedom of
According to this important document, “Gov- organizing and appointing leaders in order
ernments of all countries should develop, to express their views in the decision-
strengthen, and maintain a strong CP policy, tak- making processes and to represent their
ing into account the guidelines stated.” The final interests
document is the result of an extensive research, By their nature, the principles outlined by the
consultation, and collaboration of various UN UN and recommended to the member states gov-
bodies with national institutions. ernments are subject of states’ public
The guiding principles of the United Nations administration.
are intended to provide all countries with “Guiding principles” for consumer protection
a framework that can be used in CP. From this are the result of international efforts of the World
viewpoint, the main objectives each country Consumers Organization, created in 1960.
must focus on, both at governmental and Currently, the World Consumer Organization
nongovernmental levels are: consists of 220 member organizations in almost
– Facilitating manufacture and delivery of all countries. These organizations have met in
goods suitable for consumers’ needs and Santiago in November 1997 as part of the 15th
requests World Congress, under the motto “More powers
– Encouraging high level ethics of employees for consumers in the twenty-first century. Con-
working in manufacturing and delivery sumers in civil society.” Congress’ message has
– Controlling, through national and interna- been very clear: in all countries, people in their
tional laws and regulations, abusive trade capacity of consumers, play a crucial role in
practices affecting consumers developing institutions arising from the ongoing
– Promoting international cooperation in con- process of democratization and economic
sumer protection areas liberalization.
– Encouraging development of market condi- Organizing consumer’s protection as
tions providing consumers with a wide range a complex process, which involves both public
of products and advantageous prices power and consumer himself, focuses on:
Consumers’ Protection 459 C
– National and international laws and regula- regulations. Along with IOCU, the European
tions to underpin the consumer protection Committee for Standardization mandated CRC
– Public institutions created to watch over con- to develop Consumers Institutions and Consum-
sumer protection in each country (Offices of erism Policy Program (CICPP), both being also
Consumer Protection) appointed to manage the Phare Program for CP.
– Ministries, departments, or other governmen- In Germany, the governmental bodies
tal bodies that act in branches which, besides involved in CP are yet to be established, con- C
the sector-specific objectives, take the respon- sumers’ rights being defended by the civil
sibility of consumer protection society. Generally, CP is concerned with two
– National research institutes and scientific primary services, namely, the information and
centers councils, provided by Ordnungsamt and Central
– Organizations and consumer associations Advisory Council of Consumers. Ordnungsamt’s
– Consumer Advisory Committees office is responsible for monitoring laws’
– International organizations for consumer application in CP areas, both at federal and
protection Lands’ level. Specialized inspectors are
In defending consumers’ rights, particular empowered to carry it out, to impose fines or,
roles get international organizations. Thus, in sometimes, to seize certain suspected assets. Pen-
1960, was founded the International Organization alty system is applied following a procedure,
of Consumers Unions (IOCU), a body which which includes three phases: alert, application
represents and supports consumer organizations fines, and drive trial. In each province, there is
worldwide organized as a nonprofit foundation, a CP council, while at local level consumers’
the International Organization of Consumers counseling offices act as an independent organi-
Unions (IOCU) currently gathers 180 organiza- zation, which tries to resolve disputes among
tions from 70 countries. IOCU provides support consumers and manufacturers on one hand, as
in three directions: well as importers, traders, and services providers,
– Promoting collaboration among members on the other hand.
through various means In Italy, the General Economic Inspection is
– Enhancing consumerism movement and concerned with fulfilling the laws regarding CP,
supporting newly emerged organizations primarily those relating to prices, restricting from
– Representing the consumer interests in inter- activity those businesses found guilty, including
national institutions drafting the required documentation in criminal
The IOCU leadership is provided by the Gen- investigations, where appropriate.
eral Assembly, Board and an Executive body. In Belgium, the General Economic Inspector-
Operational, the IOCU is organized as follows: ate, Department in the Ministry of Economic
– Central Office, headquarter in London Affairs coordinates all activities in CP area,
– Regional Office for Asia and the Pacific including two special units responsible for inves-
(ROAP) tigations, at national and European level, and
– Regional Office for the Latin America and seven regional directorates, which operates in
Caribbean (ROLAL) country’s provinces.
– Regional Office for Africa (ROAF) The Swedish consumer policy has a long tra-
– The Program for Transition Economies dition; in 1986, Parliament has performed
(PROTEC) a partial revision. National Council for Consumer
– The Program for Developed Economies Policies is the main body concerned with CP, its
(PRODEC) activities being focused on family savings, prod-
In Europe, Consumers Rights Center (CRC), ucts safety, traditional marketing, and contract
created in 1978 in the University of Louvain- terms.
Neuve, Belgium, participate in research pro- In Greece, the main responsibility in CP is
grams focused on consumers’ laws and legal assigned to Directorate for Technical Control
C 460 Consumers’ Protection
and Consumer Protection, its organizational and international consumer protection policies.
structure comprising five departments with activ- Finally, with adoption of guidelines, consumer
ities covering areas of goods and services, rights were as well internationally recognized,
research and studies, inspections and analysis, legitimized, and acknowledged by most of the
as well as consumer protection and information. countries. However, and unfortunately in many
In Luxembourg, consumer protection is assigned given deeds, they are ignored or trivialized by
exclusively to central government, the responsi- governments, producers, or various interests
bility of adopting and implementing the legisla- (political or economic). Therefore, establishing
tion in the field is shared among several good consumer protection legislation is funda-
ministries. mental to the global development of consumer
In UK, the main responsibility of consumer rights, covering areas as campaigns on providing
protection programs is assigned to local authori- essential services, to better standardization and
ties. Therefore, the local authorities in England fair labeling.
and Wales, responsible for consumer protection
are Metropolitan Districts and Counties
Committees. Future Directions
In Scotland, the legal enforcement on con-
sumer protection is the responsibility of Regional The assertions made by customer protection
Councils while in Northern Ireland, Governmen- organizations and associations must be thought
tal Department for Economic Development leads over as reasonable claims as they come under the
the specific activities. consumer protection guidelines which have been
Provided that many more voices believe that adopted by the United Nations. No doubt the
community bodies, Council of Europe and Euro- most important principles included in the con-
pean Commission have created an over-in con- sumer protection guidelines stands for
sumer protection, which becomes a real a structure or guide for states and governments,
impediment, it was created EFLA, with five especially in building and popularizing policies
members (Norway, Denmark, Sweden, Switzer- and legislation to certify consumer protection.
land, and Luxembourg), thus conceiving a new This is necessary in many countries, where the
economic space. Consisting of economically matter of consumer protection is the topic to
important countries, which do not necessarily relevant deficiencies, and most are, however, in
need community support, this organization sup- need of new legislation in this scope, functioning
ports the Council and Commission efforts, noting to build and improve the existent legislation to
the consumer protection actions of those bodies, encounter the demands of recent developments in
but without engaging in their implementation and spending, business activity and production at the
application. local, regional, and international level. The prin-
ciples must also contribute to the promotion of
global partnership in the field of consumer pro-
Key Issues tection within the structure, where the states and
governments are committed to providing at more
On April 9, 1985, the United Nations’ General than a minimum of these principles.
Assembly adopted the UN Guidelines for Con- These principles provide a set of points and
sumer Protection, following more than 10 years guidance to governments that should be brought
of hard lobbying by Consumers International, out to provide a perfect protection for consumers,
then known as IOCU as well as other consumers’ while considering that each government must
organizations. As the basis of CI’s work on con- acknowledge urgencies for consumer protection
sumer protection and law (CPL), the guidelines complementing with the setting of the country’s
embrace the principles of consumer rights and economic and social circumstances. In this con-
provide a framework for strengthening national text, the matters that face citizens, economies,
Continual Improvement 461 C
and societies influence consumer protection laws Cross-References
and policies more. Markets’ globalization is
increasing the role of consumers while con- ▶ Consumerism
sumers’ authorization led to new and critical ▶ Health and Safety (EHS)
responsibilities for them in managing their own ▶ Responsible Consumption
statements and decisions. In this environment ▶ Transparency
many can benefit, however children and elders ▶ Unethical Products C
(statistically growing in consumption) increasing
the number of vulnerable consumers not so much References and Readings
instructed. In these years, the need for assured
consumers to appeal to economies had never been Dinu, V. (1999). Goods standardization and certification.
Economica. Economica Publishing House, 147.
bigger. Globalization of manufacturing and com-
European Commission.com. (2007). EU consumer policy
merce will continue leading to more import strategy 2007–2013 empowering consumers,
goods consumed in various countries. Traders enhancing their welfare, effectively protecting them.
will sell to global consumers through Brussels: Commission of the European Communities.
Evans, P. (2005). Unwrapping the WTO: What consumers
e-commerce means. This act will increase the
need to know. London: Consumers International.
challenge as well as the need to effective market Evans, P. (2006). Consumers and the future work of WTO
surveillance. Therefore, in the future, the govern- – where do we want to go from here? London:
ments, institutions, and any other stakeholders Consumers International.
Sitnikov, C., & Bocean, C. (2010). New approaches of
must aim to achieve three main objectives at the
consumers’ protection in terms of management
national, regional, and global level: systems’ international standards evolution. Amfiteatru
– To empower consumers for putting customers Economic Journal, 12, 360–372.
in the first place will benefit them and encour- United Nations, DESA. (2003). United Nation guidelines
for consumer protection. New York: United Nations.
age competition considerably. Empowerment
will be fulfilled through better monitoring the
markets and national consumers’ protection
policies. Authorized and enforced consumers Contamination
will call for real choices, precise data, market
transparency, and the faith that comes from ▶ Pollution (Separate Entries on Carbon,
efficient care and strong rights. e-Waste, Ecoefficiency)
– To increase consumers’ prosperity in terms of
price, quality, diversity, and safety because
their well-being and welfare are by the core
of well-functioning markets. Continental European Model
– To defend consumers efficiently from the acute
risks they cannot intercept as people. A high ▶ Relationship-Based Systems
level of protection against these menaces is
necessary to customer trust through better con-
sumer protection regulation and through contin-
uously consumers’ information and education. Continental Model
In order to reach these objectives a high level
of consumer protection must be ensured through: ▶ Relationship-Based Systems
– Easy legal frames, enhanced evidence, fair
dialogue, and better representation of con-
sumers’ concerns
– Efficient implementation of regulations par- Continual Improvement
ticularly by way of enforcement partnership,
knowledge guidance, and amendment ▶ Kaizen
C 462 Continuous Improvement
Synonyms
Definition
Contractualism
Until now, there is no common definition of the
▶ Social Contract intersectoral cooperation between nonprofit orga-
nizations (NPOs) and companies. One reason
might be the broad variety of scientific disci-
plines and institutional actors dealing with this
Conventional Cheap Oil topic. Another reason is the huge variety of
characteristics of such cooperation, as the phe-
▶ Sustainable Primary Energy Production nomenon evolves in different fields, related to the
involved sectors, the number of involved organi-
zations, the aim, the concrete conditions, and the
circumstances of the cooperation. Furthermore,
Conventional Oil there are no common instruments to initiate and
manage such cooperation, and there are no spe-
▶ Sustainable Primary Energy Production cific legal guidelines. In practice, intersectoral
cooperation exists within a wide range, beginning
with a very informal way with loose connections,
to contractually specified long-term relation-
ships. As a result of this heterogeneous situation,
Conversations there is a huge variety of terms for these types of
organizational interaction across sectors, such as
▶ Social Dialogue strategic collaboration between nonprofits
Co-operation Between NPOs and Companies in Germany 463 C
and business (cf. Austin 2000), cross-sector In this entry, we would like to offer
(social-oriented) partnerships (cf. Selsky and a classification for a differentiated view on such
Parker 2005), or civil-private partnerships. intersectoral cooperation. Since the last couple of
With a very broad understanding, intersectoral years, cooperation between companies and
cooperation can be defined as a constellation, NGOs have gained huge attention, especially
“organisations from different economic sectors – within the debate on CSR and CC (cf. Austin
public, nonprofit, and business – co-operate to 2000; Seitanidi and Lindgreen 2010). Within C
address social issues by providing society with this debate, there are at least two major mutually
‘public goods’” (Seitanidi and Lindgreen 2010: exclusive dimensions of how this new evolving
1; cf. Selsky and Parker 2005). intersectoral cooperation should be assessed.
“Instruments” such as social sponsoring, cause-
related marketing, or corporate volunteering are
Introduction on the one side described as a way of greenwash-
ing, where notorious underfunded NPOs are
The increasing debate on corporate social “sleeping with their enemies” (cf. Crane and
responsibility (CSR) and corporate citizenship Matten 2007: 440; CorporateWatch 2006: 19)
(CC) since the 1990s illustrates a new perspec- and thereby run the risk of losing credibility and
tive on the societal role of companies. Compa- independency as fundamental resources of socie-
nies are not closed entities producing services tal legitimacy. On the other hand, cooperation of
and goods but rather societal actors, which are companies and NPOs is assessed as drivers of
influenced by and influencing societal develop- innovation, and is a part of a new form of gover-
ment. One crucial aspect is the changing rela- nance, whereby actors of the civil society sector,
tionship between companies as representatives the business sector, and the political sector work
of the economic sector on the one hand and together in a productive way to deal with societal
organizations from the political and civil society problems, instead of adversarial stakeholder
sector on the other hand (cf. Selsky and Parker strategies – a real win–win situation (cf. Sustain-
2005). Among the main reasons are societal Ability 2003). From our point of view, both
processes related to globalization, which under- perspectives are realistic, and we want to illus-
mine the scope of action for national states and trate this.
open spaces for new organizational constella-
tions at different levels. The whole debate on
multilevel governance illustrates this develop- Key Issues
ment. On the one hand, companies get involved
in challenges, such as basic social questions. As mentioned before, the terms CSR and CC
Companies act, for instance, as providers of highlight the role and influence companies have
social services or as purchasers of social ser- on society in general, besides producing goods
vices provided by NPOs. On the other hand, and services and providing jobs. As companies in
NPOs gained more importance as stakeholders Germany have not much expertise in dealing with
for companies in the past years and are these societal issues like poverty, education, and social
days important players in the business sector. services, in most of the cases they are relying on
This can be illustrated by several campaigns NPOs to develop instruments corresponding to
against companies by NPOs. In general, NPOs the concrete social situation. According to litera-
gain importance for companies and vice versa. ture, this could lead to a win–win situation, that
Although cooperation between both actors is is, the involved organization gains (business
becoming more likely, the specific circum- case) and as such cooperation meet social prob-
stances and processes of these partnerships lems, the society benefits (social case). The busi-
remain unclear, as only companies are in the ness case describes expected advantages of
focus of the debate until now. intersectoral cooperation from an economical
C 464 Co-operation Between NPOs and Companies in Germany
point of view. Core elements of the business case range of organizations with different goals,
are human resources, marketing, organizational, notions, legal status, and structures (cf. Anheier
and local development. The business case for the and Seibel 2001). From a functional perspective
NPOs is on the other hand expected in terms of on NPOs, four ideal types of NPOs can be
funding and such new projects, organizational differentiated (cf. Sachße 2001: 17ff.):
developments, and management know-how 1. Membership-based organizations (e.g., sports
(cf. SustainAbility 2003). The case for the clubs)
society – the social case – is again assumed to 2. Interest groups (e.g., economic or political
occur by implication. Empirical evidence of these interest groups)
assumptions has not yet been assessed. Instead the 3. Service organizations (e.g., welfare
contribution of companies – as organizations with organizations)
strong resources and professional expertise – is 4. Support organizations (e.g., foundations)
always seen as having a positive impact on the (1) Membership-based organizations are typi-
cooperating NPOs and of course society – a real cal for sports and leisure. Purposes of these orga-
positive-sum game (cf. SustainAbility 2003). nizations are the representation of the common
Besides missing empirical evidence of the interests of their members. Core attributes of
expected advantages of intersectoral cooperation, such organizations are the recruitment of
there are also theoretical concerns related to these new members, collectivization, and bonding of
relationships. A basic assumption is that compa- personal members. (2) Interest groups exceed the
nies and NPOs are considerably different, related associative character of membership organiza-
to their organizational logic, their organizational tions by pursuing certain interests of their mem-
goal, and their basic organizational structure (cf. bers. The spectrum of these representative
Crane and Matten 2007). While companies are organizations ranges from specialized interests
supposed to maximize private profits, NPOs of small groups to the point of common societal
which aggregate and represent interests are sup- concerns. Besides that, interest groups represent
posed to be socially inclusive, associative, and substitutional interests of marginalized groups in
provide public services (cf. Anheier and Seibel society. They gain political influence through
2001). In some respects, NPOs can be described participation in political decision making
as an institutionalized answer of market failure. processes or a position of an extra parliamentary
Another distinctive feature is the decision making watchdog. Classical representatives of this type
process within the organization, which in most of of NPOs are trade unions, organizations of
the cases is hierarchically organized in compa- employers and organizations like Amnesty Inter-
nies and based on membership democratic struc- national, Greenpeace, and Transparency Interna-
tures in NPOs (cf. Anheier and Seibel 2001). tional. (3) Service-oriented organizations more or
Furthermore, differences can be identified in the less produce and distribute services for specific
funding of organizations. NPOs are often depen- groups. Welfare organizations are a traditional
dent on public and private spending, and compa- example for this type of organizations. These
nies gain their financial resources from the welfare organizations (“Wohlfahrtsverb€ande”)
banking sector, and increasingly the financial provide basic public services all over Germany
market. Considering these substantial differ- and partly worldwide, for example, German Red
ences, cooperation between companies and Cross. In general, service-oriented organizations
NPOs seem to be highly preconditioned. This are not only service providers, they are also asso-
becomes more clearly, if we have a more detailed ciations and political interest and lobby organi-
view of which type of NPO is involved. zations (cf. Backhaus-Maul 2000). (4) The aim of
support organizations is generally to support
Varieties of the Civil Society Organizations activities and projects of a third party through
The legal term of nonprofit organizations and the financial funding, administrative assistance,
correspondent in social sciences describe a wide etc. In most of the cases, these organizations are
Co-operation Between NPOs and Companies in Germany 465 C
foundations in legal terms and can be found in companies seem to be much more skilled in han-
fields like science, culture, and international dling critical interest groups. The systematic inte-
development aid. Besides big traditional founda- gration into stakeholder dialogues is one of the
tions, small community foundations and a fast company’s ways of doing so (cf. Crane and
growing number of corporate foundations illus- Matten 2007). The possible strategies of NPOs
trate recent developments within this field. vary in the scope of critique and confrontation,
It is clear that this classification follows ideal from “name and blame” to the development of C
types of organizations. In reality, several common projects (cf. Crane and Matten 2007;
multifunctional NPOs can be found. They fulfill SustainAbility 2003). To cooperate with compa-
more than one function at the same time, such as nies requires interest groups to take certain risks,
huge service-oriented welfare organizations, such as losing their accountability and credibility.
which understand themselves as service pro- Many organizations criticize that companies use
viders, agents of social marginalized groups, the labels CC or CSR for greenwashing, without
and associative organizations. Nevertheless, this serious efforts to act more responsibly. Coopera-
outline of a functional differentiation of NPO tion with companies seems therefore like
allows instructive implications related to the con- “sleeping with the enemy” for many interest
nections of NPOs within their organizational sur- groups (cf. CorporateWatch 2006: 19f.; Crane
rounding. Adopting these schemes on financing and Matten 2007: 440). Autonomy is for interest
of NPOs results in the following differentiated groups a constitutive attribute and can be lost
picture: Membership-based organizations are easily by cooperating with wrong organizations,
mostly financed through membership fees, as the failed cooperation between Greenpeace
whereas service organizations receive payments and Lidl 2007 in Germany illustrates. On the
for their services and interest groups, just as other hand, it seems to be dangerous, or at least
support organizations are often dependent on not justified, for interest groups to refuse dialogue
donations. This aspect results in different with companies, which declare themselves open
stakeholders the organization is accountable for for dialogue.
and thus in different strategies in the relationship Many observers assume that the relationship
with companies. In matters of the relationship to of interest groups and companies is changing
companies, and especially cooperation with toward a more cooperative atmosphere. NPOs
companies, this classification unfolds a certain develop new strategies, which can be described
heuristic content. by moving from confrontation to cooperation
To illustrate that, we explain the different and communication (cf. SustainAbility 2003).
implications on intersectoral cooperation Although there is no clear empirical evidence, it
between companies and NPOs for interest groups can be expected that interest groups remain
and service organizations. skeptical if they should cooperate with
companies in order to preserve autonomy as
Cooperation Between Interest Groups and a key attribute of their societal legitimacy
Companies and that they should react with reserve to
Nonprofit interest groups have gained a lot of corporate attraction. At the same time, the
public attention and have become increasingly communication will be intensified between com-
important within political and societal decision panies and interest groups. Although interest
making processes. Several critical campaigns of groups gain a lot of public attention through
interest groups against multinational companies huge campaigns, they often represent only
illustrate this. Accordingly, the relationship of a small part of the civil society. In terms of
corresponding NPOs and companies is more employees, economic relevance and organiza-
strained than cooperative (cf. Baringhorst et al. tions in most of the countries’ service organiza-
2010; Crane and Matten 2007). After several lost tions are far more important (cf. Anheier and
battles in the past years (e.g., Brent Spar in 1995), Seibel 2001).
C 466 Co-operation Between NPOs and Companies in Germany
Cooperation Between Service Organizations are far more open to cooperate with companies
and Companies in Germany (than interest groups), path-dependent patterns in
In Germany, NPOs in the field of social services, the relation of business, state, and civil society in
especially welfare organizations, are traditionally Germany often hinder such cooperation. On the
incorporated in government politics and the pub- other hand, nonprofit interest groups are much
lic provision of services. These NPOs are gener- more reliant on independence and credibility,
ally financed by the state and through fees; in and cooperating with companies implies a huge
other words, they are not dependent on private risk of losing these sources of legitimacy.
donations. Due to the specific development of the Furthermore, independent nonprofit interest
German welfare state, cooperation between com- groups are an important corrective power within
panies and nonprofit service organizations have society. Therefore, it can be expected that coop-
not been relevant for NPOs. The influential idea eration between companies and service-oriented
of subsidiarity has an important impact on the NPOs will become much more likely than
institutionalization of nonprofit service organiza- cooperation between companies and nonprofit
tions, which intend to prioritize NPOs in produc- interest groups.
ing public social services before public and
private organizations. Connected to the rise of
the German welfare state since the 1960s, non- Future Directions
profit service organizations began to develop
tight connections to welfare state institutions. Due to rising societal challenges, empty public
As a result, service-oriented NPOs in Germany coffers, and a changing role of companies, coop-
and many Western European countries did not eration between companies and NPOs is about to
have much interest in building connections with increase. For NPOs, this development is certainly
business. Globalization and the crises of the wel- not free of risks. In reality, those cooperations do
fare state affect this privileged position of non- not always create an ideal win–win situation.
profit service organizations, and the tight Instead cooperation between NPOs and compa-
connection and relationship between state and nies is more or less a power play, where both –
nonprofit welfare sector have been gradually NPOs and companies – will directly face trends
loosened (cf. Backhaus-Maul 2000). of economization within society. A long-lasting
As the risks of social inclusion are about to dependency of NPOs from the business sector
increase, established welfare state institutions could be the result; however, NPOs in Germany
seem to be somehow overstrained and dissolving. are still connected with state and civil society,
Furthermore, companies in almost all Western which might be the guarantee for independency
welfare states are increasingly confronted with in an economized global society.
social issues like poverty and social change. In Since there has not been much attention to
this situation, collaborative relationships between collaborative business-NPO relations, there are
companies and service-oriented NPOs are more several questions which future research should
likely, as both actors can identify common inter- aim to answer. Some of the main issues might
ests and develop common projects to touch or be the societal legitimization of companies,
meet those interests. NPOs, and the collaboration among them. Fur-
Summing up, by assessing cross-sector collab- thermore, there is a need for more experienced
orations between companies and NPOs, it is practitioners who are able to handle and manage
important to consider the setting and the type of those unbalanced partnerships. Until now, there
NPO involved. As shown, different types of orga- is no clear evidence that cooperation between
nizations are engaged in different settings of part- companies and NPOs can fulfill such high expec-
nerships. Therefore, each partnership follows tations, like, for instance, solving societal chal-
distinctive rules, patterns, and circumstances of lenges. To answer these questions, instead of
the cooperation. While service-oriented NPOs more quantitative data, broader and especially
Core Principles of CSR Approaches 467 C
qualitative analysis of those partnerships is nec-
essary to gain more in-depth knowledge on pro- Cooperative Development
cesses, outcomes, and dynamics of such
cooperation. ▶ CSR and Regional Development
Cross-References C
Coordinated Market Economies
▶ Business Case for CSR
▶ Relationship-Based Systems
▶ Business in the Community (UK+Derivatives)
▶ Corporate Citizenship
▶ Corporatism
▶ NGOs and CSR Core Principles of CSR Approaches
▶ Partnership
▶ Poverty Mia Mahmudur Rahim
▶ Public-Private-Partnerships Macquarie Law School, Macquarie University,
▶ Stakeholder Theory Sydney, NSW, Australia
Synonyms
References and Readings
enterprise’s economic approach to meet its socio- officials, larger scale of customers,
economic responsibilities. Among these indica- etc. Performing corporate responsibilities not
tors, (a) economic impact on community through only incurs costs for the enterprises but also
spending and geographic variations; (b) eco- ensures sustainable profit range and brand reputa-
nomic impact through catering suitable business tion. Hence, incentives for business enterprises to
process; (c) outsourcing, knowledge, innovation, relate with CSR are many. CSR relationship can
and social investments in employees and con- enhance public relations through which an enter-
sumers; and (d) taxes, tax incentives, wages, pen- prise can avoid bad publicity and can increase
sions, and other benefits paid to employees are brand differentiation. CSR practices help to man-
most important (CCBE 2003). These indicators age corporate risk via proactive corporate culture.
extend the economic approach of CSR practices; Preempting of mandatory/legislative measures
they relate this approach with the broader sense of with stricter and enforceable standards is another
CSR that also investigates moral rights of individ- important incentive for business societies if they
uals in relationship to business and moral duties of could add CSR practices within their culture.
business in relationship to social outcomes Indeed, proper business strategies can keep
(Windsor 2006). CSR practices relate the ethos explicit cost of social responsibilities minimal and
of economic man with the philosophies of corpo- can create benefit out of these responsibilities.
rate citizenship. Its practices shift the narrower Socially responsible actions in terms of employee
economic approach of enterprises to the broader morale always raise employees’ productivity and
approach of corporate citizenship. No matter what face relatively less labor problems. On the other
the artificial citizen gets as privilege or responsi- hand, low performance of social responsibilities
bilities, the true standard of citizenship is self- could raise doubt into the abilities of business
restraint and altruism beyond self-interest. At this enterprises to produce quality products, and
point, the comment of Adam Smith is prominent; because of this doubt, customers may not favorably
he mentioned: “He is not a citizen who is not dispose of their products. Hence, Paul Samuelson
disposed to respect the laws and obey the civil supports the efforts of enterprises to engage in
magistrate; and he is certainly not a good citizen social performances, as he writes, “a large corpo-
who does not wish to promote, by every means in ration these days not only may engage in social
his power, the welfare of the whole society of his responsibility, it had damn well better try to do so.”
fellow-citizens (Smith in Windsor 2006).” The green paper on the promotion of a European
Business enterprises have social responsibili- framework for CSR has endorsed this views.
ties. For them, performing these responsibilities While designing a CSR framework in Europe,
depends upon convincing financial payoff that the European Commission in the Corporate
these responsibilities can create. To add these Social Responsibility:A Business Contribution
two factors – performance of social responsibili- to Sustainable Development identifies that the
ties and financial payoff – business enterprises basis of this framework should be a structural
evaluate effects of its decisions on external social and partnership-based approach between business
system in a manner that their decision accomplish and their various stakeholders and a concerted
social benefits along with traditional economic effort by all those concerned toward shared objec-
gains. They relate with social issues as low level tives. In broader perspective, this framework aims
of social responsibility performance may to interlink CSR, economic progress through
increase their financial risk where potential inves- increased competitiveness of business enterprises,
tors relate business enterprises’ managerial inef- public policy, and societal progress. A growing
ficiencies with their less socially responsible number of countries and business enterprises are
performance. While business enterprises relate following this perspective. They are more closely
more with the social activities, they, in fact, integrating CSR notions into key aspects of their
improve their standing with more important business strategy and practice. Their abilities to
constituencies like bankers, investors, government handle the main intangibles are more important
Core Principles of CSR Approaches 471 C
than before. Nowadays, successful business strat- 11-year period also find evidences of positive rela-
egies hold clear understanding of societies’ chang- tionship between social and financial indicators.
ing demands. For example, British Petroleum Business enterprises’ performance of their
commits to “go beyond” petroleum, and the Ford social responsibilities could be viewed in three
Motor Corporation’s vision is to become major ways. First, business enterprises face
a provider of mobility. trade-off between social responsibilities and finan-
However, the societal concern mentioned in cial performance. Second, cost for performing C
the vast body of literature on CSR, stakeholder social responsibilities is minimal, and business
integration into corporate governance, and busi- enterprises can strategically be benefited from
ness ethics has been criticized on the point that these expenses. Third, cost for performing these
“the domain of CSR cannot be assessed by responsibilities is significant but could be offset by
primarily economic criteria, and neither can an a reduction in other managerial costs. These views
environmental ethic be developed through an hold that business societies have responsibilities to
‘ethically pragmatic managerial’ mortality that societies, and these responsibilities could be
primarily serves organizational interests turned as tools for their profit maximization. This
(Fineman in Banerjee 2006).” Hence the critics correlation has driven the economic approach of
of CSR put questions into the construct and con- CSR toward a broader dimension within which the
cepts of discourses, for example, on corporate core principle is that a business enterprise should
greening based on “deep ecology,” “ecocentric,” maintain efficiencies in producing goods and ser-
or “sustaincentric” management. The models of vices and in adding values to the socio-
strategies for incorporating CSR notions into cor- environmental life of the society.
porate management are not beyond criticism;
these models are not conclusive in attaining its Principle of the Environmental Approach of CSR
purposes. But these models have firmly proven Environmental approach of CSR contends the
that these are creeping toward creating effective operational activities of corporations that have
impacts on the relationship between CSR and immense impact on living and nonliving natural
corporate management. Experiment of different resources, land, air, and water, including ecosys-
strategies for relating its practices with business tems. For the big business enterprises, this
operations has already gained considerable approach is mostly based upon major interna-
acknowledgement from the business and civil tional instruments providing normative standards
societies. Jennifer J Griffin and John F Mahon of corporate responsibilities for environmental
evaluated 62 research articles spanning 25 years protection. The principles for this approach are
of research and found that 33 articles demonstrate many and vary according to the varied circum-
a positive correlation between corporate social stances. Among others, UN Global Compact is
and financial performances. This finding was a prominent international organization that fixed
reevaluated, and the number of researches that some principles related with environmental
showed positive correlation has increased. These liabilities of international business enterprises. It
researches are from the real world and followed details that business enterprises should adopt “a
by established methodologies. For example, precautionary approach to environmental
a meta-analysis conducted by Frooman con- challenges,” undertake “initiatives to promote
cludes that good corporate social performance greater environmental responsibility,” and
leads to good corporate financial performance encourage “the development and diffusion of
(Giffin and Mahon 1997). To establish this con- environment-friendly technology.”
clusion, six chemical industries were reviewed and ICC Business Charter for Sustainable Devel-
concluded with the hope for those of us who opment and OECD are two other international
believe in some positive relationship between cor- organizations that set principles for delivering
porate financial and social performance (Giffin and environmental responsibility of international
Mahon 1997). Fortune reputation ratings over an business enterprises. ICC Business Charter
C 472 Core Principles of CSR Approaches
extends the Global Compact–initiated environ- would be a good example at this point. This tractor
mental principles to the principles of environ- maker enterprise started up a business unit to help
mental management on the basis of priority and farmers harvest wind energy: they offer financial
the efficient use of energy, materials, and renew- backing and consulting. This may seem an odd fit,
able resources with able corporate management but it becomes a source of value innovation: an
systems. Here, the core principle is that business enterprise known for providing farmers with the
enterprises are responsible for adopting tools they need is offering to help them survive
a precautionary approach, the minimization of and create new revenue streams.
adverse environmental impact and waste genera- The principles for environmental approach of
tion, and the safe and responsible disposal of resid- CSR practices balance the demand for profit
ual waste. ICC Charter identifies these principles generation out of investment and social need for
as important concern that relates environmental minimizing the harm in environment due to
approach of CSR and corporate responsibilities business operations. The core of these principles
for environment. OECD Guidelines for Multina- is that environmental concern in business
tional Enterprises focus on the assessment and operations can generate long-term profit and
consideration of enterprises of the possible envi- reputation and minimize risk in business, and there-
ronmental and environment-associated health con- fore, business enterprises should have roles in
sequences of their activities and their impact on repairing environmental damages caused by their
indigenous natural resources, and on estimation of irresponsible uses of natural resources.
health risks of products. These guidelines point out
that the environmental approach of CSR practices Principle of the Stakeholder Approach of CSR
should focus on the measures for mitigating the The core of the stakeholder approach of CSR is
adverse effects of environmental degradation. that anybody who has been affected by the enter-
Environmental approaches in CSR practices are prises’ operations has stakes in enterprises’
used as a vital tool, for instance, to control eco-risk operations. It reflects the ideas that the conduct
for global enterprises and retailers. A business of enterprises can be a concern of a broader range
enterprise’s responsibility is not to put the environ- of peoples than merely shareholders. All these
ment into an awkward position. Otherwise, the persons in these groups are “vital to the success
enterprise would likely face legal actions and in and survival of a corporation.” Generally,
most cases might lose market share. With the rise these persons could be divided into three types of
of transparency, ethical consumerism, and impact stakeholders: organizational stakeholders,
of branding on market share, unethical business economic stakeholders, and societal stakeholders.
practices or irresponsibility usually causes huge Together, these three types of stakeholders form
negative impact on business. Business enterprises a concentric set of circle where the employees of
have acknowledged these principles. For instance, the enterprises are the foremost organizational
McDonald pushes back on its supply chain to lower stakeholders; customers, creditors, distributors,
antibiotic use in chickens or asks for documentation suppliers, etc., are the economic stakeholders;
that ensures that its suppliers’ produced cattle do and communities, government, civil societies,
not have mad cow diseases. Intel spends millions to environment, etc., are the societal stakeholders.
ship its hazardous waste from some developing Stakeholder principles hold that business orga-
countries to the United States so it can be disposed nizations are responsible and accountable to their
of properly. Helping customers to reduce their envi- shareholders, and they are also responsible to con-
ronmental problem can generate customers’ loyalty sider the legitimate interests of stakeholders. These
and attract new sales; reducing product’s energy principles do not reject profitability and wealth
use or toxicity also can add to customer value. creation initiatives. Jones and Wicks stress that
Hence, strategies for minimizing customers’ burden the aim of this principle is not to “shift the focus
can also be the strategies for maximizing profits. of firms away from marketplace success toward
John Deere’s recent foray into renewable energy human decency but to come up with
Core Principles of CSR Approaches 473 C
understandings of business in which these objec- of stakeholder approach of CSR practices hold
tives are linked and mutually reinforcing.” These business enterprises responsible in considering the
principles strike a balance between business profit legitimate interest of their stakeholders.
and stakeholder interests as business enterprises
have immense influence on the lives of stake-
holders. The core of these principles is that the Future Directions
business enterprise has to value the rights of its C
stakeholders. This principle implies that if the busi- The basis of corporate responsibility has
ness enterprise wants to “guarantee their legitimacy transitioned from why business enterprises must
in society and be granted the license to operate that be socially responsible to how they can become
recognize the responsibilities of all parties involved socially responsible. CSR is now a major compo-
in the running of organizations,” they should pay nent of new business and corporate governance
attention to the legitimate claim of their models for long-term sustainability. Business enter-
stakeholders. prises take different approach for fulfilling their
social responsibilities following some core princi-
ples developed in CSR scholarship and practice.
Key Issues CSR is a complex subject, and its definition is
contingent on situational factors. At this point, the
Despite the inconclusive definition, different core principles of its approaches are necessary for
approaches, and many dimensions of CSR, the the development of its implementation in business
major approaches of CSR practices are related regulation. The core principles of economic,
with economic, social, environmental, and stake- social, environmental, and stakeholder approaches
holder issues. Although these approaches are not of CSR would assist the CSR standardization
conclusive, they are inwardly consistent and con- regime to relate CSR notions with corporate strat-
verged on some common characters and similar egies more efficiently; this would help this regime
elements. The core principle of the societal to practice a universal standard. Moreover, this
approach of CSR is that business enterprises should identification would help other organizations for
contribute to building better societies and, there- initiating any strategies related with CSR. These
fore, should relate social concerns into their core principles could also be considered as the corner-
strategies and consider the full scope of their impact stone for developing a socially responsible corpo-
on societies. More particularly, this principle rate culture at the business enterprise level.
requires business enterprises to implement fair
wage policy, upholding human rights, fair trade
and ethical issues, producing safe products, and Cross-References
cooperating in the networks of business enterprises
and communities. The economic principle empha- ▶ Caux Round Table Principles
sizes business enterprises’ efficiencies in producing ▶ Definitions of Social Responsibility
social goods without tilting social and environmen- ▶ Equator Principles
tal values. This principle denotes that along with the ▶ Strategic Corporate Social Responsibility
responses to the financial expectations of share-
holders, business enterprises should have focus on
the economic well-being to society as a whole. The References and Readings
environmental principle, in short, is that
the business enterprises should not harm the Banerjee, S. B. (2006). Corporate citizenship, social
environment for maximizing their profits and they responsibility and sustainability: Corporate colonial-
ism for the new millennium. In J. Jonker, & M. de
should have strong roles in repairing Witte (Eds.), The challenge of organizing and
the environmental damage caused by their irrespon- implementing corporate social responsibility (p. 43).
sible use of natural resources. Finally, the principle New York: Palgrave Macmillan.
C 474 Core Values
Synonyms
Definition
Co-regulation
Corporate citizenship (CC) is one of the story
▶ Public Policies on CSR words in today’s business arena. Now generally
Corporate Citizenship 475 C
viewed as worthy among communities and in the fundamental underpinnings of sound – and
corporate world, CC’s definition has been evolu- rewarding – corporate citizenship. Regardless of
tionary. Since the commencements of CC’s surge the heavier responsibility of this broader symbol
in popularity over a decade ago, the most coher- of corporate citizenship, corporations are pro-
ent trend has been for companies to engage in it gressively feeling the concrete and progressive
through philanthropic giving and community benefits.
involvement. These two paths have apparently C
been the most obvious and logical way for com-
panies to do the right thing. Popular press, man- Introduction
agement theory literature, and corporate PR
reports highly recommend – and justifiably – The remarkably reality that corporations, experts,
numerous examples of company contributions scholars, and others use the term “corporate citi-
to charities and sponsorship of community zenship” as one of the equivalent words for the
events. public or community drives of business warrants
Today, however, the definition of CC is seizing seriously transformed corporations into
expanding. For some, CC is about a new contract active performers from citizenship perspective.
between businesses and society, a vision of part- The probability of corporations demanding, or
nership between different sections of community, being allocated, a political or legal status
which allies profitable companies with healthy corresponding to individual citizens is, somewhat
communities because what happens to societies rightly, a cause of interest for many scholars and
happens to business. In addition, CC is seen as the practicians. In this way, one can, at the very least,
role of a company in considering its responsible value corporations in part on their own relation-
involvement within the wider community. Inves- ships by studying them through the lens of
tors use an internal definition, including transpar- citizenship.
ency, governance, and ethics as key citizenship Furthermore, citizenship is a notion which is
elements. Others often define it as the full range particularly concerned with functions and
of both internal and external corporate activities responsibilities. More specifically, citizenship is
that contribute to the well-being of society, those an establishing principle for associating roles and
which embrace the related concepts of sustain- responsibilities among representatives of politi-
ability and corporate social responsibility (CSR). cal communities (i.e., on a leveled dimension)
Corporate citizenship recognizes that busi- and between them and other institutions exercis-
nesses have a responsibility to respect the indi- ing authority and accountability (i.e., on an
viduals, the community, and the environment in upright dimension). This is important since cur-
a way that when devising or implementing any rent controversies about the roles and responsi-
rightful business strategy, they will abide by the bilities of corporations are, for example, spirited
laws and regulations and adhere to high ethical by concerns about who the corporation should be
standards. With increasing awareness and study answering to, why, and in which ways the respon-
of corporate influences across environmental, sibility should be released. Citizenship puts for-
economic, and social arenas, companies are ward a way of functioning through these
being prodded – through both competition and relational concerns using a set of concepts and
public pressure – to make sustainable efforts in structures that have been well founded in theory
all of these areas. To do this efficiently, company and practice for many years. Thirdly, and more
must formulate the concept of corporate citizen- generally, the concept of citizenship is at the core
ship into their mission declarations and the very of larger deliberations about societal governance
framework of their organizational structure. Cor- of which corporations shape a central part. Con-
porate governance; fair employee treatment; sequently, criticisms of corporate power, for
“green” ways of thinking, doing, and being; and example, are frequently underpinned by an opin-
structured, ongoing giving to have become the ion that corporations and their plans are directly
C 476 Corporate Citizenship
designing citizenship independence and variety. thought over as citizens, inasmuch as they work
Then again, there is the opinion that human “with” and participate “in” society and in putting
citizenship is being recasted since the major forward their concerns to authorities and
institutional delegates of citizens, democratic responding to authorities’ legislation and action.
governments, are being replaced by corporate The target here is especially on the ways’ corpo-
power. However, more extensively, there is the rations share the levels and process principles of
concern that the modern forces of globalization citizenship. Assertions about corporations being
and the diluting of national governments are also like citizens can have a number of origins; any-
detrimental to efficient citizenship. Although this way, inevitably these are not coherent. For cen-
latter point does not forcefully straight connect to turies, European business people immersed in
corporations, by virtue of their capacity as envoys citizenship-like paths by way of their integration
of globalization, they are implicated in broader of and involvement in their associations, the her-
political debates about citizenship. Linking cor- alds of business organizations, which supplied
porations with citizenship should not be per- structures of administration in distinctive busi-
ceived from citizenship viewpoint where this is nesses and forms of reciprocal assistance. In
merely used to assist in understanding particular ancient periods of representative public affairs,
points of the corporation. Furthermore, the cor- business possession empowered people to come
poration can be used to study the theory and across a property franchise.
practice of citizenship. Nowadays, various con- Furthermore, corporations may well be
cepts of citizenship are in movement, while thought over as part of community in that their
experts of political science and sociology have members, owners, executives, or workers are
gotten to be more and more interested in the role members of society. Related to this matter, prac-
of marketplaces, multinationals, and other eco- tices of industrial paternalism or charity voice the
nomic causes involved in the change of citizen- social aspect of industry. Hypotheses of business
ship. Therefore, the time is suitable for authenticity are often theorized on the required
a concentrated inquiry of the nature and influ- corporations to be the winner of the confirmation
ences of corporate players on citizenship. Of of society for their individual and collective
course, even to start this attempt, one needs to being and accomplishment.
recognize at least some initiating points for what The suggestion that corporations may well be
one means by citizenship in the context. As the seen as citizens can as well outline on the some-
dynamic tasks of corporations in business – soci- what different kind of reason that they have an
ety relationships are complicated and many- individual operational and judicial uniqueness:
sided, throughout the last decades, a triad of They are commended or denounced, they sign
tracks in which the notion of citizenship can and agreements, enter accords, and build internal
has been used to light up business – society rela- decision-making structures and frameworks free
tionships developed corporations as citizens, as from the individuals inside the corporation.
governments, and stakeholders as citizens. Industries can enter the legal agreements, be
In this context, one must focus on the thought owners, hire employees, prosecute, and be pros-
that corporations can be considered citizens. The ecuted. Therefore, a corporation can be dealt with
idea that corporations are or not like humans or, in the legal environment as an “artificial person.”
more specifically, citizens, has been examined More widely, the use of the “citizen” term linked
recently. In this view, corporations are examined to corporations can outline on the rationale that
on a related leveled connection with other corpo- “every large corporation should be thought of as
rate and humans as citizens. From human citi- a social enterprise; that is, as an entity whose
zens’ perspective, corporate citizens are studied existence and decisions can be justified only inso-
on an upright connection of entrustment with far as they serve public or social purposes.” Even
authorities in which the citizens “author” the though there are obviously boundaries to the
mandate of authorities. Corporations can be implementation of the citizenship term to
Corporate Citizenship 477 C
corporations especially concerning their position assertion making and consequently, in addition
(they do not participate in voting or participate in of citizenship. As an outcome, many works
panels), corporations can have several limited founded upon particularity and distinction
entitlements that are related to those of citizens: (whether sex, ethnic, cultural, diasporas, eco-
protection under the judicial influence and eligi- logic, technical, and urban) have created tracks
bility for grants under various civil policy gov- of expressing their pretensions to citizenship
ernments (education programs). However, their implied not just as a judicial position but as gov- C
first affirmation to be seen as citizens subsists in ernmental and public identification and economic
the way they take part in various practices of redistribution. Consequently, there is a quite mis-
citizenship. In this context, corporations are cellaneous, many-sided comprehension of citi-
brought forward in various ways. First, corpora- zenship that somewhat compounds its
tions are involved in financing or in lobbying implementation to the corporation. At the same
different campaigns or causes. Second, corpora- time, as it is impractical to shorten this whole
tions are involved in daily governance through argument, there are various reshaping of citizen-
designing, manufacturing, and selling goods or ship, which have relevant links for corporations
services on the markets, along with making deci- such as urban (cosmopolitan), ecological, and
sion on hazardous or unethical technologies to ethnic citizenship.
employment, providing goods or services to or The primary and evident change of citizenship
from minorities or other groups. Then, took place as a consequence of globalization as
nongovernmental organizations and civil society this has pregnantly influenced the control means
associations are seen and sought as partners for of the key reference pinpoint of the long
addressing various administrative issues as such established conceptions of citizenship, the state
healthcare, education, training, and community nation. The increase occurrence of urban citizen-
development. Political debate is a case in view ship – particularly a citizenship performed by
for corporations as just the example of global multinational associations – shows a quite vivid
warming, governments’ involvement, and corpo- range of transformed and extended forms of cit-
rations raising the voice of the world-known izens’ entitlements, position, and practices of
experts on addressing this policy matter. involvement. While theories such as human
Nowadays, it is not anymore remarkable that rights control the aspects of status and entitle-
there is a suggestive opposition to the implemen- ments, there is seen a recent field of involvement
tation of citizenship into the examination of cor- in the many-sided, several might even state
porations, and vice versa. Envisioning a disorder, field of international civil community
corporations through a citizenship base has been with its abundance of players who contrast con-
waved as “an idea whose time has not come” or as siderably from every one with regard to authority,
“little more than neoliberal propaganda.” This authenticity, and concerns. The deliberation on
hesitance to accept corporations inside the vocab- urban citizenship stresses courses of authorizing
ulary of citizenship is founded on a hypothesis citizenship, modern ways of involvement, as well
that if one does, it will be to validate the corpo- as broader and various remark points for what
ration’s political task. Critically considering the composes the pertinent governmental commu-
conception of citizenship assists to examine nity. Nowadays, urban citizenship makes
governmental parts that corporations engage in a place for positioning corporations in the inter-
will lead one to, inevitably linking citizenship national ground. Moreover, during the last
and corporations in a whole. decades, it was witnessed the enterprising task
The current notion of citizenship as purely of corporations in changing almost all of this
status kept under the authorization of the govern- general specifics and traits of citizenship. Subse-
ment has been appealed and widened to comprise quently, urban citizenship gives a start area for
various governmental and public works of iden- much wider conceptions of citizenship, particu-
tification and redistribution as occurrences of larly concerning the part that any corporation
C 478 Corporate Citizenship
plays in modeling citizenship. The meanings of ecologic pleas of their stakeholders, who steadily
the conception of CC at the international level are more comprehend a secure environment as one of
large and various. First, urban citizenship gives their integral civic entitlements. In the end, the
plenty of space for positioning corporations in ongoing discussion on suitable acknowledgments
a diversity of angles of citizenship and hence to global climate alteration has faced corpora-
inlays them in the brand new scene of global tions with the difficulty of distinguishing their
governmental organization. Second, this aspect pertinent community of duty. Taking all these
also underlines a number of boundaries of corpo- facts into account, the conceptions of ecologic
rations in seizing up this new political function. citizenship can lead to a resettlement of corporate
Apart from the clearly unassuming goals corpo- accountability – close to local as well as global
rations expose when using the language of inter- communities, and moreover, to tomorrow gener-
national citizenship, the field of urban citizenship ations and beings.
presently still occurs as a quite diffuse acting Following the evident extensions of urbane
scene, granting political tasks to corporate and ecologic citizenship, a keen multiplication
players who provide a low amount of comple- of other citizenship characters, which are theo-
mentary levels of clarity, comprehensibility, tem- rized on social individualities such as age, eth-
perateness, and accessibility to public discussion nicity, impairment, and sexual orientation were
and control. considered. Citizenship individuality, frequently
During the last years, as a reply to developing related to “cultural citizenship,” seizures the style
apprehensions about the planet and its future, groups comprehend and see themselves as inter-
conceiving relationships of citizenship versus nally united and distinct from other people in the
the background of the ecologic environment has polity. These traits are used as a foundation for
become a steadily more favored method of fram- expressing pleas to part the larger citizenship
ing discussions in environmental policies. Eco- position from where they have been disallowed
logic citizenship is focused on the position, or to get specific citizenship benefits or dispensa-
entitlements, and practices of involvement that tions in relations with entitlements and/or prac-
relate citizens to the environment. Once more, tices. One can hold a conventional position as
the conceptions of ecologic citizenship are a citizen yet be left out (in law or in fact) from
many-sided, changing from percepting citizen- particular civil or public privileges or from types
ship as informal bond with a definite land or as of involvement in the political practice valid for
just a supplement of usual citizenship entitle- society.
ments, comprising the right to a protected and In this context, one can situate corporations in
normal natural ambience and environment. Like the horizon of individuality-based citizenship in
urban citizenship, ecological aspects can also fundamental ways. Industry can mirror a citizen’s
pregnant develop privileges and responsibilities identity such as industries opened and run by
of civilians, producing new communal ties to disadvantage groups or various minorities or, on
people in various territorial areas or new genera- the other hand, industries that provide typical
tions (who could be influenced by the ecologic food for minorities. Then, corporations can per-
effect of the current time). Once more, the view- form a central part in empowering citizenship
point of ecologic citizenship has a sum of mean- individualities. This can occur at the degree of
ings for comprehending corporations as providing people, who in other ways would not
governmental players. On the one hand, corpora- have the right to remain in a specific state, with an
tions actually have been quite enthusiastic in occupation (here, it is the matter of many legal
exportation and modeling conceptions and con- and sometimes illegal immigrants to rich coun-
victions of (tolerant) citizenship that disjoints tries). Moreover, corporations provide an excess
people from their environment (no matter which of goods and services, which empower minorities
one). On the other hand, corporations have also or impaired to act like different types of involve-
confronted a developing inquiry for valuing ment in their larger communities.
Corporate Citizenship 479 C
Lastly, and combining the two directions represent for executives and policies’ makers and
referred to before, corporations have often been what the prescriptive implications of such evolu-
related to binding citizenship individualities. tions could be. Therefore, mapping out the actual
This can happen by banning particular ethnic or area of research and using various methods of
sexual orientations from work, by limiting the study – academic, heuristic, prescriptive, and
advancing of certain employees, or by providing applicable – prove to be useful to further the
goods and services that lead to stamp out the understanding in this field. C
representation of citizenship individualities. There is also the need of reshaping citizenship,
which opens the view of watching at corporations
in the framework of citizenship, while being
Key Issues aware of the probability that corporations might,
in fact, have important influences on citizenship.
Corporate citizenship endeavors to widen the Corporations are not unassertive actors in a firm
perspective of political postulating about corpo- scene of citizenship practices and organizations.
rations by reasoning about a number of ways that The motion of citizenship is, to some extent,
corporations and citizenship can come in con- modeled by the projects of corporations. There-
junction. The link (as citizen) and the fore, there is a need for a greatly large consider-
reconfigurations of citizenship (urbane, ecologic, ation in the adjacent disciplines of political
individuality) prove that there are numerous sciences, international relations, philosophy,
paths to examine corporations as the forceful sociology, and legislation about the effect of cor-
player from citizenship view. Each path exposes porations on the movement of current citizenship
the affluence and complexity of the part corpora- theory and practice. Comparing, the corporations
tions play in citizenship area; plus in conjunction, and their position have lately got thorough con-
they prove the trouble of advocating a conclusive sideration, while the discussion on citizenship
consideration of the corporation’s duties from still indicates bordered increase of the corporate
citizenship point of view. character in actively modeling and changing the
idea of citizenship. Therefore, new and large
debates about corporations and citizenship must
Future Directions eventually be able to conduce to understand not
only corporations but also the conception of cit-
Even though the citizenship hypothesis does not izenship. This issue is one of the most stimulating
provide any rapid ready-made answers, it assists and demanding courses of theoretical evolution
to comprehend this brand new certainty and yet expecting to be uncovered.
empowers in investigating its connections for
autonomy and social administration. Discussions
about the governmental character of the corpora- Cross-References
tion have already been initiated, and the develop-
ing of concepts about corporations and ▶ Business Case for CSR
citizenship can give them a significant input. In ▶ Community
the future, the inputs of citizenship theory must ▶ Corporate Governance
initiate discussions on the settings, requirements, ▶ Corporate Governance as a Tool for
usual approaches, and restrictions of corporation Alleviating Developmental Issues
involvement in power dividing in community – ▶ Corporate Social Innovation
like (un)equal citizens accompanied by distinct ▶ Corporate Social Responsibility
citizens on a parallel level or as players impli- ▶ Corporate Social Responsibility in Tourism
cated in the administration of citizenship on an ▶ Economic Globalization
upright level. Furthermore, investigation is ▶ Embedded CSR
needed here regarding what this could actually ▶ Global Environmental Management Initiative
C 480 Corporate Citizenship and Africa
▶ Good Corporation
▶ Institutes of Directors and CSR Corporate Citizenship Reporting
▶ Philanthropy
▶ Poverty ▶ Disclosure (CSR Reporting)
▶ Small- and Medium-Sized Enterprises
Engagement in CSR
be the “Base Code” of the Ethical Trading At suborganizational level, codes can give
Initiative (ETI) in the United Kingdom which guidance for members of individual corporate
was set up with support from the UK Depart- functions, such as engineers or computer profes-
ment for International Development. At sionals, as well as for specific CSR challenges,
regional level, there are codes that are pro- whether these are child labor, corporate philan-
moted by a set of national governments, such thropy, or biodiversity. Again, a discussion of
as the “Code of Business Conduct” designed corporate codes of conduct requires taking notice
by Asia-Pacific Economic Cooperation of these suborganizational codes. Some compa-
(APEC). nies use an all-in-one model for their codes where
• Furthermore, codes have been adopted by all CSR requirements are collected in a single
a range of intergovernmental organizations, document, whereas others use a differentiated
like the conventions by the International suite model and have adopted a range of stand-
Labour Organization (ILO) or the Organisa- alone documents to address individual CSR chal-
tion for Economic Co-operation and Develop- lenges (Preuss 2010).
ment’s (OECD) “Guidelines for Multinational • A first suborganizational code is the code of
Enterprises.” Strictly speaking, these are bind- ethics. This can be an alternative term for
ing on national governments rather than indi- a code of conduct, yet some companies have
vidual firms, yet references to the fundamental adopted both. In such cases, the code of ethics
ILO Conventions and the OECD Guidelines often deals with specific ethical issues
are frequently included in many company- employees may face, such as compliance
level codes. Often, codes by intergovernmen- with legislation, conflicts of interest, gifts
tal organizations cover a wide range of issues and hospitality, or insider information,
but may not be as detailed in terms of their whereas the code of conduct may set out stake-
stipulations as NGO codes. Having said this, holder relationships that are important to the
the OECD Guidelines are one of the most company. As a more pronounced version of
comprehensive codes of conduct, as they this division of labor, some codes of ethics
address corporate reporting, employment and deal specifically with the requirements that
industrial relations, environmental issues, arise for senior managers out of legislative
combating bribery, consumer interests, developments like the Sarbanes-Oxley Act of
science and technology implications, compe- 2002.
tition, as well as taxation. • Another widespread category of suborgani-
• Codes by intergovernmental organizations zational codes are environmental or sustain-
culminate at the global level in the United ability policies. Given their title, these policies
Nations Global Compact, a set of ten princi- tend to concentrate on environmental issues,
ples of responsible business practice in the sometimes, but not necessarily so, to the
areas of human rights, labor standards, envi- detriment of social ones. Greatest salience is
ronment, and anticorruption, which compa- usually given to issues that promise concrete
nies of any sector or size can subscribe to. economic returns, such as reducing energy
The Global Compact is often hailed as the consumption, increasing resource efficiency,
largest corporate citizenship initiative in the or reducing waste generation, whereas issues
world. According to its own figures, 5,300 that are less easy to convert into tangible ben-
businesses from 130 countries participated in efits, like climate change or biodiversity, tend
the initiative by June 2009. However, the to be addressed less often.
Global Compact is also an illustration of the • Some companies adopt CSR policies, quite
weaknesses of code issues by intergovernmen- often in addition to an environmental one.
tal organizations, particularly in terms of the Their content is often organized either by
clout they have to enforce corporate adherence CSR issue or by stakeholder. CSR policies
to the code. tend to concentrate on social issues, such as
Corporate Codes of Conduct 483 C
support for local communities, decent Code Content
working conditions, or health and safety at
work. They also tend to contain general com- Although the range of codes a company adopts
mitments to environmental protection, may be impressive, the question arises how
although in contrast to environmental policies, comprehensive corporate codes of conduct are.
these commitments are often not spelled out in Comprehensiveness is an important indicator of
further detail. code quality as the more elaborate a code is, the C
• In addition to these, many companies have also better the adherence to its stipulations can be
adopted codes for individual CSR challenges, monitored (Kolk et al. 1999). Code comprehen-
like a “human rights policy”, a “community siveness can be discussed along three dimen-
investment policy”, or a “biodiversity state- sions: (a) in terms of which CSR issues
ment”. Such codes tend to be found in indus- corporate codes of conduct typically address,
tries that have been in the public limelight over (b) what the reach of the code is along the
specific issues, as the adoption of an “animal value chain, and (c) what monitoring and com-
testing policy” by retailers of home care and pliance stipulations codes entail.
personal care products illustrates. With reference to the range of issues
• Another widely adopted category are codes for addressed in codes of conduct, the OECD
individual corporate functions, such (2001) analyzed a sample of 246 corporate,
as marketing or supply chain management. industry association, NGO, and intergovernmen-
A “responsible marketing code” by tal codes in terms of nine issues: environmental
a manufacturer of alcoholic beverages is an stewardship, labor standards, science and tech-
example of this category. In some organizations, nology, competition, information disclosure, tax-
these function-specific codes are backed up fur- ation, bribery and corruption, and consumer
ther by ethical codes for the function. Both cat- protection; in essence, the areas the OECD
egories are often influenced by codes developed “Guidelines for Multinational Enterprises”
by the respective professional bodies. For exam- cover (see Fig. 2). While noting considerable
ple, with regard to the supply chain management differences in terms of both code content and
function, the US-based Institute for Supply degree of detail, the OECD study found that
Management has developed “Principles and labor standards (60% of 246 codes) and environ-
Standards of Ethical Supply Management Con- mental stewardship (59%) were addressed most
duct” and the UK-headquartered Chartered often across the sample, followed by consumer
Institute of Purchasing and Supply adopted its protection (48%). By contrast, bribery and cor-
“CIPS Code of Ethics.” ruption (23%), competition issues (20%), infor-
Codes at organizational, supra-organizational, mation disclosure (18%), or science and
and suborganizational levels thus form technology issues (11%) were only mentioned
a latticework of intermeshing documents (see in a minority of documents, taxation just in
Fig. 1). Some of these documents stand in a hier- a single one (0.4% of the sample). However,
archical order to each other, as stipulations of the many codes also contained extensive passages
ILO Conventions or the OECD “Guidelines for regarding some fairly narrow questions of inter-
Multinational Enterprises” may be taken up in nal control and shareholder value. In terms of
corporate codes of conduct and then also included labor standards, the provision of a reasonable
in environmental or CSR policies. Other codes working environment (76% of codes), compli-
operate in parallel to each other, as for example, ance with labor laws (66%), and banning discrim-
codes by industry associations, social interest ination and harassment (61%) were mentioned
groups, and intergovernmental organizations do most often. These were matched on the environ-
at the supra-organizational level or codes of mental side by a commitment to comply with
conduct and codes of ethics at the organizational environmental laws (68%) as well as in terms of
level. consumer protection by a commitment to provide
C 484 Corporate Codes of Conduct
Supra-organizational level
Global code
IGO code
NGO code
Regional code
Industry code
National code
Specific stipulations
Code of conduct
Code of ethics General
stipulations
Environmental/
sustainability policy
CSR policy
Ethical code for a Functional code
function
Sub-organizational level
Corporate Codes of Conduct, Fig. 1 The Range of Conduct in Organisational Context: From Cascade to
Corporate Codes of Conduct. Reproduced with kind Lattice-Work of Codes, Journal of Business Ethics, 94
permission by Springer from Preuss, L. (2010) Codes of (4), p. 477
goods and services that are safe and of high its sphere of direct control (KPMG 2008). The
quality (77%). OECD (1999) thus distinguished between codes
A second aspect of code comprehensiveness that apply to:
concerns the reach of the code, that is, whether it • The code issuing company only but including
applies to the code issuing company only or goes its affiliates and joint ventures (or in the case
beyond this to cover business partners along the of industry association codes its member
value chain too. Indeed, it is one of the key companies)
challenges in CSR management that the bound- • Contractors, that is, any business which
ary of responsibility for the firm’s social and directly contracts with the code issuing com-
environmental impacts is often much wider than pany to perform work or provide services,
both the boundary of its legal responsibility and materials, or components
Corporate Codes of Conduct 485 C
70
60
50
40
30
20
C
10
0
s
re
n
rd
og
er
hi
tio
io
io
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ds
tit
at
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ol
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Br
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ot
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ew
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Corporate Codes of Conduct, Fig. 2 CSR issues Contents, OECD Working Papers on International Invest-
addressed in codes of conduct (in percent, n ¼ 246 ment, No. 2001/06. Paris: Organisation for Economic
codes) (Source: OECD 2001, p. 8). Reproduced with Co-operation and Development. http://dx.doi.org/
kind permission by the OECD from OECD (2001). 10.1787/206157234626
Codes of Corporate Conduct: Expanded Review of their
• Subcontractors, that is, any business which companies increasingly utilize codes of conduct
does not contract directly with the code issu- to regulate CSR issues that occur beyond their
ing company but contracts with one or more of legal boundaries (Preuss 2009).
its contractors A third aspect of code comprehensiveness
• Customers, that is, any natural or legal person concerns monitoring and compliance, as in the
who distributes, buys, or sells the company’s absence of legal stipulations regarding these
goods or services, including the final issues, a code would be of little more than sym-
consumer bolic value. A range of tools exist that could aid
Analyzing a sample of 233 corporate, industry code monitoring and compliance (Kolk et al.
association, NGO, and intergovernmental codes, 1999; Wood et al. 2004). These include:
the OECD (1999) found that 82% of codes apply • Employee training in CSR issues and ethical
to the code issuing organization, 50% also to its performance appraisals of employees
contractors, 22% furthermore to subcontractors, • Enforcement of code stipulations, including
and 34% also to customers. The vast majority of stating the consequences for individuals who
codes thus cover only the code issuing company fail to uphold the code, from verbal warning
and its employees, usually containing a clause through demotion to cessation of employment
that the code provisions are to be applied across • Formal complaint channels and investigation
all the locations the company operates in. processes, including guaranteeing confidenti-
A significant number of codes seek to influence ality and whistleblower protection and
the behavior of business partners in the upstream establishing an ethics ombudsman/ethics
supply chain. Here, codes typically contain committee
nondiscrimination clauses, for example, stating • Regular review of the code and its
that domestic and overseas suppliers are to implementation
receive equal treatment. By comparison, attempts In practice, the provision of information
to influence downstream business partners, such regarding monitoring and compliance is underde-
as agents, distributors, or final consumers, are veloped relative to other aspects of code content.
rarer. However, these figures do illustrate that While 92% of the G250 companies have a code of
C 486 Corporate Codes of Conduct
conduct in place, only 59% report on Singh 2003). In a related fashion, the adoption
noncompliance with their code (KPMG 2008). of a code can improve the company’s organiza-
Code monitoring and compliance is also largely tional climate by providing a moral compass for
a company internal matter, as third parties do not existing organizational members and socializing
play a significant role in these processes. For new ones into its culture. A code can hence moti-
example, government authorities may be vate and guide employees, as well as provide
involved in the development of codes by some encouragement and support for ethical behavior
professional associations but are hardly ever (Adams et al. 2001).
consulted in corporate ones (OECD 1999). Beyond the organization, the adoption of
The various aspects of code comprehensive- a code can project a responsible image to outside
ness were synthesized by van Tulder et al. (2009) stakeholders, such as regulators, customers, com-
into a stage model that classifies the CSR stance munities, suppliers, or shareholders (Kolk et al.
of a company from inactive through reactive and 1999). The existence of a code could thus signal
active to proactive based on two dimensions: the an enhanced corporate reputation, forming
specificity of the code content and the degree of a self-regulatory contribution to higher industry
monitoring and compliance. Thus, an inactive standards to fend off legislation (Diller 1999).
approach to CSR is evident in a code of conduct A further significant rationale for the adoption
that is weak in both specificity and compliance of a code has been quasi-legal pressure. In the
measures. A reactive firm will have a code that United States, the 1991 Federal Sentencing
shows greater content specificity but is rather Guidelines encouraged the adoption of codes of
vague in terms of compliance because the firm conduct through allowing a reduction in fines for
does not have a strong incentive to implement the companies with meaningful ethics compliance
code. A firm with an active approach to CSR is programs. The Sarbanes-Oxley Act of 2002 has
likely to have a code that is much more detailed in made having a code – at least for directors and
its compliance mechanisms, although specificity senior officers – a necessity for quoted companies
may not be high as the firm may refer to rather with a presence in the United States (Carasco and
general principles or a limited number of issues Singh 2003). For companies from developing
only. By contrast, the code of a proactive com- countries, the adoption of a code may further-
pany will score highly on both the specificity and more boil down to an issue of market access as
compliance accounts. it reflects demands by overseas customers and
financial markets.
Empirical data regarding the spread of these
Advantages and Disadvantages motives for code adoption has been provided by
of Codes the OECD (2001) analysis of 246 corporate,
industry association, NGO, and intergovernmen-
A code of conduct can offer several advantages tal codes. Protecting or enhancing reputation
for the firm that adopts it (Adams et al. 2001; emerges here as the most important reason for
OECD 2001). From a management perspective, code adoption (21%), with some codes stating
drawing up a code can be part of an attempt to that the company aims to be an industry leader
manage the CSR performance of the firm, as the in terms of CSR. Beyond this, companies suggest
code can send messages about what constitutes that the adoption of a code can aid customer
good business practice and hence clarify expec- loyalty and confidence in its product or service
tations of employees. In view of the greater moral (9%), improve internal operations (6%), or help
space available for MNEs as they operate in dif- control risks related to violations of legal require-
ferent national contexts, the code can furthermore ments and associated litigation or increased gov-
reduce inconsistencies in the behavior of organi- ernment regulation (6%). In a small number of
zational members and introduce coherent stan- cases, companies also expect codes to strengthen
dards across the organization (Carasco and the loyalty of staff (4%). To the extent that the
Corporate Codes of Conduct 487 C
25
20
15
C
10
0
Protect or More customer Improved Control of legal Stronger staff
enhance loyalty operation of risks loyalty
reputation business
Corporate Codes of Conduct, Fig. 3 Motives for the OECD Working Papers on International Investment,
adoption of codes of conduct (in percent, n ¼ 246 codes) No. 2001/06. Paris: Organisation for Economic Co-opera-
(Source: OECD 2001, p. 17). Reproduced with kind tion and Development. http://dx.doi.org/10.1787/
permission by the OECD from OECD (2001). Codes of 206157234626
Corporate Conduct: Expanded Review of their Contents,
text of the codes comments on motives for code where monitoring and compliance issues
adoption, economic issues do not seem to be at receive little attention (KPMG 2008). Self-
the forefront of motives that prompt companies to regulation through codes of conduct thus does
adopt codes of conduct (Fig. 3). not have the same clout as government regula-
However, the usefulness of codes of conduct tion. Additionally, there could be a danger that
has been questioned from two main directions, codes may actually replace legislation and
on the one hand, whether they provide an effec- hence result in lower standards, in particular
tive form of CSR regulation and on the other, concerning working conditions or environmen-
whether they actually promote ethical decision- tal protection.
making among organizational members. In terms of the ability of codes to promote
A major weakness of codes with regard to the ethical behavior, the suggestion has been
first issue lies in their voluntary and often selec- made that codes may actually aid unethical
tive nature. Although the adoption rate of codes behavior through encouraging employees to
has made vast strides in recent decades, far from work “by the book” to the detriment of
all companies have a code in place. Apart from moral imagination. In a sense, such limitations
a degree of peer pressure, there is little that the apply to all CSR tools: all organizations
code as such can do to persuade or coerce hesi- face limits in terms of their ability to control the
tant companies to follow the more proactive ethical reasoning that their members follow;
ones. Selectivity also applies to the stipulations in particular, they cannot easily alter external
of the code, as these are often limited to general impacts on ethical behavior. However, there
statements or win-win issues. In terms of labor seems to be evidence that the presence of a code
standards, for example, companies have put of conduct can have a positive impact on the
much more emphasis on issues with salient perceptions of ethical behavior in organizations,
media impact, such as child labor, while in particular when coupled with key aspects
neglecting fundamental social rights, like free- of a supportive organizational climate. These
dom of association and collective bargaining include both agency-related issues, such as
(Sobczak 2003). Such selectivity is reinforced support given by senior management to ethical
C 488 Corporate Codes of Conduct
Synonyms
Corporate Communication
Charitable giving; Community giving; Corporate
▶ Media CSR Forum charitable contributions; Corporate philanthropy
Definition
Corporate- Community Involvement
and Poverty Corporate giving can be seen as an application of
individual generosity at the firm level. Corporate
▶ CSR and Poverty giving is a synonym for corporate philanthropy.
The word “philanthropy” comes from Greek,
philanthrōpia (philos, love, and anthropos,
human being) and it originally meant goodwill
Corporate Control to human beings, active effort to promote human
welfare. In the corporate world, when a company
▶ Company Directors and CSR uses its resources to support philanthropic activ-
ities carried out by nonprofit organizations, espe-
cially in communities where the company
operates, corporate giving occurs. Generally
speaking, the term “corporate giving” refers to
Corporate Credo, Statement of Core the donations of some of a company’s profits and
Values and Principles resources to social causes and philanthropic pro-
jects. In large corporations, corporate giving
▶ Mission Statements (Credo, Way, Vision) often is handled through a foundation. Smaller
firms usually give directly to nonprofits. While
the primary focus of corporate giving has been on
cash donations, recent forms include time and
Corporate Culture human resources through employee volunteering.
Other practices of corporate giving include pro-
▶ Cultures, Businesses, and Global CSR moting self-sufficiency among economically
disadvantaged communities, charitable contribu-
tions abroad, support for housing, support for
education, establishment of relations with indig-
Corporate Environmental enous peoples in areas of proposed or current
Management operations, etc. For firm leaders and managers,
corporate giving goes beyond the simple fact of
▶ Corporate Social Responsibility in Tourism donating cash and other resources to nonprofits.
C 490 Corporate Giving
It has become a way for managers to integrate many experts have expressed concerns that the
social demands into firm core mission, culture, work of nonprofits, foundations, and charitable
and strategy. For that reason, corporate giving is institutions throughout the United States and
a subset of a much broader concept of corporate the world would be compromised substantially.
social responsibility (CSR). Corporate social In an encouraging note, several reports in recent
responsibility means that corporations should be years have confirmed the increasing of corporate
held accountable for any of their actions that giving rates, even when profits of many
affect people, communities, and the natural firms were declining. For instance, the Commit-
environment. tee Encouraging Corporate Philanthropy
(CECP) reported an increase in total giving by
corporations from 2009 to 2010. Similarly, for
Introduction year 2010, Giving USA reported that corporate
giving rose an estimated 10.6% (8.8% adjusted
Over recent decades, the interest in corporate for inflation).
giving has increased in various business, Corporate giving also has been the object of
research, government, and community circles, a growing number of research studies and pub-
especially in the United States. How a firm con- lications that have focused on corporate giving
nects or tries to do so with the communities behavior, its principles, perceived benefits, and
where it operates through charitable donations implementation. Several specialized academic
generates a lot of buzz in local and national and trade journals also have been created. The
media. There is no doubt that corporate giving perceived benefits and therefore motives of cor-
or corporate philanthropy has emerged as porate giving include building trust, facilitating
a genuine social phenomenon with its sponsors, public relations, involving the company in the
givers, and receivers or consumers. First, many community, improving social and economic life
professional organizations composed of busi- and infrastructure, improving the company’s
nesses and foundations have been created to image, improving the loyalty and motivation of
promote corporate giving among business employees, increasing general public awareness
leaders and managers, and these organizations of the firm and/or its products, and encouraging
seem to be successful in achieving their goals. loyalty among existing customers. Several firm
These organizations also have created mecha- characteristics seem to influence how much
nisms to monitor and report periodically the a corporation gives to charity: slack resources,
state of corporate philanthropy and grant awards cash flow, advertising expenses, size, public
to companies that distinguish themselves in dif- scrutiny, unions, board composition/diversity,
ferent categories of charitable contributions. and operational diversity. The increased scru-
Second, for firm leaders and managers, corpo- tiny of firm behaviors toward social issues has
rate giving is not only a matter of writing a check made many realize the importance of
to nonprofits. Rather, it is has become a way for reassessing their business practices and out-
a firm to align its mission, competencies, and comes. Some corporations among the larger
strategy with philanthropic efforts in order to ones even have been playing leading roles in
build a competitive advantage in its industry seg- corporate giving by introducing new ideas and
ment. Giving back to the community through any strong business models to formalize and inter-
kinds of philanthropic activities has become cen- nalize their philanthropic efforts. These innova-
tral to doing business in modern times. Finally, tions and business models often are analyzed in
thousands of nonprofit organizations of different research studies conducted at various educa-
types are recipients of corporate giving and tional institutions. The publication of the results
depend on cash donations as a sole source of of these studies usually has theoretical and
income of their operations. In fact, in the wake of practical impacts on corporate philanthropic
the global financial crisis that began in 2007–2008, behavior of other firms.
Corporate Giving 491 C
Background Some contributed to educational and charitable
institutions; others developed internal programs
With all of these developments, there seems to be to support the health and well-being of their
enough evidence that, despite some critics and employees. This trend resulted in the develop-
decrease of donations due to the global financial ment of two foundational principles upon which
crisis that began in 2007–2008, corporate giving social responsibility is formed: the charity prin-
as a social phenomenon is here to stay and for ciple and the stewardship principle. The charity C
a long time. The overall relative success of cor- principle is “the idea that the wealthiest members
porate philanthropy can be explained by the of society should be charitable toward those less
series of transformations this practice has under- fortunate.” Andrew Carnegie and John D. Rocke-
gone over the past few decades. These transfor- feller were two of the earliest philanthropists,
mations are the results of the ongoing debate over donating millions of dollars to society even
whether or not corporations should donate por- before tax provisions provided incentives for
tions of their profit to support social causes. In this kind of giving. Their example was followed
other words, why and how should corporations by business firms giving to charitable programs
integrate social demands into their business prac- versus just business owners as individuals. The
tices? This question is at the core of the broader stewardship principle is the belief that a business
concept of corporate social responsibility. In fact, has an obligation to see that everyone, particu-
corporate philanthropy as a subset of the broader larly those in need or at risk, benefits from the
concept of social responsibility began with phil- firm’s actions. Under this principle, firms have
anthropic efforts by wealthy industrialists at the been put in a position of public trust and therefore
turn of the twentieth century. These efforts were have a responsibility to use their resources for the
aimed at educational and cultural institutions. benefit of society as a whole.
The development of corporate philanthropy prac- The charity principle and, to a larger extent,
tices, at least in the United States, can be divided the stewardship principle made charitable contri-
into five major periods: nineteenth century butions a business-related activity. As the debate
through the 1950s, 1960s and 1970s, 1970s and over the legitimization of corporate giving
1980s, early 1990s, and mid-1990s and beyond. progressed through the twentieth century, the
The question of the participation of corpora- business-related benefits of charitable contribu-
tions in charitable activities has long dominated tions began to surface. By the 1920s, charitable
the debate in various circles of the society. How- contributions to communities made by small
ever, during the first period in the development of groups of wealthy philanthropists shifted to busi-
corporate giving in the nineteenth and twentieth ness firm themselves. The legal legitimization of
centuries, corporate donations in support of char- corporate giving occurred in 1953 when the US
itable causes were illegal. Federal law prohibited Supreme Court ruled in favor of a company
the use of corporate funds for philanthropic activ- engaging in philanthropic activities. The ruling
ities unless they were in line with stockholders’ recognized the idea that charitable contributions
interests. As a consequence, it was very common impact the society positively. Upon the ruling,
for stockholders to sue their companies. During the societal perception that companies should
this period, many big businesses were criticized play a role in the society increased. At the same
for being too big and too powerful, hence leading period, the concept of social responsibilities of
to corrupt business practices. The government organizations began to be used and popularized in
attempted to address these concerns with regula- business, academic, and community circles.
tion: antitrust laws, banking regulations, and con- Through the 1950s, corporations began to make
sumer-protection laws. But some executives saw contributions to charities even though they were
an opportunity beyond regulation. They encour- not related to stockholders’ interests. The second
aged the idea of using the business’s power and period in the development of corporate philan-
financial influence for a broader social purpose. thropy was the 1960s and 1970s, a time generally
C 492 Corporate Giving
associated with rapid economic growth. As com- responsibilities has generated a variety of con-
panies grew and expanded their economic power ceptualizations and practices of corporate giving
through big financial gains, social inequalities accepted by some and contested by others. The
widened in many communities. The general pub- main challenge for firms remains the creation of
lic began to question the role of businesses in a corporate strategy that incorporates all three
society and believed that corporations should obligations. Among the key issues of corporate
use a portion of their profits to support the com- giving are: the conception of corporate giving as
munities. In response, larger corporations started a strategic tool, the alignment of corporate giving
to set up foundations responsible for coordinating with firm core competencies, and the relationship
charitable donations to nonprofits. between corporate giving and firm performance.
The third period, the 1970s and 1980s, coin- One of the main criticisms of corporate social
cided with the economic slowdown due to the oil responsibility and therefore corporate philan-
crisis that started in October of 1973. As thropy was the argument by economist Milton
a consequence, the corporate giving movement Friedman, who wrote in a famous 1970 article
registered big losses and companies backed off in the New York Times that the only “social
their involvement in charitable contributions. responsibility of business is to increase its
During the fourth period of the early 1990s, com- profits.” This was immediately criticized as an
panies recovered from the economic crisis and extreme view of corporate social responsibility as
the public exercised pressures to formalize cor- a practice that prevents the corporation from
porate governance and corporate accountability. maximizing its value for its shareholders.
The corporate scandals fueled by greed of firm Today, while recognizing that the corporation is
executives raised expectations for businesses to the instrument of wealth creation, many believe
participate more in charitable activities. From the that corporations’ social involvement should pro-
mid-1990s and beyond, the corporate giving phe- vide a means to achieve economic results. This
nomenon entered its fifth period of development. approach is called “strategic philanthropy,”
Corporate giving gained legitimacy and philan- which means that when a firm engages in philan-
thropic practices expanded beyond cash dona- thropic activities, managers accept that, in the
tions to include time and human resources. The long term, the donations made to nonprofits and
legitimacy of philanthropic activities of corpora- communities will pay back in some way or
tions was an important step in recognizing the another. Philanthropic activities are viewed as
relationship between philanthropy and corporate strategic investments. As an illustration, when
benefits, with its stakeholders including a pharmaceutical company sponsors a molecular
employees, customers, suppliers, and communi- biology program at a local community college,
ties. Businesses began to form partnerships with there is a recognition that corporate philanthropy
other entities to analyze and solve social prob- is not merely an altruistic practice, because the
lems. Finally, corporations are recognizing that firm expects a return on its investment. This
charitable contributions must be an integral part comes as a counter argument to Friedman’s posi-
of their overall mission, vision, and strategy. tion. The rationale behind strategic philanthropy
is that businesses and society are interdependent.
Therefore, to survive, firms need to improve the
Key Issues context of the environments in which they
compete. By investing in the communities, they
Although corporate giving has gained legitimacy are investing in future employees and customers.
among business leaders, some say that social There is an expectation that, with corporate dona-
responsibility comes at an economic cost, that tions, firms will be perceived as “good citizens,”
a firm cannot be socially responsible and compet- which might boost employee productivity and
itive at the same time. The way a firm must strike customer loyalty, and help recruit and retain tal-
a balance among its economic, social, and legal ented employees. In this way, strategic
Corporate Giving 493 C
philanthropy can be viewed as a means to achieve to strategic philanthropy that will lead to compet-
competitive advantage. As a strategic tool, cor- itive advantage involved the integration of both
porate managers need to be cautious when mak- the firm competencies and its market orientation.
ing decisions regarding charitable donations. This integration requires the development of spe-
They need to identify where philanthropic activ- cific competencies involving various functional
ities will add value and select carefully the non- levels. These competencies must be collectively
profits and other recipients of charitable integrated, coordinated, and learned. How such C
contributions to work with. Formulating and a combination of complementary capabilities and
implementing marketing strategies by asking competencies can emerge in practical terms and
consumers to buy promotional products/services contribute to competitive advantage remains
because a portion of the proceeds will go directly unclear, especially with regard to corporate
to nonprofit organizations is termed cause-related philanthropy.
marketing. Because cause-related marketing ben- Perhaps the most interesting issue in corporate
efits both the corporation and nonprofit institu- philanthropy today is the measure of the overall
tions, it often is viewed as a form of strategic results of the actions taken by a company to
philanthropy. Because going international pro- improve its impact on the communities in which
vides an opportunity for corporations to improve it operates. This is referred to as corporate social
their competitive advantage, corporate leaders performance. The fundamental questions for
should take strategic philanthropy to the global businesses that give a portion of their profit to
level for the same purpose. charity is: Does corporate philanthropy contrib-
Aligning corporate giving with firm core com- ute to firm profitability or does firm profitability
petencies is another key issue. To be strategic, the lead to more corporate giving? The answers to
practice of corporate giving must be tied to the these questions provide interesting opportunities
firm’s key resources, capabilities, and core com- for the future of corporate giving as a business
petencies. The ability to integrate, combine, and practice.
coordinate new competencies is essential to suc-
cessfully implement strategic philanthropy.
Improving competitive advantage with philan- Future Directions
thropic activities cannot stem from
uncoordinated and disparate charitable activities As a subset of corporate social responsibility and
without any clear vision. The lack of coordination a relatively new phenomenon, corporate giving
is often the result of philanthropic activities has gained a solid legitimate status among busi-
selected by managers or board members without ness leaders after decades of much debate. The
a rigorous assessment of the needs of recipients integration of chapters on corporate philanthropy
and nonprofits organizations. This often creates in the textbooks of various courses such as
a misunderstanding among all participants in “Business Ethics,” “Business and Society,” and
these activities. The firm donates to charity, but “Strategic Management” has also consolidated its
the real outcomes of its actions are unknown or status in business programs in the United States
difficult to monitor, so the firm cannot make sure and around the world. This legitimacy is an indi-
that it will benefit from its actions in the long cation that corporate giving has been an effective
term. Improving competitive advantage through way to respond to societal demands. The number
philanthropic activities cannot be accomplished, of corporations implementing corporate giving
either, when these activities are skewed toward initiatives will continue to rise. The current
community demands and overlook firm compe- knowledge of the relationship between corpora-
tencies. The implementation of philanthropic tions and society shows that the analysis and
activities in line with firm competencies that a deeper understanding of the challenges of cor-
ignore external demands might not lead to com- porate philanthropy lay open an interesting area
petitive advantage. The most effective approach for future research. So far, research on corporate
C 494 Corporate Giving
philanthropy has demonstrated mixed results philanthropy for the firms and specific communi-
regarding the conceptualization and operationa- ties. Future research can explore approaches
lization of various key concepts. There is much more focused on the normative questions of the
more to be learned by elevating what is known relationship between business and society.
today to the next level.
Although the results of many empirical studies
on corporate philanthropy have been validated, Cross-References
these studies have noted limitations. Overcoming
these limitations represents interesting topics for ▶ Business Case for CSR
future research. First, corporate philanthropy key ▶ Business for Social Responsibility
concepts such as strategic philanthropy, corpo- ▶ Corporate Citizenship
rate citizenship, and corporate social perfor- ▶ Corporate Governance
mance are rarely clearly defined and described ▶ Corporate Social Performance
in current studies. Common concepts describing ▶ Corporate Social Responsibility
strategic philanthropy practices and strategy, ▶ Philanthropic CSR
such as social impact, strategy alignment, or ▶ Philanthropy
competencies related to philanthropy remain rel-
atively broad. Similarly, organizational capabili-
ties purported to boost competitive advantage References and Readings
through corporate philanthropic practices tend
to be rather broad and unspecific, such as capa- Brammer, S., & Millington, A. (2004). The development
of corporate charitable contributions in the UK:
bilities for proactive management, shared vision,
A stakeholder analysis. Journal of Management
market orientation, etc. Future research should Studies, 41, 1411–1434.
focus on defining clearly key concepts of corpo- Chen, J., Patten, D., & Roberts, R. (2008). Corporate
rate philanthropy and indicating ways to better charitable contributions: A corporate social perfor-
mance or legitimacy strategy? Journal of Business
operationalize these concepts within
Ethics, 82, 131–144.
corporations. Committee Encouraging Corporate Philanthropy (CECP).
Second, quantitative analysis tends to be the (2011). Giving in numbers – 2010 edition, report.
predominant methodology used in most studies Fry, L. W., Keim, G. D., & Meiners, R. E. (1982). Corpo-
rate contributions: Altruistic or for-profit? The Acad-
of corporate philanthropy. The analysis of the
emy of Management Journal, 25, 94–106.
experiences and interpretation of managers who Galaskiewicz, J. (1989). Corporate contributions to
have designed and implemented corporate phi- charity: Nothing more than a marketing strategy?
lanthropy practices have been overlooked. Future In R. Magat (Ed.), Philanthropic giving: Studies in
varieties and goals (pp. 246–260). Oxford: Oxford
research may focus on qualitative studies to help
University Press.
understand how capabilities needed for corporate Giving, U. S. A. (2011). The annual report on philan-
philanthropy are actually understood, learned, thropy for the year 2010. Indianapolis: Giving USA
and implemented inside corporations. Foundation.
Navarro, P. (1988). Why do corporations give to charity?
Third, the predominant approaches to corpo-
Journal of Business, 61, 65–93.
rate philanthropy are generally considered to be Porter, M. E., & Kramer, M. R. (2002). The competitive
an output of philanthropic practices and organi- advantage of corporate philanthropy. Harvard
zational capabilities. In other words, corporations Business Review, 80, 56–69.
Smith, C. (1994). The new corporate philanthropy.
are encouraged to engage in philanthropic initia- Harvard Business Review, 72, 105–116.
tives and develop competencies because corpo- Vaidyanathan, B. (2008). Corporate giving: A literature
rate philanthropy pays back. However, it would review (Working paper). Center for the Study of Reli-
seem simplistic to take for granted that all phil- gion and Society, University of Notre Dame.
Varadarajan, P. R., & Menon, A. (1988). Cause-related
anthropic initiatives based on organizational
marketing: A coalignment of marketing strategy and
competencies would be profitable. This relates corporate philanthropy. The Journal of Marketing, 52,
to the measure of specific outcomes of corporate 58–74.
Corporate Governance 495 C
Introduction
Corporate Globalism
During the 1970s and 1980s Corporate Gover-
▶ Corporatism nance was debated by academics worldwide
(often with regard to US corporations), but in
particular the financial scandals that erupted in
Corporate Governance the end of the 1990s (such as the German ship- C
builder Bremer Vulkan) and in 2000 and 2001
Dirk Classen1 and Matthias S. Fifka2 (such as Enron and WorldCom) have made Cor-
1
Classen Fuhrmanns & Partner Rechtsanw€alte, porate Governance a topic of great international
Köln, Germany attention. The financial scandals were caused by
2
Cologne Business School (CBS), Dr. J€
urgen dubious accounting methods, bad management,
Meyer Endowed Chair for International Business and insufficient internal control systems. As
Ethics and Sustainability, Koeln, Germany listed companies were involved, investors
increasingly lost confidence in the companies
Synonyms and in the integrity of the financial markets. To
rebuild the impaired confidence of the investors,
Code of conduct; Corporate guidelines; Corpo- various legislative actions were taken around the
rate principles; Corporate regulations; Corporate world (Cheffins, 2011). In the following, some of
standards; Laws of governance these – international and national – measures
shall be described and explained:
The Sarbanes-Oxley Act, which was – as part
Definition of the binding law for companies listed in the
USA – introduced in 2002 by the Securities and
Though “Corporate Governance” is not a legal Exchange Commission (SEC), was a precursor
term and its definition is ambiguous, Corporate for an international codification of Corporate
Governance can be regarded as a system by Governance regulations. It aims at ensuring
which companies are directed and controlled a more effective way of controlling corporate
(the Cadbury Report, 1992). In the Preamble of financial reports, the reorganization of the
the OECD Principles of Corporate Governance responsibility for financial accounting, and
(2004, 11), Corporate Governance is defined as the extension of management duties. As a result,
“a set of relationships between a company’s man- the management and the monitoring of the man-
agement, its board, its shareholders, and other agement should be strengthened, and the share-
stakeholders. Corporate governance also pro- holders’ lost trust in the financial markets should
vides the structure through which the objectives be reinforced.
of the company are set, and the means of attaining The OECD Principles of Corporate Gover-
those objectives and monitoring performance are nance (OECD Principles) were originally devel-
determined.” In a broader perspective, as shown oped in 1998 and then agreed on in 1999. They
in Fig. 1, governance determines how all corpo- have formed the basis for Corporate Governance
rate players (such as shareholders, supervisory initiatives in both OECD and non-OECD
board, management board, authorities, auditors, countries alike. In light of the developments in
and the society) influence a company. Corporate Governance described above, the
The sources of Corporate Governance can be OECD Council Meeting at Ministerial Level in
divided into (1) binding law (e.g., European Direc- 2002 agreed to assess the OECD Principles. This
tives, regulations, national acts), (2) European and task was entrusted to the OECD Steering Group
national court decisions, and (3) soft law on Corporate Governance, which comprises rep-
(e.g., OECD Principles, (European) recommenda- resentatives from OECD countries. In addition,
tions, (national) Corporate Governance codes). the World Bank, the Bank for International
C 496 Corporate Governance
Corporate Governance,
Fig. 1 Actors in Corporate Shareholders
Governance (Source: own
illustration) Supervisory Board Management Board
Company
Authorities Society
Auditors
Settlements (BIS), and the International Mone- objectives and of monitoring performance. In
tary Fund (IMF) were observers to the Group. For this context, the Corporate Governance frame-
the assessment, the Steering Group also invited work depends on the legal, regulatory, and insti-
the Financial Stability Forum, the Basel Commit- tutional environment. In addition, factors such as
tee, and the International Organization of Securi- business ethics and corporate awareness of the
ties Commissions (IOSCO) as ad hoc observers. environmental and societal interests of the com-
In 2004, the principles were revised in order to munities in which a company operates can also
include suggestions made by a variety of actors have an impact on its reputation and its long-term
and to address shortcomings that had become success.
evident in the meantime. In the OECD Principles, the organization
According to the Preamble, the OECD Princi- stresses that there is no single model of good
ples (2004, 11) are intended “to assist OECD and Corporate Governance. However, the OECD
non-OECD governments in their efforts to eval- has identified some common elements that under-
uate and improve the legal, institutional, and lie good Corporate Governance and build the
regulatory framework for corporate governance Principles on these common elements. Further-
in their countries, and to provide guidance and more, the OECD points out that the Principles are
suggestions for stock exchanges, investors, nonbinding and do not aim at detailed prescrip-
corporations, and other parties that have a role tions for national legislation. Rather, they seek to
in the process of developing good corporate identify objectives and suggest various means for
governance.” The OECD Principles focus on achieving them. Their purpose is to serve as
publicly traded companies, both financial and a reference point. The Principles can be used by
nonfinancial, and represent a common basis that policy makers as they examine and develop the
OECD Member States consider essential for the legal and regulatory frameworks for Corporate
development of good governance practices, and Governance that reflect their own economic,
are not intended to substitute for government, social, legal, and cultural circumstances, and by
semi-government, or private sector initiatives to market participants as they develop their own
develop more detailed “best practice” in Corpo- practices. In conclusion, “it is up to the govern-
rate Governance. ments and market participants to decide how to
Furthermore, the OECD considers Corporate apply these Principles in developing their own
Governance as one key element in improving frameworks for corporate governance, taking
economic efficiency and growth as well as into account the costs and benefits of regulation
enhancing investor confidence. It involves a set (OECD 2004, 13).”
of relationships between a company’s manage- The European Commission (EC) reacted to the
ment, its board, its shareholders, and other stake- situation described above in September 2001 by
holders. It also provides the structure through appointing a High Level Group of Company Law
which the objectives of the company are set, Experts chaired by J. Winter (so-called Winter
and determines the means of attaining those Group). At first, the Winter Group dealt with
Corporate Governance 497 C
Corporate Governance, Action Plan
Fig. 2 The “EU Action
Plan” (Source: own
illustration)
issues related to the takeover bids directive, but corporate law discussions in Europe for almost
then the EC extended the original mandate in a decade now (Hopt 2010). In the opinion of the
April 2002 in the light of the recent corporate EC, as illustrated in Fig. 2, the future initiatives
scandals to deal specifically with a number of taken in the field of company law should be ded-
Corporate Governance issues. In its Report icated to the achievement of two main objectives
released on 4 November 2002, the Winter as far as possible: to strengthen the shareholder
Group recommended to create a system of flexi- rights and third party protection, with a proper
ble and efficiently adaptable subordinate rules. distinction between categories of companies, and
The Winter Group believed that the detailed to foster efficiency and competitiveness of busi-
rules should be set by the appropriate bodies ness, with special attention to some specific
within the EU Member States in view of their cross-border issues.
national company laws, but the EU should ensure As the EC pointed out in the Action Plan, the
a certain level of coordination of the setting of reasons for a such a European regulatory frame-
these detailed rules by the EU Member States. work for company law and Corporate Gover-
This was to be part of the general framework to nance are the following: (1) the damaging
be set up in the EU to coordinate the Corporate impact of recent financial scandals; (2) the grow-
Governance efforts of the EU Member States. ing trend for European companies to operate
Due to the extended mandate of the Winter cross-border in the Internal market; (3) the con-
Group, the report contained detailed recommen- tinuing integration of European capital markets;
dations on Corporate Governance, capital forma- (4) the rapid development of new information and
tion and maintenance, groups and pyramids, communication technologies; and (5) the forth-
corporate restructuring and mobility, the Euro- coming enlargement of the EU to new Member
pean Private Company as well as cooperatives States.
and other forms of enterprises. The Winter Achieving the aforementioned key policy
Group recommended that one of the short-term objectives, which should inspire any future action
priorities for the EU should be to improve the EU to be taken at EU level in these areas, the Com-
framework for Corporate Governance. munication contained numerous legislative and
The Winter Group’s recommendations formed nonlegislative proposals. It included a plan seek-
the basis of the ambitious “Action Plan on Mod- ing to lay out various actions which appear
ernizing Company Law and Enhancing Corporate necessary over the short (2003–2005), medium
Governance in the European Union” that was (2006–2008), and long (2009 onward) term, and
presented by the EC on 21 May 2003 (the “Action determined which type of regulatory instrument
Plan”). Since then, it has been in the center of should be used, and approximately by when.
C 498 Corporate Governance
Corporate Governance,
Compensation systems
Fig. 3 Key issues of for executive and
Corporate Governance non-executive directors
(Source: own illustration)
Independence and
Shareholder rights
integrity of
and their protection
the audit process
In this context, a question not addressed in the many economies. From this perspective, it
Green Paper is whether in (not listed) family- becomes clear that the respective matters are not
owned companies, a specific code should only important for the owners and stakeholders of
apply instead of the national Corporate Gover- family businesses, but also for society as such,
nance code. This is of crucial importance as since SMEs are major providers of products,
family-owned companies are the most common employment, and taxes. The underestimation of
company type. They are particularly predominant issues in Family Business Governance thus could
among medium- and smaller-sized companies, have fatal consequences.
but in many markets even most of the large
companies have a family as their controlling
shareholder. Family-owned companies can be
defined as companies in which the founders or Cross-References
the founders’ families have either complete
ownership or effective control of the companies ▶ Agency and Corporate Governance
and, usually, play a significant role in the compa- ▶ Board of Directors
nies’ management. The complex interaction of ▶ Bonuses and the Recent Global Financial
the family and the company that it controls Crisis
creates several difficult governance issues in ▶ Business Judgment Rule
addition to those faced by other companies. ▶ Company Directors and CSR
These include the succession planning for the ▶ Comply or Explain
family management, family versus nonfamily ▶ Corporate Citizenship
employment, equitable treatment of nonfamily ▶ Corporate Codes of Conduct
shareholders, and the role of family meetings ▶ Corporate Governance as a Tool for
vis-à-vis board meetings and shareholders Alleviating Developmental Issues
meetings. ▶ Ethical CSR
In order to address these issues, some efforts ▶ Evolution of Corporate Governance Reports in
have already been made. In Germany, where the UK and Ireland
SMEs are of vital importance, the first Corporate ▶ Global Governance and CSR
Governance code especially for family-owned ▶ Good Corporation
companies was established in accordance with ▶ Legitimacy Theory
the German Corporate Governance Code in ▶ OECD Principles of Corporate Governance
2004. It contains some broad recommendations and CSR
for organizing Family Business Governance. On ▶ One Tier Board
an international level, the IFC Family Business ▶ Shareholder Rights
Governance Handbook was initiated by the Inter- ▶ Theory of Corporate Governance Emergence
national Finance Corporation, which is part of the ▶ Two-Tier Board
World Bank Group, in 2008. Its intention is to
complement the existing tools for improving the
governance practice in family-owned enterprises. References and Readings
On the European level, the Corporate Gover-
nance Guidance and Principles for Unlisted Armour, J., & Ringe, W.-G. (2010). European company
law 1999–2010: Renaissance and crisis (Oxford Legal
Companies in Europe was established by the Studies Research Paper, No. 63).
European Confederation of Directors’ Associa- Cheffins, B. R. (2011). The history of corporate gover-
tions in 2010 and puts forward some overriding nance (University of Cambridge Faculty of Law
principles. Research Paper No. 54).
European Commission. (2011). Green paper of the
Nevertheless, the issues of Family Business European Commission. http://ec.europa.eu/
Governance need to be addressed more pro- internal_market/company/docs/modern/com2011-164_
foundly in the future, since SMEs are central to en.pdf. Accessed 29 May 2012.
Corporate Governance as a Tool for Alleviating Developmental Issues 503 C
European Corporate Governance Institute. (2012). Index have framed different definitions of CSR. Some
of corporate governance codes. http://www.ecgi.org/ of the definitions found in the literature include
codes/all_codes.php. Accessed 29 May 2012.
European Union. (2002). Comparative study of corporate that of Ghillyer (2008), who described CSR as the
governance codes relevant to the European Union actions of a corporation that are directed toward
and its member states on behalf of the European the achievement of a social benefit over and
Commission. http://ec.europa.eu/internal_market/ above maximizing profits for its shareholders
company/docs/corpgov/corp-gov-codes-rpt-part1_en.
pdf. Accessed 29 May 2012. and meeting all its legal obligations. Pearce and C
Hopt, K. J. (2010). The European company law action Doh (2005) defined CSR as the actions of
plan revisited: An introduction. In K. Geens & K. J. a company to benefit society beyond the require-
Hopt (Eds.), The European company law action plan ments of the law and the direct interests of share-
revisited. Leuven: Leuven University Press.
Hopt, K. J. (2011). Comparative corporate governance: holders. A similar but more general definition
The state of the art and international regulation. Amer- says CSR is about the interaction of the corpora-
ican Journal of Comparative Law, 59, 1. tion with the legal and social obligations of the
OECD Principles of Corporate Governance. (2004). societies in which it operates, and how it accounts
http://www.oecd.org/dataoecd/32/18/31557724.pdf.
Accessed 29 May 2012. for those obligations. Furthermore, corporate
Report of the Committee on the Financial Aspects of social responsibility is defined by the World
Corporate Governance. (1992). The Cadbury report. Business Council for Sustainable Development
http://www.ecgi.org/codes/documents/cadbury.pdf. as the continuing commitment by business to
Accessed 29 May 2012.
behave ethically and contribute to economic
development while improving the quality of life
of the workforce and their families, as well as of
the local community and society at large
Corporate Governance as a Tool for (WBCSD Stakeholder Dialogue on CSR 1998).
Alleviating Developmental Issues The WBCSD on CSR have argued that the lack of
an all-embracing definition of CSR should not
John O. Okpara discourage corporations and those involved in
Department of Management, College of CSR activities from grappling with the CSR
Business, Bloomsburg University of issues. They believed that a formal definition of
Pennsylvania, Bloomsburg, the concept will eventually emerge.
PA, USA
Introduction
Synonyms
For the last two decades, CSR philosophies
Corporate citizenship; Corporate governance; requiring businesses to act as good and responsi-
Corporate social performance; Poverty allevia- ble members of their society seem to have been
tion; Social entrepreneurship; Social responsibil- accepted by the majority of corporations. Many
ity; Sustainability; Sustainable development leading corporations, in both developed and
developing economies, have adopted a CSR
philosophy, implemented CSR activities, and
Definition reported their CSR performance. CSR has also
become a popular subject among leaders and
One of the most frequently asked questions about members of every social segment: academic,
corporate social responsibility (CSR) is the obvi- business, and government. Though there still
ous: What is CSR? A formal and generally might be some critics of CSR who claim that it
acceptable definition of CSR has yet to emerge is a distraction from the essential activities of
as the topic is debated in local and international a business, the majority of reports and research
mediums. At present, different organizations studies indicate that CSR is important to
C 504 Corporate Governance as a Tool for Alleviating Developmental Issues
a company’s performance. There are neverthe- the ethical behavior of a company toward society.
less still many scholars and business leaders This means that management should act respon-
who believe that CSR has no clear business ben- sibly in its relationships with other stakeholders
efits and could destroy shareholder value by who have a legitimate interest in the business, not
diverting resources from core commercial activ- just the shareholders.
ities. Many business leaders and scholars are For many corporations engaging in corporate
concerned that businesses will be persuaded to social responsibility, activity is no longer viewed
take on social responsibilities that should be han- as an extra cost or burden. Rather, CSR is increas-
dled by government and individuals. They ingly viewed as not only making good business
believe that the social responsibility of sense but also contributing to the long-term pros-
a business is to fulfill its role as a business, that perity of companies and ultimately their existence.
is, to maximize profits for shareholders in the The driving forces behind corporate philanthropy
provision of goods and services that meet the or social responsibility have been grouped into
needs of its customers. According to this view, two categories: morally driven or to-do-the-right-
customers, employees, and shareholders are the thing approach; and economically driven or to-do-
main groups of people for which the business is the-mutually beneficial-thing approach. Both posi-
responsible, and nothing else. In a New York tions have impacted CSR. Examination of the
Times article about business social responsibil- philanthropic behavior of large companies indi-
ity, Friedman (1970) argued that the responsibil- cates that these companies’ CSR activities are
ity of a business is to make profit for its owners both altruistic and strategic. For example, compa-
within the legal-compliance boundaries. nies have adopted environmentally responsible
According to Friedman: behavior due to both ethical and economic rea-
There is one and only one social responsibility of sons. On justifying their reasons for CSR initia-
business—to use its resources and engage in activ- tives, economic or bottom-line arguments were
ities designed to increase its profits so long as it used more by US multinationals; while their Euro-
stays within the rules of the game, which is to say, pean counterparts relied more on moral justifica-
engages in open and free competition without
deception or fraud. (Friedman 1970, p. 33) tion. Branco and Rodriguesr (2006) argued that
public perception or opinions of the public at
There are others who disagreed with large are persuasive in fostering social and good
Friedman’s view. These groups of scholars have work from companies. According to Gan (2006),
argued that the responsibility of a business goes the driving force of CSR in big and powerful
beyond making a profit. They argued that a CSR corporations was their vulnerability to govern-
strategy based on ethical and core values offer mental scrutiny, court cases, and pressure from
clear business benefits. These benefits may general public opinion. Overall, the reasons com-
accrue from the adoption of a broader worldview, panies are becoming more socially responsible
which enables businesses to monitor shifts in include enhanced reputation, competitive advan-
social expectations and helps control risks and tage, cost savings, industry trends, stakeholders’
identify market opportunities. Such a strategy pressure, social/cultural interests, genuine concern
also helps to align corporate and societal values, of top management, customer demand, share-
thus improving reputation and maintaining public holder demand, access to capital, and economic
support. Supporters of this viewpoint described performance. Technology and globalization have
CSR in terms of moral obligations of a business. also been identified as two important factors
They believed that the role and contributions of influencing ethical and social responsibility deci-
businesses allowed communities to attain a good sions. Both of these make possible the very rapid
quality of life. They also maintained that CSR sharing of information. As a result, stakeholders
should encompass the value system of a business, are more informed about how well a corporation
such as moral philosophy, ethical conscience, conducts their social responsibility activities. Fur-
benevolence, or volunteer commitment. CSR is thermore, due to the accelerating decline in the
Corporate Governance as a Tool for Alleviating Developmental Issues 505 C
earth’s natural resources, corporations are now Role of CSR in Alleviating
under increasing pressure from diverse stake- Developmental Issues
holders to show that their businesses contributed
to sustainable development. Corporate social responsibility has implications
For the last few years, development agencies on improving the lives of the society. According
and academic scholars have brought to attention to the report of Towers Perrin (2009), CSR is the
the positive role that corporations can play in third most important driver of employee engage- C
addressing social and economic issues not only ment overall. For most communities, local com-
in terms of poverty but also in such areas of munity organizations are the second most
health, hunger reduction, child labor elimination, important driver of employee engagement, and
and more (Frynas 2008). For example, the UN a company’s reputation for social responsibility
estimates that there are approximately 70,000 is also among the top ten drivers. The common
multinational corporations (MNCs) with roles of CSR in alleviating developmental issues
hundreds of thousands of subsidiaries, and many are discussed as follows:
MNCs have turnovers significantly higher than 1. Develop closer relationship between corpora-
the gross domestic product (GDP) of the devel- tions and community. Through CSR, the pur-
oping nations in which they operate (Jamali pose of corporations in the social system
2010). Corporations have a role to play in becomes more than just a place to get employ-
addressing development issues because quite ment or to produce goods and services. By
often corporations have more expertise and developing a closer relationship between the
resources then governments in developing coun- two entities, corporations and community
tries to eliminate social and economic problems. would be able to achieve and remain in peace
As the key generator of wealth and employment, and harmony. This becomes a social capital
businesses are crucial to the economic and social that is essential in community development.
development of the societies in which they oper- 2. Developing and sustaining local talents.
ate, and a review of the literature confirms that Organizations with reputations for CSR can
these companies’ CSR programs have the poten- take advantage of their status and strengthen
tial to contribute to these communities’ local their appeal as an attractive employer by mak-
development. For example, companies’ CSR pro- ing their commitment part of their value prop-
grams have resulted in greater environmental osition for potential candidates, in terms of
protection and conservation, increased access to developing and training future employees. It
health care, better sanitation, and improved labor is found that when employees more favorably
practices for many people in developing coun- view their organizations’ commitment to
tries. CSR Business owners and leaders often saw social responsibility, they also tend to have
a broader role for themselves in society and par- more positive attitudes in other areas that cor-
ticipated in nation building by helping to finance relate with better performance. They believe
the construction of low-income houses, schools, their organizations recognize and reward great
libraries, museums, roads, and universities. Many customer service, act quickly to address and
well-known and successful entrepreneurs, such resolve customer concerns, and are led by
as Andrew Carnegie, Bernard van Leer, and people in senior management who act in the
Joseph Rowntree, and many wealthy but less best interest of customers. This in turn
famous names, endowed foundations to carry increases the confidence of senior manage-
out philanthropic work. They saw this as part of ment in other areas. For example, if a large
their civic obligations, of giving something back, number of employees perceive that their orga-
although on a very paternalistic basis. Today’s nization’s senior management supports new
wealthy entrepreneurs such as Ted Turner, Bill ideas and new ways of doing things, this
Gates, Warren Buffet, and many others have con- results in the employees also having increased
tinued this tradition. trust in, and loyalty to, the organization.
C 506 Corporate Governance as a Tool for Alleviating Developmental Issues
to reduce a gap between information that is inter- organization structure, shareholders rights, and
nally available and externally requested. Through the ownership structure.
corporate governance reporting, firms can signal
high corporate governance quality. Due to an Board’s Organization Structure The board’s
increasing demand for external information, dis- organization structure addresses the role of the
closure on corporate governance will gain further corporate board and its ability to perform inde-
attention. pendent oversight on the management’s perfor-
mance. Separation of authority at the board level
Contents of Corporate Governance Reporting is important. In Anglo-American countries, the
Despite the importance of corporate governance board’s organization structure is characterized by
reporting, precise instructions regarding the con- a unitary board of directors (one-tier system)
tents of corporate governance reports do not comprising both full-time executive and part-
exist. Instead, various recommendations regard- time nonexecutive directors. The nonexecutive
ing the content of corporate governance report directors are primarily responsible for manage-
are published by different national and interna- ment oversight. In European countries, corporate
tional institutions that are mostly private. The boards are often based on two-tier boards as pro-
components of a corporate governance report posed by the Fifth EU Directive (two-tier
outlined below represent the major corporate System). Two-tier boards involve a separation
governance aspects that are covered in codes of into a management board, which is responsible
best practices and are widely mentioned by com- for the strategy and the operative business of the
mercial corporate governance rating agencies, company, and a supervisory board, which is
like Standard & Poor’s and Deminor, and responsible for supervision and accountability
research groups, such as the German AKEU, the of the management board’s members.
Compliance Scorecard and Transparency Disclo- The corporate governance report should
sure Scorecard or the EU High Level Group. describe the organization structure and function-
Accordingly, a corporate governance report ing of the board, especially its responsibilities
should inform about: and interaction. It should describe the procedures
• The national corporate governance system adopted by the board to fulfill its duties (e.g.,
• Accountability and audit frequency of, and procedures at, board’s meet-
• The compensation of board members ings). In addition, further information should be
• Directors’ dealing and stock ownership given on board members’ contracts, especially
• The compliance to a national code of best with regard to compensations in the event of
practice a termination of activity.
National Corporate Governance System Board’s Committees The board should estab-
A description of the corporate governance lish committees, consisting of at least three inde-
system is a crucial part of corporate governance pendent nonexecutive directors of the board
reporting. Differences between continental respectively members of the supervisory board.
Europe, especially Germany, and Anglo- Most countries obligate a company to have at
American countries are reflected in divergent least three committees: the remuneration com-
corporate governance systems that are based on mittee, the nomination committee, and the audit
an interaction between statutory regulations and committee. The nomination committee has to
further institutional and environmental condi- decide on new appointments to the board and
tions. Corporate governance reporting is an other senior positions in the company. The remu-
important contributor for understanding differ- neration committee devises an appropriate
ences in the use of corporate governance mecha- remuneration system, including benefit and
nisms in a given corporate governance system. bonus packages, for the executive directors. Due
The main characteristics are the board’s to the importance of executive payments, it is
Corporate Governance Reporting 511 C
vital that pertinent decisions are taken by those shareholders, in particular all material transac-
who do not benefit from them. In smaller compa- tions which require explanation.
nies, duties and responsibilities of the nomination
and remuneration committees may be combined. Accountability and Audit
The audit committee assists the board in oversee- Internal Control The board should implement
ing the financial reporting process. It is intended a sound system of internal control and an ade-
to provide a link between auditor and executive quate risk management system to safeguard C
directors since the latter are responsible for the shareholders’ investments and company’s assets.
company’s financial reporting which is the sub- The actual financial crises have contributed to
ject of the audit. The audit committee gives a growing skepticism among share- and
recommendations regarding the appointment, debtholders concerning the effectiveness of inter-
reappointment, and removal of the external audi- nal control and risk management systems. The
tor. It reviews the independence and competence corporate governance report should include
of the external auditor and the effectiveness of the a description of the main features of the
audit process. Furthermore, the audit committee company’s internal control and risk management
is assigned with the review of the internal control system. In this context, information on the
and risk management system and monitors the company’s risk profile and risk tolerance is desir-
effectiveness of the company’s internal audit able. Risks are not static. Thus, there is also
function. a need to review the effectiveness of the internal
The corporate governance report should control and risk management system. The review
inform about the designated committees, their should cover all material controls, especially with
size, and the relevant expertise of their members. regard to financial, strategic, operational, compli-
Information should also be given on the fre- ance, and financial reporting risks. As
quency of meetings during the fiscal year and a consequence, the corporate governance report
the underlying charter. should inform share- and debtholders that the
company’s board or the audit committee per-
Shareholders’ Rights and Ownership forms such a review.
Structure In continental European countries,
corporate governance is often characterized by External Auditor External auditors verify
concentrated ownership, smaller and more nar- whether financial statements are fairly stated in
row capital markets (regarding both equity and conformity with the relevant accounting stan-
debt capital), and poorer investor protection. For dards and that these statements reflect the true
that reason, the continental European corporate economic situations and operating results. Thus,
governance system is also called an insider sys- the external auditor’s verification adds credibility
tem. In contrast, in Anglo-American countries to the company’s financial reporting. Therefore,
corporate governance involves characteristics an audit of a high quality is expected to reduce
like dispersed ownership, larger and wider capital information risk. Audit quality is determined by
markets, and better investor protection. There- an auditor’s competence and independence and is
fore, it is called an outsider system. affected by the auditor’s brand name or the pro-
The corporate governance report should con- vision of non-audit services. Differences in audit
tain information on shareholders meeting (e.g., quality result in a variation of credibility offered
voting procedures), financial rights (e.g., divi- by the auditors. Thus, the corporate governance
dends, ability to exercise rights), or takeover report should include at least information on the
defenses. In this context, the report should also name of the auditor, a declaration of auditor’s
inform on the company’s shareholders and the independence and auditor’s total fees, differenti-
capital structure, on blockholders and their voting ated into audit and non-audit fees. Non-audit fees
and control rights and other direct or indirect should be further subdivided into their main
relationships between the company and major categories (e.g., tax advisory).
C 512 Corporate Governance Reporting
Definition
Corporate Irresponsibility
Building on Drucker’s 1973 definition of corporate
▶ Corporation as Psychopath mission, Pearce and David (1987, p. 109) define
a corporate mission as “. . .the fundamental, unique
purpose that sets a business apart from other firms
Corporate Local Responsibility of its type and identifies the scope of business’s
operations in product and market terms.” They go
▶ CSR and Regional Development on to define a “mission statement” as:
. . .an enduring statement of purpose that reveals an
organization’s product or service, markets,
Corporate Mandate customers, and philosophy. . .a mission statement
provides the foundation for priorities, strategies,
plans, and work assignments. It is the starting
▶ Profit Maximization point for the design of managerial jobs and struc-
tures. It specifies the fundamental reason why an
organization exists.
Synonyms The old adage states that “if you don’t know
where you’re going, any old road will take you
Company mission; Corporate beliefs; Corporate there.” There is much wisdom in this statement.
mission; Corporate purpose; Creed statement; As individuals, we need some sense of direction
Mission statement; Statement of philosophy; in order to guide us through life; otherwise, we
Statement of purpose; Vision statement risk wandering around somewhat aimlessly and
Corporate Mission, Vision and Values 517 C
achieving less than our potential. So too it is with must be engaging. Their primary purpose is to
business firms. A firm without a clear sense of inspire employees of the firm. For that reason, the
direction may take up opportunities in an ad hoc actual wording of the statements is of vital impor-
manner and make little real progress on any one tance. Thompson et al. (2010, p. 26) suggest that
opportunity. Just as for people, it is very useful the vision statement should be graphic, specific to
for a firm to have a clear sense of purpose. the firm, distinctive, and forward looking; the
One way for a firm to set out its purpose and envisaged future should be desirable and feasible C
direction is through one or more formal state- to achieve. The statement should avoid being
ments. Such statements are often termed mission, bland, vague, too broad, or overly reliant on
vision, or values statements. The mission state- superlatives. These authors criticize many
ment sets out the current purpose of the firm and existing vision statements as being too lofty and
its range of activity and declares what the firm generic: more akin to public relations statements
stands for. The vision statement sets out the long than statements of future direction; they argue
run aspirations of the firm: where it is headed and that such statements may not be of great use in
where it wants to be in a number of years time. propelling a company forward. Henry Ford’s
The values statement sets out the values that famous vision of “a car in every garage” is often
define the firm; these values in turn form the given as an example of a good vision statement:
basis on which the firm carries out its operations one that captures people’s attention and imagina-
and the basis for behavior of individuals who tion. Notwithstanding this, it should be noted that
work in or for the firm. Together, these three Beaver (2000) and others have noted that the
statements set out the purpose of, the direction language of mission, vision, and value statements
of, and the nature of the firm: why the firm exists, is often the same.
what future does it envisage, and what the firm Two broad mechanisms exist by which the
stands for (Collins and Porras 1996). mission, vision, and values can be developed:
While mission, vision, and values are usually top down and bottom up. O’Brien and Meadows
determined as statements, it is not necessary for (2003) found in their study of financial organiza-
them to be formally written down. In former time tions that the vision was primarily developed by
purpose, direction and values were transmitted the CEO and senior management of the firm, with
through the organization by means of stories, little consultation taking place outside of that
examples, and analogies. In current times, mis- group and with little use being made of formal
sion, vision, and values are more commonly writ- methodology or theory. These authors found that
ten down and transmitted as formal statements. this top-down, low-participation process some-
Either way, what is vital is that the mission, vision, times leads to significant lack of engagement
and values are clear and made well known to all with the vision on the part of junior or frontline
members of the firm. This helps ensure that there staff. Where the visioning process was success-
exists within the firm a “sense of mission” (Camp- ful, embedding the vision in the organization, that
bell and Yeung 1991). Without such a widespread is, generating a “sense of mission,” typically took
“sense of mission,” the mission, vision, and values 2 years. A bottom-up visioning process by its
will be ineffective in driving the firm forward: nature is much more inclusive but has its own
mission, vision, and values become only of rele- issues: it can take a long time; it can be difficult to
vance to a small group of individuals within the gain agreement; it can pander to too many tastes
organization, usually the group that developed leading to an overly broad, vague vision; and it
them, or to one tier in the firm, usually top man- can result in a vision that is less strategic and
agement. On the other hand, in firms with a strong more operational in nature. It should be noted
sense of mission, all members are clear about what that Beaver (2000) and others have noted that the
the firm stands for and where it is going. language and themes corporate missions, visions,
In order to gain the attention of members of and even values are often the same. Indeed in the
the firm, statements of mission, vision, and values case of values, Beaver (2000, p. 208) posits that
C 518 Corporate Mission, Vision and Values
there are four basic values a company need con- initiatives that it would like to carry out. It is all
cern itself with: too easy for nonbusiness organizations, and even
First, produce high quality goods that add real business firms, to take up opportunities in a willy-
value to both customers and consumers. Second, nilly fashion and so fall into the trap of mission
be a good place for employees to work. Third, creep (extending the organization’s activities into
behave in a publicly responsible manner. Finally,
too many areas resulting in it performing less
provide those that own the business with a good
return on their investment. The language can be efficiently and competently) or mission drift
modified to customize the ideas to the operating (moving away from the organization’s core area
context and particular circumstances of the organi- resulting in the organization becoming less effec-
zation but those basic values will serve it well.
tive). It is also important for the organization to
While the mission, vision, and value state- ensure that strategic drift (Johnson et al. 2008,
ments are primarily directed at employees, they p. 179) does not occur: this happens if the orga-
can also be useful in making other stakeholders nization keeps to its track but fails to realize that
aware of the firm’s intentions. Organizations may the environment has changed resulting in its
make them available to other stakeholders, make product or service no longer fully meeting the
them available to the general public on their need of its customer.
websites, and may even incorporate them into To avoid mission creep and drift, it is impor-
advertisements. For example, Siemens included tant to monitor the organization’s performance.
their corporate values on advertisements on Up until relatively recently, performance assess-
the back of public transportation; the ment was almost entirely restricted to financial
Johnson&Johnson credo is well known and reg- results in the case of business firms and budgetary
ularly cited; and Yahoo!’s core values are given performance in the case of noncommercial orga-
in Thompson et al.’s (2010) strategic manage- nizations. Kaplan and Norton (2007, 1992) intro-
ment textbook. duced the concept of the balanced scorecards in
It is not just business firms that need mission, 1992, and this has fostered a much more rounded
vision, and values statements. Noncommercial, assessment of organizational performance, driven
volunteer, not for profit, and public sector orga- by the organization’s mission, vision, and values.
nizations also need to have a clear understanding Those authors suggest measuring organizational
of their purpose, their direction, and the values performance along four distinct dimensions: cus-
that they espouse. Arguably, such a clear under- tomer, operational, innovation, and financial. Cus-
standing of purpose is even more important for tomer dimensions measure the extent to which
nonprofit organizations as these organizations are users or buyers of the organization’s product or
not always subject to the discipline of the mar- service are satisfied. Operational dimensions mea-
ketplace. Not for profit organizations with an sure the efficiency with which the product or ser-
unclear purpose face the real risk of serving too vice is produced or carried out. Innovation
many masters, and serving none of those well, or dimensions represent how well the organization
risk serving no real purpose at all, saves to con- is positioned for the future. Financial dimensions
tinue in existence. A clear mission sets out the measure financial performance. Together, these
mandate for such an organization to its various four dimensions give a balanced view of how the
stakeholders and can be used to hold the organi- organization is performing and whether or not it is
zation accountable. This may well be in the best on track to carry out its mission, achieve its vision,
interest of those served by the organization but and stick to its values.
also in the organization’s own long run best inter-
est as the nature and value of the service it pro-
vides is clear to all its stakeholders. Without Key Issues
a clear, distinct mission, the organization may
find it difficult to prioritize future opportunities While corporate statements of mission, vision,
or discriminate between possible projects and and values are widely referenced in academic
Corporate Mission, Vision and Values 519 C
texts, popular business books and research, a situation exacerbated by rapidly changing
researchers and commentators highlight the complex environments requiring near-constant
homogeneity of such statements. They often use adaptation.
similar language and proclaim their commitment
to similar themes and goals. As such, the value of
such statements has been questioned if there are Cross-References
no fundamental differences at all. This is not to C
say that having a mission, vision, and clear artic- ▶ Business Strategy
ulation of corporate values is not important but ▶ Corporate Codes of Conduct
that in many respects, statements are often ▶ Corporate Strategy
generic. ▶ Cultural Differences in Values/Ethics and
The degree to which statements of mission, Decision-Making
vision, and values reflects actuality is another key ▶ Reputation/Reputation Management
issue. This is particularly relevant in the area of ▶ Responsible Leadership
corporate social responsibility where companies ▶ Stakeholder Theory
have been criticized for engaging in boxchecking
behavior. Collins sums this up as the need for
organizations to worry more about what they do References and Readings
as an organization and less about what they say.
Unless values are central to competitiveness, one Beaver, G. (2000). The significance of strategic vision,
might argue they will never be central to strategy. mission and values. Strategic Change, 9(4), 205–207.
Campbell, A., & Yeung, S. (1991). Creating a sense of
While organization’s mission and vision are mission. Long Range Planning, 24(4), 10–20.
relatively straightforward concepts, there is Collins, J. C., & Porras, J. I. (1996). Building your company’s
ongoing debate on organizational values and in vision. Harvard Business Review, 74(5), 65–77.
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ties, practices. New York: Harper & Row.
works for aligning previous and current research Enz, C. (1988). The role of value congruity in intraorga-
on values. This is further complicated by the nizational power. Administrative Science Quarterly,
influence of individuals, groups, institutions, 33, 284–304.
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ware of the mind. New York: McGraw-Hill.
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for example, are values stable or developmental? Exploring corporate strategy (8th ed.). New York:
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Kaplan, R., & Norton, D. (1992). The balanced scorecard:
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C 520 Corporate Morals
▶ Corporate Giving
▶ CSR and Africa Definition
▶ CSR and Poverty
▶ Philanthropic CSR There are many ways to create corporate political
connections (CPCs). These links can be focused on
direct political connections, i.e., relations between
present or former top managers, employees, or
investors and politicians with present or past political
Corporate Political “Liaison” activities, or on indirect political connections such as
campaign contributions and lobbying activity.
▶ Corporate Political Connections The concept is a brand new term in manage-
ment literature in recent years. Since there is no
fit-for-all definition for the concept, it can be
associated either with negative consequences for
Corporate Political Access the corporation or for the society (e.g., high levels
of corruption; damages to minority shareholders;
▶ Corporate Political Connections destruction of the firm value) or with positive
consequences (e.g., knowledge about how to nav-
igate government bureaucracies; increased firm
value; better performance; enhanced economic
Corporate Political Actions competitiveness; charity; corporate philanthropy;
regional development). This sometimes trans-
▶ Corporate Political Connections lates into multiple sets of definitions for the
Corporate Political Connections 521 C
same concept that were constructed to fit in with the board, but also cases in which a politician’s
an author’s research and its theoretical frame- close relative (husband, wife, children, or parents
work. For example, according to standard defini- siblings) holds such positions. Close relation-
tions used in the literature, CPCs are related to the ships include share ownership or directorships
political involvement between shareholders, top held by former prime ministers or heads of state
officers, and government (officials). Others asso- as well as former directorships held by current
ciate it to contributions to political campaigns or politicians, foreign politicians, and relationships C
to political parties. Others still associate CPCs to with political parties.
the interests in government policies/government A second definition of CPCs is based on cor-
functioning (local, national, and international). porate donations to finance campaigns, parties, or
Since Krueger’s (1974) seminal work on rent political activities. Most studies adopting this
seeking, there has been a proliferation of studies approach focus on countries where corporate
that have tried to ascertain the relationship donations are legally allowed (such as the USA
between firms and political connections. or Brazil). It is clear that firm contributions are
Researchers generally believe that political con- related to political connections and political
nections are obscure relationships between com- favors. For instance, in some emerging markets,
panies and the individuals with political influence firm financing and financial structure depends on
and power. The idea is simple: Firms (or individ- their relationships with politicians, with negative
uals) are said to seek rents when they try to obtain welfare effects (Claessens et al. 2008). Neverthe-
benefits through the political arena. Firms usually less, it appears that campaign contributions have
do so to get a subsidy or a tariff on a good they less relevant effect on political decisions than it
produce or to get a special regulation that hampers seems. Several studies argue that lobbying is
their competitors. Steel producers, for example, more relevant than contributions, and firms,
often seek restrictions on imports of steel, and after all, spend much more on lobbying than on
firms with a socially responsible position often parties or campaigns contributions. These facts
lobby to keep regulations in place that restrict are very important for countries where lobbying
competition from less socially responsible firms. activities have no legal framework or where there
However, it is also true that some firms is no legal support to party or campaign contri-
complement its relative social irresponsibility butions. In such countries, CPCs can be associ-
with its lobbying efforts to maintain the ated with negative consequences (e.g., high
regulatory/policy status quo. levels of corruption).
Recent studies show three distinct approaches A third definition relates CPCs to corporate
to identify a company or individual with political lobbying activities. Lobbying is the practice of
connections. One definition qualifies a firm as attempting to persuade legislators to propose,
“politically connected” if its top executives or pass, or defeat legislation or to change existing
largest shareholders are or were politicians, civil laws, which could provide gains for special inter-
servants, members of parliament, or close to ests. Lobbying expenditures, payments by special
political power. For example, according to Faccio interests to political insiders to influence legisla-
(2006), a firm is politically connected if at least tive outcomes in ways to provide gains to special
one of the firm’s largest shareholders (anybody interests, is a measure that can be used to quantify
directly or indirectly controlling at least 10 % of the degree of the connectedness, as firms with
votes), or one of its top officers (CEO, chairman greater lobbying expenses are expected to have
of the board, president, vice president, or secre- stronger political ties (Hill et al. 2010). For some,
tary) is a member of parliament, a minister, or lobbying can be a more effective path to influence
head of state or is closely related to a politician or legislation than campaign contributions. This
party. Connections with government ministers happens because usually there are no legal limits
include not only cases in which the minister him- to lobby expenditures, whereas such legal limits
self or head of state is a shareholder or member of exist in the case of political funding. Lobbying
C 522 Corporate Political Connections
firms typically employ former government offi- and will positively reflect on their economic per-
cials as lobbyists (Yu and Yu 2010), and this formance and value. Politically connected firms
implies that lobbyists tend to be political insiders. may benefit from easier access to debt financing
Thus, lobbying activity provides firms a way to by government institutions, preferential treat-
become politically connected. ment in competition for government contracts,
privileged access to government subsidies, regu-
latory protection, and government aid for finan-
Introduction cially troubled firms, and many other forms.
Meanwhile, some firms (global players) are led
In a broad view, CPCs can be found all over the to CPCs due to countries’ perceived corruption or
world. They exist in developed countries (e.g., to make CSR works. Sometimes firms can adopt
the USA, Canada, Germany, etc.), emergent CPCs in order to deal with environment or market
countries (e.g., Brazil or China), and in poor issues. In high perceived corruption countries,
countries; in countries with high (e.g., Malaysia, firms may need to establish political connections
the Philippines) or low (e.g., Denmark, Finland, in order not to lose some market position to
Singapore) levels of perceived corruption; in competitors. Perceived corruption can work as
countries with common-law (the UK, the USA) an incentive to CPCs. In countries or industries
and code-law legal systems (France, Italy, etc.); with weak legal or regulatory environment, firms
in countries with a strong legal environment (the with high competitive concerns are led to CPCs
USA, the UK, and Sweden) and in countries with in order to reduce or mitigate this weakness or
weak legal systems (Indonesia, the Philippines, market threat. Be that as it may, in the end CPCs
India, etc.). CPCs exists either in global players are driven by the desire to enhance firm value.
(Multinational Corporation) or in domestic In addition to being important to firms, polit-
corporations. ical connections may also have beneficial conse-
Faccio (2010) suggests that connections are quences both to politicians and to firms’
especially common in countries with higher connected managers. Politicians themselves will
levels of corruption and countries imposing extract at least some of the rents generated by
restrictions on foreign investments. On the other the connections. The chances of politicians’
hand, she argues that connections are less com- (re) election can be favorably affected by man-
mon in countries with regulation that sets more agement practices adopted. This much is
rigorous limits on political conflicts of interest. suggested in the context of state-controlled com-
Furthermore, the incidence of political connec- panies and in the case of listed companies not
tions is greater in firms with large sales to gov- directly controlled by the state. Such connection
ernment, large exports, and large lobbying also gives politically connected managers certain
expenditures (Agrawal and Knoeber 2001). incentives as they may receive a share of the rents
Politically connected firms differ more from extracted (higher wages, public status, easy
nonconnected firms when their political links are access to political decisions).
stronger. That is, differences are greater when In the company’s view, managers compete for
companies are connected through owners rather a political position to extract economic benefits
than directors. Similarly, differences are greater (rents) of political power regarding firms interests
when the connection is with a minister or a head (Boubakri et al. 2008). On the other hand, com-
of state rather than with a member of parliament. panies are interested in having managers who are
The main motivation for the establishment of influential in the political scene and could be able
CPCs pertains to the enhancement of a firm’s to extract rents from the public and competitors
value. Firms are motivated to be politically on behalf of their firms (Agrawal and Knoeber
connected by the expectation of obtaining gains 2001).
from the preferential treatment given to these The sources of value of connections are con-
firms that will result in competitive advantages tradictory. On the one hand, there is a positive
Corporate Political Connections 523 C
correlation between political connections and • CPCs can allow better CSR. When studying
firm value and performance, both in countries corporate philanthropy, Jia et al. (2008) found
with weak legal systems and high levels of cor- that the optimal level of philanthropic contri-
ruption and in countries with strong legal systems bution is dependent on the value of managers’
and lower levels of corruption. Thus, it prevails personal political connections. In these cases
the idea that political connections create value by shareholders should be concerned about large
generating future benefits to the firm. These ben- levels of philanthropy, indicating that their C
efits are mainly due to preferential access to managers are obtaining personal benefits
credit, allocation of lucrative government con- from the firm’s philanthropy. It is also much
tracts, favorable regulatory conditions, govern- better that the firm invests the money on the
ment support (bailouts) in times of economic corporate relational wealth such as brand rep-
distress, enhanced lobbying power. On the other utation, firm image but not on the transferable
hand, Chaney et al. (2011) claim that political relational wealth such as managers’ personal
connections have a negative effect upon firms’ political connections.
value and their economic performance. Further- • CSR can promote CPCs. Campaign contribu-
more, political interference in business manage- tions and lobbying expenditures influence the
ment and the poor management profile of the voting behavior of individual politicians and
political connected individuals can be harmful result in creation of regulatory environments
to economic performance. that are beneficial to specific industries. As we
For the explanation of these effects, arguments have seen above, institutional environments
based on agency and resource-based theories can affect the value of political connections,
be used. Thus, while the positive impact of CPCs given the firms operating in a higher level of
on firm value can be explained through the law enforcement environment, the value of
resource-based theory, the agency theory fits the political connection decreases and it is better
explanation of the negative effects of CPCs. for the firms to invest less in political connec-
According to the resource-based theory of the tion. This also suggests that CSR engagement
firm, the competitive advantage of politically is much more probable in the case of firms
connected firms is mainly driven by ties with operating in good law enforcement environ-
government, which help firms to obtain key ments. CSR allows firms present in different
resources that are difficult or costly for other environments (markets) to deal more consis-
firms to obtain, and thereby increase the value tently with perceived corruption. As Luo
of connected firms. Based on agency theory, the (2006) suggests, when perceived corruption
politically connected managers (especially in in the business segment increases, multina-
state-owned companies) will prioritize the align- tional enterprises that focus more on ethics
ment of firm goals with government rather than have a greater propensity to use “arm’s length
the maximization of firm value. bargaining” to deal with the government,
The concept of CPCs seems to be associated to whereas their counterparts that focus less on
environmental, social, and economic aspects that ethics have a greater propensity to use social
could be described as corporate social irrespon- connections to deal with the government.
sibility, namely in situations that represent dis- As far as the authors are aware, Richter (2011)
tortions of competition and of democratic was the first author to establish a direct relation-
representation. In these cases, CPCs may be said ship between CSR and CPCs. According to Rich-
to have a negative relation to Corporate Social ter (2011), firms’ CSR positions work as an
Responsibility (CSR). However, there are many economic complement to its political activity
situations in which the concept can also be asso- rather than as a substitute. When joint, the two,
ciated to aspects that could be rightly described as CPCs and CSR, increase a firm’s value. On the
CSR. In these latter instances, the relation may contrary, acting independently each activity is
work in both directions: more difficult to reconcile.
C 524 Corporate Political Connections
▶ CSR and Regional Development Corporate reputation can be of two types – good or
bad. Businesses strive to build a good corporate
reputation and shy away from and try to avoid
being tarnished or associated with a bad, poor, or
Corporate Regulations damaged reputation. Fombrum (1996) argues that
credibility, reliability, trustworthiness, and respon-
▶ Corporate Governance sibility are key to building a positive and favorable
reputation. A range of managerial and communi-
cation tools can be deployed to protect, minimize
damage to, improve, and enhance corporate image,
Corporate Reporting brand, and reputation. Separating out these con-
cepts from one another is not always easy, and at
▶ Small- and Medium-Sized Enterprises times, terms can be conflated. By way of example,
Engagement in CSR corporate reputation is often equated to or associ-
ated with company image. It is certainly true that
there is a degree of overlap between the two, but it
Corporate Reporting for Sustainable should be acknowledged that corporate reputation
Development is more than just another term for company image.
It is something that can enhance and is deemed to
▶ Reporting Sustainable Development have inherent value. However, Kennedy (1977),
Alvesson (1998), Dichter (1985), and Dutton
et al. (1994) argue that image and reputation are
pretty much one and the same thing and contend
Corporate Reputation that it is acceptable for the terms to be used
interchangeably.
Brian Jones A good corporate reputation is in itself
Leeds Business School, Leeds Metropolitan deemed to be of value to a business, and this
University, Leeds, West Yorkshire, UK can be reflected in the share price. A business
with a good reputation is argued to help build
business brand, offer consumers a higher level
Synonyms customer service experience, grow market
share, and among other things deliver better
Corporate image; Reputation management returns for investors. A poor corporate reputation
is likely to reflect weak performance in a number
of areas including customer care, the environ-
Definition ment, profitability, and among other things deliv-
ery of and meeting key business objectives.
Corporate reputation is an intangible highly val- CSR has an important role to play in enhancing
ued business asset. The term refers to the ways in and helping to build a good, positive corporate
Corporate Reputation 527 C
reputation. Businesses that do harm to the environ- Future Directions
ment, that do not engage with or take account of
societal and community interests, and behave Web 2.0 social media has transformed the com-
unethically can suffer as a result of reputation munication landscape and the means by which
damage. In today’s competitive market, the public, businesses build and manage reputation. Busi-
along with stakeholders, are more aware, educated nesses such as Primark (Jones et al. 2009) are
about, and concerned with environmental and increasingly deploying tools of Web 2.0 such as C
community issues. As a result of this, the public Facebook to communicate in partnership with
expect businesses to behave in a socially responsi- their stakeholders and publics. Companies moni-
ble way, and those that do not can suffer reputation tor contributions to social media to rebut and chal-
damage. lenge false comments or misrepresentations. They
endeavor to communicate with rather than simply
to their stakeholders. A myriad of opportunities
Key Issues and threats to corporate reputation are thrown up
by the advent of Web 2.0 social media. The future
A good reputation has to be earned and does not of corporate reputation is prone to shift and change
necessarily last. Rather it is prone to change as in light of developments in CSR, communication,
a result of changing attitudes, expectations, stan- stakeholder management, and new social media.
dards, values, and as a result of competitors enter- A positive reputation should not be taken for
ing the market. Once damaged, it is possible to granted but rather should be earned, and busi-
rescue reputation, but this can be costly as well as nesses that do so will prosper long into the future.
difficult to manage and is not always guaranteed
to succeed. In a world dominated by media cov- Cross-References
erage, corporate reputation has to be monitored
carefully and any challenge posed to it rebutted ▶ Communicating with Stakeholders
and questioned. Competitors recognize the value ▶ Corporate Social Marketing
associated with corporate reputation and recog- ▶ Corporate Social Responsibility
nize that by attacking reputation, the underlying ▶ CSR Communication
value of businesses can be questioned, eroded, ▶ Media CSR Forum
and diminished. ▶ Media Reporting of CSR
The media play an important part in helping to ▶ Reputation/Reputation Management
shape and inform public understanding of repu-
tation in all its guises from good to bad. Busi-
nesses use the media to communicate good news References and Readings
stories that enhance corporate reputation. Com-
municating a bad news story that has potential to Alvesson, M. (1998). The business concept as a symbol.
harm reputation can require the deployment of International Studies of Management and Organisa-
tion, 28(3), 86–108.
the skills and competencies of public relations
Dichter, E. (1985). What’s in an image? Journal of
professionals. Stakeholders can by association Consumer Marketing, 2, 75–81.
affect the image and reputation of businesses Dutton, J. E., Dukerich, J. M., & Harquail, C. V. (1994).
they supply or work with. Companies that are Organisational images and member identification.
Administrative Science Quarterly, 39, 239–263.
supplied by or have dealings with businesses
Fombrum, C. (1996). Reputation: Realising value from
that operate in an unethical way, by, for example, the corporate image. Cambridge, MA: Harvard
use of child labor, can as a result suffer Business School Press.
a tarnished reputation. Therefore, careful man- Jones, B., Temperley, J., & Lima, A. (2009). Corporate
reputation in the era of Web 2.0: The case of Primark.
agement of stakeholders from suppliers through
Journal of Marketing Management, 25(9–10), 927–939.
to customers is key to maintaining a positive cor- Kennedy, S. (1977). Nurturing corporate images.
porate reputation. European Journal of Marketing, 11(3), 120–164.
C 528 Corporate Response to Social Demands
Synonyms
Corporate Responsibility
CR index; CRI; ESG index; S&P index;
▶ Business Case for CSR S&P/EGX ESG index; Sustainability index
▶ Corporate Social Innovation
▶ Corporate Social Responsibility
▶ Corporate Social Responsibility in Tourism Definition
▶ Institute of Business Ethics (UK)
▶ Institutes of Directors and CSR The Corporate Responsibility Index (CRI) is
a management and benchmarking tool produced
by UK’s Business in the Community (BITC). It
was developed in collaboration with BITC’s cor-
porate members.
Corporate Responsibility It is designed to assist managers enhance their
(Management) CSR performance and to allow benchmarking of
companies on certain aspects of CSR.
▶ Sustainability Management
Introduction
Corporate Responsibility Index, Fig. 1 The CRI annual cycle (Source: Corporate Responsibility index 2010)
environment, through its operations, products or complete the survey. All submissions must be
services and through its interaction with key signed off at main board level to ensure direc-
stakeholders such as employees, customers, tor-level commitment to the veracity of the
investors, communities and supplies.” responses to the survey.
The annual cycle is shown in Fig. 1.
companies are not being announced until the implementation (Corporate Responsibility Index
results are published. It is the decision of the 2010). Fairfax drew upon information from the
corporation of whether they wish to announce broader debate about responsibility and concen-
their participation on their own website or if trated on the benefits of responsible corporate
they desire case studies of their corporate respon- activity. The approaches used by The Sydney
sibility practices to be submitted for consider- Morning Herald and Melbourne’s The Age (Fair-
ation by the Financial Times (Corporate fax) follow the media partner approach adopted
Responsibility Index 2010). by BITC’s UK experience.
The seventh Australian Corporate Responsi-
Eligibility bility Index (CRI) Awards were published on
The CR Index is designed for large companies. May 27, 2010, at the 11th National Business
Typically participants meet two of the three Leaders Forum on Sustainable Development at
criteria below, although this is not a mandatory Parliament House, Canberra. Eligible entrants in
requirement (Corporate Responsibility Index the awards included all Australian and/or New
2010). Zealand companies that participated in the 2009
• Turnover of £250 m CRI in Australia.
• Assets greater than £125 m The 2009 CRI Award winners in Australia and
• Greater than 1,500 employees New Zealand (Aus/NZ CRI) were as follows:
Sector leaders of the Dow Jones Sustainability • Best Overall Performance Platinum Award:
Index are also eligible to participate in the index. Energy Australia – for the corporation that
has attained the highest overall score in the
2009 Aus/NZ CRI
• Platinum Award Certificate: Australian
Licensing of the CRI
Broadcasting Corporation and Country
Energy – for corporations that have attained
BITC also licenses the CRI, including the follow-
a Platinum overall score (more than or equal to
ing organizations in the following countries:
95%) in the 2009 Aus/NZ CRI
Australia The St James Ethics Centre licensed the CRI • Best Progress Gold Award: Pricewaterhou-
from 2003 to 2009. Since 2009, some seCoopers – for the corporation that has
Australian companies have continued to attained a Gold overall score in the 2009
participate in the CRI through BITC.
Aus/NZ CRI and the highest score enhance-
Greece Licensed from 2008, the Institute of Corporate
Responsibility runs the CRI for Greece-based
ment between 2008 and 2009
companies. • Best Progress Silver Award: New Zealand
Post Group – for the corporation that has
While the CRI was licensed to the St James attained a Silver overall score in the 2009
Ethics Centre in Australia, publication of results Aus/NZ CRI and the highest score enhance-
of Australian companies was with two leading ment between 2008 and 2009
daily newspapers: The Sydney Morning Herald • Best Progress Bronze Award: Western
and Melbourne’s The Age. The conditions of the Power – for the corporation that has attained
contract proposed between St James Ethics a Bronze overall score in the 2009 Aus/NZ
Centre and Fairfax (publishers of The Sydney CRI and the highest score enhancement
Morning Herald and Melbourne’s The Age news- between 2008 and 2009
papers in Australia) officially identify an inten- The CRI Leaders’ Network in Australia
tion to encourage best practice as the main includes ANZ, BHP Billiton, Boral,
purpose of the implementation. Presumably this EnergyAustralia, Rio Tinto, Toyota Australia,
was because participants are not likely to be and Westpac Banking Corporation. In addition,
attracted to a “blame and shame” game that has Australian Broadcasting Corporation and Coun-
informed other methods to this form of try Energy are entitled to join the CRI Leaders’
Corporate Responsibility Index 531 C
Corporate Responsibility CR Index Companies versus FTSE All-Share Index - TSR by year
Index, Fig. 2 CRI 50
compared to FTSE
companies on total 40
shareholder return (Source:
Corporate Responsibility 30
index 2010)
20
C
Mean TSR
10
0
2002 2003 2004 2005 2006 2007 2008 2009
−10
−20
−30
−40
Year
Network in 2010. CRI Leaders’ Network refers to CRI Performance Compared to Total
Australian and/or New Zealand corporations that Shareholder Return
have accomplished more than or equal to 95% in In October 2008, Business in the Community
previous Aus/NZ CRI surveys (PWC 2005). published research showing that FTSE 350 com-
panies which consistently managed and mea-
sured their corporate responsibility as evidenced
Details of Greek Companies by good performance on the CRI outperformed
their FTSE 350 peers on total shareholder return
Brief History 2002–2007 by between 3.3% and 7.7% per year.
The CRI was established in collaboration with In 2010, further research was published which
over 80 leading UK corporations and with UK- showed a similar trend (see Fig. 2) (Corporate
based nonprofit organizations. Responsibility index 2010). That result is in con-
There has been a tremendously positive trast to a negative correlation for TSR for the
response from corporations, investment fund Dow Jones Sustainability Index and a slightly
managers and city analysts, pension funds, positive correlation for FTSE4Good Index.
insurers, government, and the public. Over 100
corporations have participated in the Business in How Does the CRI Work?
the Community (BITC) Index every year from The CRI has released corporations with a web-
the time of its establishment. For instance, in based tool created by Business in the Commu-
2004, 500 companies were asked to join in. 139 nity, and is protected by a password to every
corporations of these finished the index, which corporation, permitting members to finish the
represents 14% increase compared to 2003. survey online and to download the information
Essentially the 139 embrace the majority of the that assists their proposals. Corporate strategy,
biggest corporations in UK (Pricewatercoo- integration, management, performance and
pershouse 2005). Companies which have impact, and assurance and disclosure are the
achieved Platinum for their global operations five main components of the index model. The
are Anglo American, BHP Billiton, British Tele- corporate strategy section observes how the
com, Rio Tinto, Tata Consultancy Services, nature of the corporation and its activities impact
Unilever, and Xstrata. the corporation’s values, how these relate to
C 532 Corporate Responsibility Index
strategy, and how they are tackled through its handling the corporate responsibility to guarantee
management, development of policies, and director-level dedication to the reliability of the
responsibilities held at a senior level in the cor- responses to the survey. The index process offers
poration. The integration section observes how a number of levels of assurance. Business in the
corporations make plans for, administer, and Community has worked through a validation pro-
incorporate corporate responsibilities all over cess to strengthen the honesty of the index,
their operations. This integration is measured in including checks throughout key stages in the
the management section, which checks proce- compilation, examination, aggregation, and pre-
dures for supervising various stakeholder rela- sentation of information. Once the validation pro-
tionships. This section embraces the main topics cess has been completed by corporations, the
for corporations, and it observes its procedures, results are electronically published by BITC’s
objectives, and targets. Community, environ- online benchmarking system, as shown in Fig. 3.
ment, marketplace, and workplace are included
in the four management areas. The performance Benefits
and impact section engages the corporation’s per- Corporations who adopt the CRI as an internal
formance across a variety of social and environ- management instrument have discovered that it is
mental areas. In total, they are six impact areas very helpful in recognizing how the integration of
where all corporations make obligatory reports corporate responsibility offers the opportunity to
on two environmental impacts: global warming add value to the corporation. Here are some com-
or energy and transport together and waste ments of different directors using CRI in their
management. corporations (bitc.org.uk):
Also corporations are asked to choose two • Mark Johnson, Chief Executive Officer of
social impacts obtained from product safety, PricewaterhouseCoopers (PwC), stated that
occupational health and safety, human rights “Corporate Responsibility is an integral part
and the supply chain, diversity in the workplace, of our business – it is not a sideshow. PwC’s
and community investment as well as two addi- corporate responsibility commitment includes
tional self-selected impact areas that matter to the our contribution to the community, protecting
corporation. The score of the survey is set by the environment, creating the right culture for
summing up the marks of the five sections, as our people and embedding these values in
shown in the diagram below where 10% of the everything we do. The CRI helps us to not
total score is awarded to the corporate strategy only measure our performance but to be trans-
section; 22% of the total score is awarded to the parent in our results.”
integration section; 26% of the total score is • Craig Murray, the Managing Director of
awarded to the management practice section, Country Energy, says: “At Country Energy
including community, environment, market- corporate responsibility is integral to our cor-
place, and workplace management sections; porate strategy. The CRI process provides
36% of the total score is awarded to the perfor- independent and comprehensive feedback on
mance and impact section, including a choice of how well we are doing relative to our internal
social and environmental impact areas; and the targets as well as to industry best practice. Our
last 6% of the total score is awarded to the assur- progress in the survey has been a pleasing
ance and disclosure section. It should be noted reflection of the company’s commitment to
that each management section of community, corporate responsibility principles.”
environment, marketplace, and workplace, as • George Maltabarow, the Managing Director
well as each of the social and environmental of Energy Australia, states: “An independent
impact areas, is equally weighted. All this repre- benchmark like the CRI is the best way for
sents a self-assessment process, and every corpo- a company to truly gauge its performance in
ration is accountable for signing off its own index key areas like the community and environ-
findings by CEO or through the board member ment. Using the CRI pushes us to improve
Corporate Responsibility Index 533 C
Corporate Responsibility
SECTION LEVEL:
Index, Fig. 3 Online
benchmarking system
(Source: BITC 2010) 10% 22% 26% 36% 6%
Environment Social
Marketplace
Workplace
QUESTION LEVEL:
year after year and shows our commitment to time, comparing progress to that of industry
doing the right thing.” peers and the wider universe of all other partic-
Consequently, CRI provides the participating ipants, and showing cases and sharing best prac-
corporations with several benefits (bitc.org.uk): tice publicly or through the optional “mutual
1. It helps corporations improve, execute, and disclosure” tool – companies are ranked and
assess their responsible practice and assists results are published annually in the Financial
corporations in creating a corporate responsi- Times, which reaches 500,000 readers daily.
bility issues into corporate strategy. 7. It offers a communication tool with various
2. By identifying what responsible corporation stakeholders both internal and external, which
means in practice, the Corporate Responsible creates transparency and builds trust. This is
Index helps to set the management and achieved by enabling more direct and focused
reporting criteria against which corporation commitment with stakeholders; by regularly
will be judged. assisting stakeholders to understand the corpo-
3. It challenges whether the corporation is ration such as its operations and the constraints
performing its activities in an organized and it faces and, on the other hand, assisting the
integrated way and directs companies through company to understand its stakeholders, for
the process of integration. instance, their perceptions and issues of impor-
4. It brings various functions in the corporation tance; and by also helping in creating trustable
together to comprehend and manage the key and long-lasting relationships.
CSR issues for the business.
5. It provides corporations with a practical gap What Differentiates CRI from Other Indices?
analysis through a confidential feedback The CRI is the only voluntary, business-led
report, stressing on parts of great performance benchmarking index which embraces all corpo-
and spotting where enhancements need to take ration divisions and reports on the four basic
place. influence sections of corporate responsibility:
6. It is a benchmark that permits corporations to community, workplace, marketplace, and envi-
contrast their performance inside and across ronment. The CRI works as a business instrument
divisions through tracking their progress over rather than an investment instrument. Indices that
C 534 Corporate Responsibility Maturity
Other Indices
Other indices exist in other countries, including:
• Dow Jones Sustainability Index
• FTSE4Good
Corporate Responsibility Maturity
• ESG Index (Egypt)
Heiko Spitzeck
• CSR Index (Estonia)
Doughty Centre for Corporate Responsibility,
• Sustainability Index (Latvia)
Cranfield School of Management, Cranfield
University, Cranfield, Bedford, UK
Future Directions
Corporate Responsibility
Maturity,
Fig. 1 Integrative Integrative Perspective
perspective (Adapted from
Wood 1991)
Corporate Corporate Performance
Corporate Motivation
Structures & Processes
Economic & Social &
Principles
Stakeholder Engagement Environmental
Values
Issue Management Results
Mindset
Leadership (Triple Bottom Line)
studies (Mirvis and Googins 2006a) differenti- well as the single case study approach used dis-
ates stages by characteristics of the management course analysis in order to describe the moral
systems, for example, by the inclusion of CR in rationalization processes of the corporate actor.
the mission statement, the influence of stake-
holders in corporate decision making, or the qual- Integrative Models
ity of leadership. None of the studies in this group Some models aim to present an integrated model
use a replicable process with precise indicators in of CR evolution comprised of different dimen-
order to determine stages of CR maturity. sions (Avastone Consulting 2007; Maon et al.
2010; Wood 1991). The cognitive dimension
Moral-Cognitive: The Mind-Set Perspective describes the corporate principles and values,
The moral-cognitive perspective describes CR which influence structures such as stakeholder
evolution in terms of the organizational ethos engagement mechanisms, which in turn, influ-
(Spitzeck 2009b; Sridhar and Camburn 1993). ence performance (Fig. 1).
Organizational ethos is defined as the moral con- However, research has not yet presented evi-
sciousness and principles, which guide collective dence for a correlation between principles, struc-
decision making and rationalization within the tures, and performance. Research on CR
organization. evolution seems to have developed from a focus
The main indicator used to sort organizations on measurable performance toward a more sense-
in different moral-cognitive development stages making perspective (Basu and Palazzo 2008).
is the form of moral argumentation. This meth- A similar process takes place in practice if one
odology has been developed by Kohlberg and has compares the GRI (founded in 1997 with the
been applied to broad empirical research on indi- vision that disclosure on economic, environmen-
vidual moral development (Kohlberg 1969, tal, and social performance becomes as common-
1971). place and comparable as financial reporting) and
In terms of empirical evidence of moral- the ISO26000 – guidance on social responsibility,
cognitive CR evolution, the design of the frame- which takes a social-constructivist view and is
works is always case study based and takes three envisioned for 2010. Also the level of analysis
basic forms: (1) illustrative cases to describe the has shifted from the whole organization to the
different stages of moral-cognitive development question how the organization deals with specific
which have been deducted from Kohlberg’s CR issues (Zadek 2004).
framework of individual moral development,
(2) comparative case study design taking
a snapshot of moral development at a single Future Directions
moment of time, and (3) a single longitudinal
case study to test evolution of the organizational Empirical evidence in general is very weak as it is
ethos (Spitzeck 2009b). Both the comparative as mostly based on illustrative case studies except
Corporate Secretaries 537 C
for measuring CR performance and some parts of Kohlberg, L. (1971). From is to ought: How to commit the
the organizational ethos. Also, all cases depict an naturalistic fallacy and get away with it in the study of
moral development. In T. Mischel (Ed.), Cognitive
upward learning trend of organizations becoming development and epistemology (pp. 151–235). New
more responsible. Some studies suggest that de- York: Academic.
learning is also possible especially in the case of Maon, F., Lindgreen, A., & Swaen, V. (2010). Organiza-
a change in leadership but no cases of CR de- tional stages and cultural phases: A critical review and
a consolidative model of corporate social responsibil-
learning have been analyzed empirically in this ity development. International Journal of Manage-
C
respect. ment Reviews, 12(1), 20–38.
Margolis, J. D., & Walsh, J. P. (2003). Misery loves
Learning Triggers companies: Rethinking social initiatives by business.
Administrative Science Quarterly, 48(2), 268–305.
Nearly all the research on evolutionary CR relies Mirvis, P. H., & Googins, B. (2006). Stages of corporate
on a crisis as a learning trigger. Therefore, com- citizenship. California Management Review, 48(2),
panies going through a CR crisis are taken as 104–126.
objects of study to evaluate the evolution of their Mirvis, P.H., & Googins, B. (2006b). Stages of corporate
citizenship: A developmental framework. Boston: Cen-
CR approach (Zadek 2004). Only Mirvis and ter for Corporate Citizenship at Boston College.
Googins (2006) relate high CR evolution with Spitzeck, H. (2009a). The development of governance
reasons such as the founding spirit, internal devel- structures for corporate responsibility. Corporate Gov-
opment challenges, as well as laws and regula- ernance, 9(4), 495–505.
Spitzeck, H. (2009b). Organizational moral learning:
tions. However, also they acknowledge the What, if anything, do corporations learn from NGO
learning triggers presented by crisis from external critique? Journal of Business Ethics, 88(1), 157–173.
forces. The moral development of executives Sridhar, B. S., & Camburn, A. (1993). Stages of moral
seems to be of particular importance for the orga- development of corporations. Journal of Business
Ethics, 12(9), 727–739.
nizational ethos (Sridhar and Camburn 1993), and Wood, D. J. (1991). Corporate social performance
a change of leadership might trigger de-learning. revisited. Academy of Management Review, 16(4),
691–718.
Zadek, S. (2004). The path to corporate responsibility.
Harvard Business Review, 82(12), 125–132.
Cross-References
▶ Restructuring
References and Readings
They are called upon by their organizations to Australia (CSA) describes its members as gover-
carry of the following functions: nance professionals and the CSA describes itself
• Drive and advice on best practice in on their website as “The peak professional body
governance. committed to the promotion and advancement of
• Champion the compliance framework to safe- effective governance and administration of orga-
guard the integrity of the organization. nizations in the private and public sectors, CSA
• Promote and sound the board on, high stan- has developed its structure and reporting mecha-
dards of corporate behavior. nisms to promote these ideals and principles.”
• Bridge interest of the board or governing
body, management, and stakeholders. CSR and Corporate Governance
The CSA also argues that anyone who is Professional Institutions of Corporate Secretaries
referred to by his or her organization as “gover- In the UK, the Institute of Chartered Secretaries
nance professional” has a significant impact on and Administrators (ICSA) is the professional
the level and quality of the organization’s corpo- body which assesses and certifies the compe-
rate governance and governance culture and often tences of prospective chartered secretaries with
has a pivotal role in assisting the board to achieve a series of examinations and post qualification
the entity’s vision and strategy. It concludes that (CPD) programs. The ICSA is the only body
the activities of the governance professional among the seven chartered bodies noted above
encompass legal and regulatory duties and obli- and specified in Section 273 Subsection 3a–3g
gations and additional responsibilities assigned CA 2006 which trains its members solely to
by the employer. become corporate secretaries; having said this,
it must be noted that qualified members of the
ICSA do end up in other senior executive posi-
Key Issues tions in organizations which are not necessarily in
company secretariat. There are two grades of
A series of high-profile corporate scandals membership of the institute – associate member-
involving some corporate executives, which ship [a member becomes an associate (having
occurred in both the developed and developing completed the institute’s examinations) after
economies around the world, have led several serving a period of time in their chosen industry]
CSR-related questions being asked about the and fellow membership (an associate becomes
state and effectiveness of corporate governance a fellow after a period of time in a senior man-
in many countries. Bearing in mind that CSR agement position in their chosen industry). The
involves how a company manages its social, eco- institute represents the profession with all exter-
nomic, and environmental impacts of its activi- nal bodies including governments and interna-
ties on all its stakeholders regardless of whether tional organizations. Its American equivalent is
these are primary or secondary stakeholders. The the Society of Corporate Secretaries and Gover-
state of corporate entities’ governance is in fact nance Professionals (SCSGP). There are also
not the only issue here. Our world over the last similar bodies in some other countries of the
50 or so years has gone through a series of trans- world, for example, the Chartered Secretaries,
formation and development which have brought Australia, Canada, Hong Kong, India, Malaysia,
to the fore some important issues about the rela- New Zealand, Nigeria, Singapore, South Africa,
tionship which subsists between business and and Zimbabwe. These bodies are all affiliates of
society. the ICSA, UK, or had been related to it at some
Our key issues here therefore relate to corpo- point in the past.
rate governance and corporate social responsibil- The ICSA in the UK states that “it promotes
ity as they both impact on what corporate best practice in corporate governance, liaising
secretaries do. Corporate secretaries are gover- with governments and regulatory bodies world-
nance professionals; the Chartered Secretary wide.” The SCSGP states that it recognizes that
Corporate Secretaries 541 C
“the corporate secretary is a senior corporate offi- Corporate Secretaries, Table 1 Companies participat-
cer who is expected to hold wide ranging respon- ing in the study
sibilities and is often the confidant and counselor 1. Balfour Beatty Plc
to the Chief Executive Officer and other members 2. Bellway Plc
of senior management, especially on corporate 3. Bovis Homes Plc
governance affairs.” The Institute of Chartered 4. Centrical Plc
Secretaries & Administrators in both the UK and 5. ITV Plc C
in some of the country’s other former colonies 6. Llyods TSB Plc
7. Tesco Plc
note earlier for instance Australia, Canada, New
Zealand and others consider that governance as
one of the main duties of corporate secretaries.
Corporate governance therefore ranks highly them to “explain in as much detail as possible
in the roles corporate secretaries perform in orga- their experiences of how their companies have
nizations. Corporate social responsibility is part absorbed the requirements of field of CSR into
of governance since the decision to embark on their professional activities giving both the chal-
socially responsible actions whether this relates lenges and opportunities that have accrued from
to strategic, altruistic, ethical, and philanthropic inculcating CSR into what they do.”
Lantos (2001) or some other forms of CSR will The direct method generated ten responses out
start at the board level and works its way down of which only three provided the required infor-
the corporate ladder. mation; the other seven stated that they were
Because issues relating to CSR now rank unwilling to participate in the study for different
highly on corporate agendas in the UK, several reasons; for example, some companies stated that
large UK companies now have a member of the the time to provide the required information was
board in charge of CSR; in other words, there are not available to them.
now CSR directors. The UK labor governments
since March 2000 have had in post several Mem- Indirect Method
bers of Parliament at different times that have The author with the assistance of a practicing
held the position of CSR Ministers Idowu company secretary enlisted the assistance of
(2009). It must be noted that a UK CSR minister a company which specializes in the recruitment
does not spend 100 % of their time on CSR of company secretaries for FTSE100, FTSE250,
duties; CSR issues are only part of what the and other quoted companies in the UK. The com-
minister does. pany emailed 40 letters to these companies ask-
ing them to do exactly the same thing as
A Study on Corporate Secretaries’ contained in the letter sent out by the direct
Involvements in CSR in the UK method. The indirect method on the other hand
In an attempt to understand how UK corporate generated eight responses with four of these com-
secretaries have absorbed the requirements of the panies providing the required information; the
field of CSR in addition to their statutory duties remainder stated that they did not have the time
for their various organizations and what parts to participate in the study and wanted to wish the
they have played in their organizations’ quest to study every success. Table 1 below gives
join the “CSR bandwagon” the author carried out information about companies which provided
a study in order to obtain information from UK information for the study.
companies’ company secretaries using two The information provided by these seven com-
methods – direct and indirect methods. panies from the two different methods used in the
study was in different forms. Some companies
Direct Method provided detailed written explanations as
The author sent letters directly to 30 company required by our letter, some sent their most recent
secretaries of large listed UK companies asking CSR reports, with some explanations, some sent
C 542 Corporate Secretaries
an electronic version of their most recent CSR • Improve stakeholder communication and
reports and one of these companies provided engagement
a link to their web address, where information • Ensure that the company’s KPIs are meeting
about their most recent CSR report could be the needs of their stakeholders and the com-
obtained. pany continues to be good neighbors in the
communities they serve
Findings • Ensure that their KPIs are robust enough to
The study reveals clearly that corporate secretar- reduce drastically their areas of adverse
ies in the UK and perhaps elsewhere working in impact for example climate change, health
collaboration with their other senior executive and safety, local impact, and employees
colleagues within their various organizations are • Governance arrangements
actively involved in decisions about corporate • Reporting and disclosure of their non financial
involvements in corporate social responsibility performance.
activities. We were able to decipher from this • Stakeholder engagement
study that several large UK companies now • Increase employee engagement and customer
have Corporate Responsibility Committees satisfaction
which are chaired by one of their executive direc- • Conduct and behaviors
tors usually having the title of CSR director or • Better corporate responsibility management
some similar titles. The Group Company Secre- Apart from the above issues, the Group
tary of one of our seven participating companies Company Secretary of a particular company
stated that they had chaired this committee which calls it own committee the Sustainability
between 2003 and 2006. The Group Company Working Group explains clearly that apart
Secretary of another of our companies currently from being a member of the Sustainability
chairs this committee. These committees have an Group, they are by virtue of their position in the
explicit remit to carry out several CSR activities group personally responsible for the following
within the particular company. It was also activities:
revealed that these companies’ corporate secre- • Coordinating the production of the CSR report
taries are members of these Corporate Responsi- • Ensuring that its coverage accurately reflects
bility Committees. the company’s activities and provides
The following is a summary of some of the a balanced view
CSR issues included in the explicit remit for • Providing information to various rating agen-
which the committees in each of our participating cies and organizations
companies are responsible: • The CSR report being a reputational tool is
• Assess and manage risk also used internally by the Company Secretar-
• Develop corporate responsibility strategy ial Department to educate the business on the
• Review social, ethical, and environmental extent of CSR initiatives.
(SEE) policies and practices • Coordinating the quarterly meeting of the Sus-
• Encourage best practice throughout the tainability Working Group
business
• Identify opportunities to improve the effec-
tiveness and sustainability of the business Discussion
using community and environmental
initiatives From the information which the study has
• Review, agree, monitor, and report on corpo- elicited, it appears that corporate secretaries in
rate responsibility key performance indicators their various organizations are not working in
(KPIs) isolation in their quest to absorb the field of
• Increase internal awareness of corporate CSR into what they do while representing
responsibility their profession in these organizations. The field
Corporate Secretaries 543 C
touches all professions that are required by cor- It was also apparent to us that the roles exec-
porate entities in order to ensure that they utives play in an attempt by corporate entities to
successfully achieve their missions and objec- inculcate the field of CSR into their activities are
tives and at the same time demonstrate to the unclear. These executives appear to innovate as
world at large that they are socially responsible. they go along. Adopting a strategy of innovation
The roles each of these senior managers (who are is perhaps the best action they could take under
perhaps members of other professions and who the circumstances, since the field is neither an C
bring the knowledge and experiences of these exact art nor science, it must be noted that the
professions on to the board of corporate entities) practices of CSR have improved drastically of the
play in order to ensure that the field of CSR is last 10 years.
built into the corporate strategy are not explicit
to non-insiders. There could be several reasons
for this: Future Directions
• There are still many things that are unclear
about CSR. Lantos (2001) suggests that CSR CSR is perhaps one of those issues that will never
has unclear boundaries and debatable legiti- go away from societies around the world; corpo-
macy; Idowu (2009) argues that what falls rate strategies would continue to include CSR-
under the umbrella of CSR in one political related issues. This is certainly this author’s view.
setting may probably be of little or no signif- Social, economic and environmental challenges
icance in another political setting. would continue to affect the world economies;
• This field of CSR is not an exact art or science; the solutions of these challenges would require
corporations are only practicing it the way CSR actions.
they believe it affects their core business or The objective of this entry was to provide
the way they understand it. a framework that facilitates some understanding
• Corporate entities that have chosen to adopt of the contributions corporate secretaries have
the requirements of the field are only doing so made and continue to make in the development
voluntarily; it must be noted that even though of the field of CSR using the United Kingdom as
CSR is still voluntary, there are currently not our main focus and case example. The issue of
many corporate entities which are not embed- CSR, sustainability, sustainable development,
ding the ethos of CSR into what they do. In and corporate governance is one that corporate
most countries around the world, there appears secretaries as “the servant” of the board of direc-
to be no legal compulsion (except in Indonesia tors cannot take lightly. This is so because most
and Mauritius) on the part of corporate entities of the duties performed by corporate secretaries
to mandatorily practice CSR, but some gov- are statutory in nature. For our planet to stand the
ernments and international organizations are test of time; actions must start at the board level.
encouraging corporate entities to behave The secretary has a unique role here. He or she
responsibly. In addition to this some NGOs would need to direct members of the board’s
and stakeholders are putting pressure on cor- attention to aspects they need to deliberate on at
porations to behave responsibly. Some com- board meetings.
panies are probably trying to stay out of Failure to take this issue on board at the board
trouble by adopting CSR ethos into their level has serious implications and consequences
strategies. not just for this generation but more importantly
• The field is still evolving, it is hoped that for future generations. Those at the board level
within the next 10–20 years, its situation are aware that stakeholders, in particular, institu-
would become clearer and the way to address tional investors, customers, NGOs, etc., are
some of the difficulties scholars and practi- requesting that corporations take effective
tioners have identified up to now would also actions about those issues relating to CSR; apart
become clearer. from that, members of the board are aware that
C 544 Corporate Social and Environmental Responsibility
any corporation that takes the issue lightly will ▶ Company Directors and CSR
lose the trust, loyalty, and advocacy of its stake- ▶ Corporate Governance
holders. These are important sine qua non which ▶ Definitions of Social Responsibility
any corporation that aspires to prosper in modern
markets cannot do without.
It is the responsibility of the corporate secretary References and Readings
to steer the board to the path of formulating an
effective CSR strategy on issues relating to CSR Department of Business, Enterprise and Regulatory
Reform. (2006). Companies Act 2006. London: HM
and to similarly steer executive directors’ attention
Stationery Office.
to an effective path of executing the strategy. Idowu, S. O. (2009). Practicing corporate social responsibil-
Formulating the strategy on paper or the corporate ity in the United Kingdom and northern Ireland. In S. O.
web site for people to see will not suffice. Actions Idowu & W. Leal Filho (Eds.), Global practices of cor-
porate social responsibility. Berlin/Hiedlberg: Springer.
must be taken to ensure that their key performance
Idowu, S. O. (2010). Corporate social responsibility from the
indicators on CSR are met in terms of measurable perspective of corporate secretaries. In S. O. Idowu & W.
CSR initiatives across the business operations. Leal Filho (Eds.), Professionals’ perspectives of corpo-
One of the UK companies studied in the project rate social responsibility. Berlin/Heidelberg: Springer.
Idowu, S. O. (2011). An exploratory study of the historical
noted above uses an annual business plan based on
landscape of corporate social responsibility in the UK,
steering wheel drivers made up of community, Corporate Governance, 11(2), 149–160.
customer, people, operations, and finance. At the Lantos, G. P. (2001). The boundaries of strategic corpo-
beginning of the company’s year, it sets out spe- rate social responsibility. Journal of Consumer
Marketing, 18(7), 595–632.
cific projects which they hope to deliver over the
following 12 months in terms of the five-wheel
drivers in all its operations around the world. Dur-
ing the 12 months, it directs resources, energy,
focus, and vigor to delivering their expectations Corporate Social and Environmental
in these areas. At the end of the 12 months, it
Responsibility
measures its performance in the areas and asks
a third party to take an independent examination ▶ Sustainable Production and Consumption
of its performance in each of the five-wheel drivers
and reports on the strengths and weaknesses in
terms of their actions during the operating period.
This is perhaps one of the future directions of CSR Corporate Social Development
initiatives.
CSR is a field that will remain with us for the ▶ CSR and Poverty
foreseeable future as long as business and society
continue to co-exist and it will continue to cut
across different organizational functions includ-
ing that of the corporate secretary. Over time, it is Corporate Social Entrepreneurship
hoped that all professions will become more
equipped and effective to dealing with its require- Christine A. Hemingway
ments in order to make our world a better place to Work and Organisational Psychology Group,
live in by this generation and future generations. Aston Business School, Aston University,
Birmingham, UK
Cross-References
Synonyms
▶ Agency and Corporate Governance
▶ Board of Directors Policy entrepreneurship; Social intrapreneurship
Corporate Social Entrepreneurship 545 C
Definition association, requires employees to deliver returns
to shareholders, through their job roles.
The entrepreneurial process has been described as Consequently, unless a corporate employee has
a blend between the individual’s personal attri- been given dispensation from the profit motive in
butes, such as psychological and demographic fac- order to specifically create social value,
tors, which combine with environmental factors their employed work cannot be described as
and the individual’s discovery of an opportunity social entrepreneurship (although their activities C
and the successful exploitation of that opportunity outside of the workplace might be). This is an
(Shane 2003). Hence, the notion of corporate social important distinction. Hence, even though the
entrepreneurship (CSE) relates to both personal majority of corporations, nowadays, claim to
characteristics and particular behaviors. The CSE be fully committed to CSR, it is pushing the
is thus defined as an employee of a corporation who boundaries to describe even the most hybrid of
operates in a socially entrepreneurial manner, i.e., companies (such as those dedicated to the growth
identifying opportunities for and/or championing of fair trade or environmentally sustainable pro-
socially responsible activity, in addition to their duction), as social enterprises staffed by social
formal job role in working toward achieving the entrepreneurs. This is because the remit of the
firm’s business targets. Interestingly, the CSE organization as a corporation prevents this. As
operates regardless of an organizational context a consequence, the CSE is unlikely to have the
that is predisposed toward corporate social respon- time or other resources to commit full scale
sibility (CSR). This is because the CSE is driven by toward progressing a socially responsible agenda
dominant self-transcendent (other-orientated) as because the corporation imparts constraints.
opposed to dominant self-enhancement personal Thus, corporate social entrepreneurship is char-
values. Consequently, due to the CSE’s concern acterized by its informality, in terms of being
with the development of social capital as well as added on to the job and performed in an ad hoc
economic capital: the formal job role of the CSE way and this results in its tremendous variability.
may not necessarily be connected with CSR And the entrepreneurial discretion which is
nor does the CSE have to be in an executive or required to perform it is controversial (Heming-
management position in order to progress his or her way and Maclagan 2004). Even if the CSE is part
socially responsible (SR) agenda. This may suggest of a CSR departmental function, CSR can pro-
similarities with the social entrepreneur (SE) duce both trade-offs and/or oncosts due to its
in terms of personal values and the outcomes of connections with stakeholder management. So
entrepreneurship which may benefit society, but the concept of the CSE specifically reflects its
there is also a key distinction. This is connected to nuanced nature within corporations, akin to the
the differences between the remit, or mission, of the idea of the “different shades of green” of corpo-
corporation and that of the social enterprise. rate environmental champions (Crane 2001).
Moreover, tentative empirical research in this
Distinction from Social Entrepreneurship area has indicated that the penetration of corpo-
The social entrepreneurship literature has largely rate social entrepreneurship within the firm is
concentrated on the voluntary, not-for-profit or dependent upon the levels of integration of CSR
“third” sector. Moreover, the social entrepreneur within the firm’s strategic corporate plan and also
in a for-profit context is traditionally perceived as its organizational climate and culture. In the fol-
a philanthropic agent or business owner. lowing section, the relevance of the CSE is put
The exception to this might be the UK’s into its scholarly interdisciplinary context and
Co-operative Group, which describes its business some key themes are articulated. These concern
as guided by social mission and is not responsible some of the fundamentals of CSR, in terms of its
to shareholders for delivering profit. However, connections with stakeholder theory; its discre-
the corporate model, as defined by the company’s tionary nature and that, despite its widespread
directors and shareholders in its articles of adoption in industry and as a subject taught in
C 546 Corporate Social Entrepreneurship
business schools and across other academic the social entrepreneur and corporate social
departments (e.g., schools of environment, law, entrepreneur are united in their quest to create
politics), CSR remains contested both theoreti- social value, a business ethics perspective
cally and empirically. Other premises of the CSE encourages us to ask the question “For what
relate to its philosophical roots in business ethics, end?” Thus, business ethics can be helpful as it
plus, connections with the psychological litera- uses intellectual frameworks to encourage us to
ture on personal values and prosocial behavior. think deeply about means and ends. For example,
the idea of the CSE creating social value which
benefits both the corporation and society is
Introduction known as enlightened self interest, whereas
a deontological viewpoint frames acts of socially
The notion of the CSE primarily relates to the responsible behavior as driven by the individual’s
field of corporate social responsibility (see sepa- sense of moral duty. Alternatively, virtue ethics is
rate entry). It is thus relevant to both practitioners concerned with the desirable and habitual behav-
and scholars of business and management and, ior that serves the common good, in the form of
more specifically, to business ethics, business a moral character (Walton 1988). However, it is
strategy, organizational behavior, work psychol- important to note that not all values may be
ogy, and entrepreneurship. Such complexity regarded as virtuous and that value and virtue
reflects the interdisciplinary nature of the field may be distinguished. In other words, while
of corporate social responsibility. a virtue might be described as being a value,
CSR, corporate responsibility (CR), sustain- whether or not a value can be described as
ability, social responsibility (SR), and all related a virtue is subjective and in the eye of the
concepts are most commonly understood to beholder. The point is this: how a virtue is applied
incorporate two key themes. First is stakeholder and to what ends can be variable and subject to
theory, whereby CSR is understood in terms of its what is valued. Further, the idea of a plurality of
effects on and how it is affected by all the differ- values in the world has been validated in the work
ent stakeholder groups: shareholders, employees, of social psychologists (see below). Conten-
customers, end-consumers, suppliers, competi- tiously, then, this also implies subjectivity asso-
tors, civil society (NGO’s, pressure and local ciated with the term “morality” (i.e., principles of
community groups, unions), and governments, right and wrong), and thus agency may encom-
including regulation. This perspective is inherent pass all types of behavior that may be regarded as
within definitions of CSR as a balance between “ethical” or “unethical.” Nevertheless, the possi-
people; the planet and profit, sometimes referred bility of dominant self-transcendent values, in
to as the “triple bottom line” of the environment; some people, which are deployed out of a sense
and society and economics. The second key of duty to society, is implicit within the notion of
theme of CSR relates to its voluntary nature in corporate social entrepreneurship.
terms of activities that exceed legal standards
(Carroll 1999). It is this discretionary quality Personal Values
which connects it with the notion of personal The behaviorist dimension associated with
values. As a consequence, the concept of CSR personal values was expressed thus: “values influ-
has been described as “essentially contested” ence most if not all motivated behavior” (Schwartz
(Moon 2003), due to the controversial and often 2006). Moreover, in the Schwartz Values Theory
political nature of the debate around the role of (SVT), our values are conceptualized as
business in society, since the start of the industrial a hierarchical system of priorities and we act in
revolution. Thus, CSR is embedded within the accordance with our dominant, high-priority
field of business ethics, which considers ideas values. The SVT is depicted at Fig. 1, below.
about morality in business and, in turn, the CSE The SVT (Fig. 1) contains 10 motivationally
is synonymous with (moral) agency. So, while distinct values which represent approximately 40
Corporate Social Entrepreneurship 547 C
Corporate Social
Entrepreneurship, N GE SE
LF
Fig. 1 Schwartz (2010) CHA TR
theoretical model of TO AN
relations among S SC
ES Self Direction Universalism EN
motivational types of
E NN DE
values OP NC
E
C
Stimulation
Benevolence
Hedonism
Conformity
Tradition
Achievement
SE
LF
EN I ON
HA Power Security VAT
NC ER
EM NS
EN CO
T
individual value items, such as ambition (in the achievement, while the self-transcendence values
achievement domain) or honesty (in the benevo- are contained within the motivational domains of
lence domain). Essentially, while we possess universalism and benevolence. Benevolence was
many thousands of attitudes, Rokeach (1973) defined in terms of values that “preserve and
identified just 36 values, Schwartz and Boehnke enhance the welfare of those with whom one is
(2004) used 46 value items, and Confucius said in frequent personal contact” and universalism as
that we have 50 values (Zhang 2002). Moreover, “understanding, appreciation, tolerance and pro-
the SVT represents a motivational continuum: the tection for the welfare of all people and for
closer any two domains in either direction around nature” (Schwartz et al. 2001: 521). This self-
the circle, the more similar their underlying moti- other dimension to our values was also identified
vations. This means that the domains on opposing by scholars such as Rokeach (1973: 9), who
parts of the circle represent conflicting values. described values as having either a “personal
According to Schwartz: “. . .people can and do focus” or a “social focus” and also as “self-cen-
pursue competing values but not in a single act. tered” or “society-centered.” Significantly, the
They do so through different acts, at different SVT represents an almost universal structure of
times and in different settings” (Schwartz 2010: human values, which helps us to understand and
225). And if we consider the essentially contested predict different kinds of human behavior. See
nature of CSR, referred to above, the SVT is also Table 1, below, which defines the 10 value
useful toward our understanding of the role of domains and their value items in the SVT.
employees’ values in corporate social entrepre- Hence, the employee’s degree of involvement in
neurship. Of particular relevance are the four CSR may be connected with their personal values,
higher-order value types, most notably, the in addition to the formal requirements of their role.
opposing dimensions of self-enhancement and For example, if we examine the motives of
self-transcendence. Self-enhancement encom- a philanthropist, these might be viewed in terms
passes the motivational domains of power and of Rescher’s (1969) “benefit at issue” classification
C 548 Corporate Social Entrepreneurship
tendencies in management might be overcome, much scope for replication and verification, per-
against the backdrop of the current global finan- haps using a comparison of industries and
cial crisis, which was compounded by lapses in national contexts. Certainly, the quantification
governance systems and personal integrity. of the personal values of the different types of
entrepreneur (business start-up, intrapreneur,
public/social entrepreneur) is a starting point.
Key Issues Indeed, while the distinction has been made,
above, between the social entrepreneur and
Three key issues may be identified from the above CSE, preliminary insights into the personal char-
discussion. Firstly, the notion of employee discre- acteristics of corporate social entrepreneurs and
tion may be regarded as problematic. Certainly, also what they do, i.e., corporate social entrepre-
there is an argument for organizational control and neurship, is useful in our understanding of the
governance measures in order to prevent unethical motivations and activities of social entrepre-
employees abusing their right to act autonomously neurs. Further studies might ask: What is the
in their appointed role: an argument which has relationship between family background, per-
been produced in favor of bureaucracy. Secondly, sonal values and CSR or between education and
if employees do have the freedom to use such corporate social entrepreneurship? And consider-
discretion with regard to the allocation of ing the exploratory insights regarding younger
resources, or the time to champion CSR, tension employees who volunteered in CSR activities to
and conflict may develop when an employee help their career, is there a connection between
decides to support a different “cause” than has life-stage and dominant self-enhancement or self-
been directed by their manager. And not everyone transcendent values? Can some predictive capa-
will agree on what the “right” activities are (Buono bility be developed on the basis of comparisons
and Nichols 1985: 68). Moreover, despite the between the characteristics of the CSE and other
widespread adoption of CSR by corporations (as employees? Also, the situation in the public sec-
evidenced in their corporate communications), the tor remains unexplored. There is no reason why
aforementioned study revealed some levels of the C in CSR cannot be dropped for the purposes
ignorance and disengagement from CSR at the of such an investigation, particularly when the
top of the organizational hierarchy, thereby con- ethical conduct of public sector leaders and pol-
tinuing the contested theme of CSR. It also implies iticians can attract similar amounts of publicity
the necessity for greater access to educational pro- for misdemeanor as their corporate counterparts,
grams in CSR for directors and senior managers, with regard to fraudulent expense claims or the
as well as those targeted at middle and junior negligent discharge of duties, for example.
management. Thirdly, methodological difficulties Therefore, the tentative empirically derived
abound with regard to the investigation of social insights described above are just the beginning
responsibility as a subjective state. However, for management and business ethics scholars who
despite the growing literature which connects need to dig much deeper in their quest toward the
values and behavior in systematic, predictable development of socially responsible organiza-
ways (Schwartz et al. 2001), these exploratory tions and a less flawed form of capitalism.
insights present scholars with both a highly com-
plex and potentially fruitful research agenda.
Cross-References
sustainability as a focal point when the corpora- addressing business risks in a proactive manner
tion develops a new product or service. This will gain them a competitive advantage and that
entails developing products or services which the key principles of sustainable business success
may relieve some of the world’s problems, such are to:
as disease, contaminated water, CO2 emission, • Shift from a philanthropic add-on approach to
hunger, or the lack of education. CSI is also corporate social responsibility (CSR) to
referred to as CSR innovation. CSI is useful for a strategic approach, where CSR activities
businesses which work with innovation and/or complement – or maybe even become – the
CSR (corporate social responsibility). core of business
The increasing number of cases from around • That the vision and strategy must be accom-
the globe that showcase how responsible business panied by changes in the company’s
conduct and corporate social innovation open up “hardwiring” and “softwiring,” that is, with
new revenue streams, new industries, and radi- accompanying structures, processes, perfor-
cally different business models – and prove to be mance, and measurement systems as well as
crisis-resistant – is creating a new business communications, employee, and leadership
mindset. In the new economic world order, social development programs designed to encourage
responsibility and innovation drive good busi- sustainable value creation thinking, skills, and
ness. Sustainable value creation is the way for practices
companies to future proof their business. • That they must work in partnerships that com-
bine private, public, and civil sector resources,
skills, and expertise to infuse their mainstream
Introduction practices and thinking
innovation aiming at creating a framework for introduced in order to delimit this new type
reporting the social, environmental, and eco- of innovation from earlier environmental tech-
nomic performance of firms. As such, the nology or “green tech” investments popular-
Global Compact aims to help firms attain and ized in the 1970s and 1980s. The latter were
maintain legitimacy with society. mainly end-of-pipe solutions that strongly
Individual Level: The Social Entrepreneur relied on particular legislation support.
At the individual level, social entrepreneur-
ship focuses on persons driving social change Role of NGO
and innovation. These social or civic entrepre- From the perspective of multinational corpora-
neurs can be individual citizens, community tions, and their response to globalization pres-
activists, or civil servants who use entrepre- sures, the emergence of NGOs as important
neurial spirit in order to reach social objec- actors presents both challenges and opportunities.
tives. Bornstein defines a social entrepreneur A number of individual corporations and repre-
as a pathbreaker with a powerful new idea, sentative associations have embraced NGOs as
who combines visionary and real-world prob- partners in forging a new alliance that meets both
lem-solving creativity, who has a strong ethi- economic objectives and goals of social and envi-
cal fiber, and who is “totally possessed” by his ronmental development. The GRI described
or her vision for change. Identify empathy, above is a clear example of the potential dual
moral judgment, self-efficacy, and social sup- benefits from these partnerships. At the same
port as the key aspects that distinguish social time, however, the insertion of NGOs into a set
entrepreneurs. Although the motivation to of exchanges that had previously been the exclu-
build a viable business can be part of social sive domain of governments and business places
entrepreneurship, many authors do not think MNCs in a confusing and sometimes contradic-
this to be a necessary condition. A real-life tory situation in which they must meet govern-
example of a social entrepreneur is Florence ment requirements and obligations as well as
Nightingale, who was the founder of modern respond to NGO pressures and demands
nursing. She established the first school for (Doh/Teegen 2002). This situation presents
nurses and fought to improve hospital condi- MNCs with a potential double jeopardy in
tions balancing an innovative drive and which responding to government regulation may
a passion for social improvements. sour relations with NGOs and vice versa. On the
Organizational Level: Stakeholder-Driven other hand, it may also offer the possibility of
Innovation satisfying governmental requirements through
While there is a growing literature stream demonstration of responsiveness to NGOs,
on user-driven innovation, there exists so far a potentially productive development for the
very little research on how innovation can be future of business-government-NGO delibera-
driven by other stakeholders besides users and tions over globalization (Doh forthcoming).
consumers. Another example of activist- The role of NGOs in development and imple-
driven innovation concerns the fair trade mentation of international environmental and
movement which was initiated and launched labor codes is evolving rapidly. Once viewed as
by activist NGOs. Drawing on church groups, “outsiders” who serve to frustrate or interfere
developmental charities, and activist networks with the operation of governments and corpora-
fair trade has matured from a nonprofit start- tions internationally, NGOs are becoming more
up idea into a profitable business proposition. integral to the process and outcome of global
Global Level: Sustainability Innovation discussions over important social and environ-
At the global level, much attention has been mental issues. Governments and corporations
paid to the role venture capital (VC) plays in must respond to the increasing interest of NGOs
promoting sustainability innovation. The term and the broader civil society groups they repre-
clean technology venture capital has been sent. The initial insights presented in this entry
Corporate Social Innovation 555 C
provide an ample agenda for future research improvements in human health, education,
directions, especially consideration of the human welfare, environmental protection, and
timing of NGO intervention, and the evolutionary energy.
nature of NGO involvement in these codes Innovation capabilities are not different from
and agreements. Careful consideration by all those needed to create new products with novel
relevant stakeholders of how best to include functionalities. The difference is on the focus and
NGOs in the policymaking process will have perhaps on a stronger emphasis on understanding C
a substantial influence not only on the evolution social problem areas and creating new forms of
of multilateral approaches to environmental and alliances to create solutions.
labor codes but also on the very nature of global Social innovation can thus be regarded as an
governance and the future role of multinational experimental space which provides leeway for
enterprise in the global economy. the renewal of services (commercial or public)
The typology of codes of conduct presented here but also of the main forces (the businessman,
does not capture fully the dynamism of this phe- utility, and value) that drive our societies.
nomenon. In particular, there is an increasing inci- It needs to be studied, analyzed, and appraised.
dence of multi-stakeholder agreements, such as the However, for various reasons, it is not that simple.
Global Reporting Initiative (GRI), that reflect sig- First, right away integrating the concept of exter-
nificant participation by all of the major groups nality, that is to say, of collateral results that are
discussed here. The GRI was established in 1997 impossible to measure, is the characteristic of
to develop globally applicable guidelines for these innovations. In the longer run, they may
reporting on the economic, environmental, and well develop a social efficiency that could go
social performance, initially for corporations and beyond the agenda of the initial project by being
eventually for any business, governmental, or a catalyst for social change and by contributing to
nongovernmental organization. Convened by the the emergence of a new development model. But it
Coalition for Environmentally Responsible Econo- remains difficult to reduce their value to statistics
mies (CERES) in partnership with the UN Environ- that command public policy and investor interest.
ment Programme, the GRI includes participation of How can greater recognition and development
corporations, NGOs, accountancy organizations, of such experimental spaces be achieved? Speak-
business associations, and other stakeholders from ing at the aforementioned conference, Romain
around the world (GRI 2002). The GRI’s 1999 draft Beaume, professor at the Ecole Polytechnique
Sustainability Reporting Guidelines represent the (chair of Innovation Management), rightly pointed
first global framework for comprehensive sustain- out that for over 100 years, technological innova-
ability reporting, encompassing the “triple bottom tion has been the center of attention: be it through
line” of economic, environmental, and social issues. tracking, promotion, training of stakeholders, cre-
ation of dedicated private or public structures, tax
Social Innovation policy, nothing has been neglected in fostering it.
Social innovation refers to new or enhanced prod- In contrast, social innovation is a practice at once
ucts or services that have a positive impact on ancient and very recent in the sense that its value
social or environmental issues, often termed has only been noticed in recent years. Institutions
“environmentally friendly or green products.” and economic tools liable to support its develop-
Examples illustrating possibilities for ment are still of a rudimentary nature.
social innovation include production of fibers
entirely from renewable resources, fuel oils from
vegetation, energy and water savers, chemical-free Future Directions
cleaning, recycled materials, organic food and
cosmetic products, natural home furnishings, etc. Socially responsible investing (SRI) is increasing
Social innovation represents social learning and the attention on corporate social and environmen-
problem solving in areas ranging from tal practices through either through positive
C 556 Corporate Social Innovation
screens, that is, identifying companies that in a corporate history and culture that lays the foun-
some way benefit society, or through negative dation for its values-based and holistic approach to
screens which weed out poor SRI performers, doing business. By establishing the link between
including those who pollute or maintain poor healths as a driver of wealth, it has been possible to
working conditions. pursue triple bottom line strategies in a way that
Large pension funds around the world are increasingly gets at the heart of core business
already using screening agencies to assess how processes – in the markets as well as in the corpo-
companies tackle so-called ESG (environmental, rate functions and governance mechanisms. The
social, governance) issues like eco-friendly prac- approach is shaped through extensive stakeholder
tices, human rights and corruption. Four hundred engagement embedded in organizational behavior
seventy five large institutional investors around the and business operations. An example of these
world representing more than $55 trillion of funds stakeholder-driven initiatives is the DAWN pro-
(2009 figures) investigate the emissions strategy of gram, the largest-ever, global survey to uncover
companies through The Carbon Disclosure Project diabetes attitudes, wishes, and needs. The study
(CDP). And stock market indexes like the focuses on the person behind the disease and is
FTSE4Good Index Series and the Dow Jones Sus- aimed to uncover the psychosocial aspects of dia-
tainability Index are tracking the financial perfor- betes. The DAWN program taught all parties
mance of companies that focus on creating long- involved that the patients also need mental encour-
term shareholder value by embracing opportunities agement and positive guidance empowering them
and managing risks derived from economic, envi- to take charge of their own health. Such innovation
ronmental, and social developments. in public health promotion activities helps effec-
Marks & Spencer has linked up with NGOs and tively reduce the burden of diseases such as dia-
social organizations to share knowledge, develop betes. Furthermore, Novo Nordisk is driving
solutions, and support causes linked to plan A, and national diabetes programs to educate stake-
as part of its employee engagement program, it pro- holders as well as actively supporting the growing
vides, among other things, one day’s paid time off international advocacy platform to put chronic
for all employees to participate in a plan A initiative. disease prevention on the political agenda. One
Traditional business models are consequently such initiative is the Oxford Health Alliance.
being stretched. And with the reinforcing impact
of the economic crisis, some of them are being Procter & Gamble
stretched to a breaking point where short-term Proctor & Gamble provides an example of a social
shareholder value creation cannot stand alone. As innovative product that failed to be marketed for
a result, companies are responding with attempts to profit. The case is a water purification system
reconfigure their DNA as pure profit seekers through called PUR, which P&G developed in collabora-
responsible and sustainable business actions. tion with the US Centers for Disease Control for
Multinational companies based in Europe, commercial markets, targeting low-income con-
North America, Japan, and other developed regions sumers. The product had clear social benefits,
of the world are starting to recognize the need to providing clean drinking water for households in
move into regions with growing populations and places where the health risks of untreated drinking
developing economies. Thereby, they can access water are high, especially for children. After
new markets and new consumer segments instead 3 years of market tests though, PUR was looking
of relying on their traditional markets which are like a commercial failure. Many other firms would
stagnating, shrinking, or competition intensifying. have closed down the project, but P&G instead
moved PUR to its corporate sustainability depart-
Some Cases in Corporate Social Innovation ment, where focus no longer relied solely on mak-
Novo Nordisk ing a profit. Since 2003, P&G has sold the product
Novo Nordisk has undertaken a shift from an at cost and worked in partnership with nonprofit
internal focus to a reflective view through organizations, which distribute the product
Corporate Social Irresponsibility 557 C
through their development and humanitarian relief http://www.europeanfinancialreview.com/?p¼2287
networks. However, by using the marketplace, http://www.jstor.org/stable/3857969
http://www.purwater.com/
P&G felt they could relieve people at a global http://www.unilever.com/Images/Beyond%20Corporate%
level, whereas philanthropic activity would not 20Responsibilty%20-%20Social%20innovation%20and
be as effective. Using social marketing models %20sustainable%20development%20as%20drivers%20of
by collaborating with NGOs created greater %20business%20growth_tcm13-95521.pdf
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Unilever ness Review, 11, 665–684.
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Panapanaan, V., & Linnanen, L. (2004). A phase-wise
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mental issues. Unilever has initiated the largest an innovative, stakeholder-oriented assessment tool for
rural health and hygiene education program ever organizational excellence and CSR. Journal of Business
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Murtha, T. P., Lenway, S. A., & Bagozzi, R. P. (1998).
communities and schools to reach the broad Global mind-sets and cognitive shift in a complex
masses. In order to help low-income households, multinational corporation. Strategic Management
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Petrick, J. A., & Quinn, J. F. (2001). The challenge
Another project is the “Shakri,” which deals with of leadership accountability for integrity capacity
reaching small Indian villages with less than 2,000 as a strategic asset. Journal of Business Ethics, 34,
people. Lack of retail distribution networks to 331–343. doi:0.1023/A:1012597201948.
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responsibility: A three-domain approach. Business
vative thinking at the core of strategy. The solution Ethics Quarterly, 13, 508–530.
was recruiting women from these small villages to
act as freelance direct sales operators. Cooperation
between Unilever and many women’s self-help
groups (Indian NGOs) provided training and edu-
Corporate Social Investment and
cation to these women and made them local entre-
Poverty
preneurs. The women typically doubled the
▶ CSR and Poverty
household income tending to use the money on
education for their children. Since 2000, Unilever
has extended Shakri to cover 80,000 villages.
There are many more product examples for
Corporate Social Investment in
instance in India, Indonesia, and Brazil.
Africa
Frooman, J. (1997). Socially irresponsible and illegal Social causes, social change campaigns; Social
behaviour and shareholder wealth. Business and Soci- marketing; Social marketing and assessment
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Greenwood, M. (2007). Stakeholder engagement: Beyond response tools; Traditional economic domain of
the myth of corporate responsibility. Journal of Busi- marketing
ness Ethics, 74, 315–327.
Jones, B. (2010). Corporate social irresponsibility: The
role of government and ideology. In W. Sun, J. Stew-
art, & D. Pollard (Eds.), Reframing corporate social Definition
responsibility: Lessons from the global financial crisis
(pp. 57–76). Bingley: Emerald. Not-for-profit and social marketing, like many
Jones, B., Bowd, R., & Tench, R. (2009a). Corporate other fast-evolving areas of inquiry in social and
irresponsibility and corporate social responsibility:
Competing realities. Social Responsibility Journal, management sciences, lacks consensus definition
5(3), 300–310. ISSN 1747-1117. and name perhaps because its scope of activities
Jones, B., Temperley, J., & Lima, A. (2009b). Corporate is yet to be thoroughly exhausted. Doug
reputation in the era of Web 2.0: The case of Primark. McKenzie-Mohr of Canada referred to it as com-
Journal of Marketing Management, 25(9–10), 927–939.
Kogler, D. (2007). Unternehmensethik in internationalen munity-based social marketing (CBSM) and tried
Unternehmen. Norderstedt: Grin. to sustain behavior by using tools and findings
Kotchen, M. J., & Moon, J. J. (2007). Corporate social from social psychology to unveil the perceived
responsibility for irresponsibility [Internet]. U.C. barriers (and remedies) to behavior change.
Santa Barbara and NBER University of Pennsylvania.
Retrieved June 12, 2010, http://www2.bren.ucsb.edu/ Perhaps CBSM underscores SMART (Social
Bkotchen/links/CSR9-04-07.pdf Marketing and Assessment Response Tools) as
Mitchell, L. E. (2001). Corporate irresponsibility: America’s it uses focus groups and surveys to unveil barriers
newest export. New Haven: Yale University Press. and commitments, prompts, social norms, social
Strike, V., Gao, J., & Bansal, P. (2006). Being good while
being bad: Social responsibility and the international diffusion, feedbacks, and incentive to change
diversification of U.S. firms. Journal of International behavior. However, a seemingly complete defini-
Business Studies, 37(6), 850–862. tion is right here, at least for now, to recognize
Wagner, T., Bicen, P., & Hall, Z. R. (2008). The dark side knowledge migration to social causes. Corporate
of retailing: Towards a scale of corporate social irre-
sponsibility. International Journal of Retail and Dis- social marketing is the systematic transfer of
tribution Management, 36(2), 124–142. commercial marketing concepts and tools to pro-
grams designed to influence the voluntary behav-
ior of target audiences, where the primary
objective is to improve the social welfare of the
Corporate Social Irresponsibility – target audiences and/or the society of which they
CSIR are a part. It defines instilling traditional market-
ing domains into programs primarily packaged to
▶ Irresponsibility secure and maintain target audiences’ social
engagement.
While these definitions differ from societal
Corporate Social Marketing marketing concept – integrated issues of social
responsibility into commercial marketing strate-
Hart O. Awa gies – it conveys three integrated points. First,
Department of Marketing, University of Port the primary focus is on social change campaign
Harcourt, Port Harcourt, Rivers State, Nigeria and social good – changing specific behavior
in health, safety and security, sustainability,
recycling, etc. It strives to borrow managerial
Synonyms skills similar to those of traditional businesses to
change the behaviors of communities and to
Community-based social marketing; Cross-trans- persuade them to accept, modify, or abandon
fer; Multiple publics; Not-for-profit organizations; certain ideas, attitudes, practices, or behaviors.
Corporate Social Marketing 561 C
Campaigns that encourage people to get antibi- Cross Society (Consciousness 1 and Con-
otics may be assumed more tactical and rarely sciousness 3).
connote the difficulties to attain long-run behav- • Transactions involving the exchange of intan-
ioral change of social marketing. Scholarship gible costs for tangible benefits, e.g., going on
shows that from the fall of Soviet Union to a certain diet or giving up habits, such as
rapid spread of technological innovation, the smoking, prostitution, night clubbing, thefts,
power and resilience of commercial modes of drinking, etc. C
operation have become a major theme in many • Transactions that do not involve money-
stories of social change, and so social enterprises passing hands (Consciousness 2). Connotative
are increasingly and/or grudgingly admired for transfer is slowest here because transaction
their dynamism, their market discipline, their does not involve economic considerations in
incentives for efficiency and innovation, and either side of the exchange.
their economically self-sustaining character. Less hostility to marketing favorably affects
Second, the interest is not that of the marketer the rapid transfer within organizational catego-
rather to influence long-term social behavior ries, and specifically improves effectiveness in
of the audiences and the general society. For terms of costs and service delivery. The greater
instance, social causes that promote and remind the similarity of not-for-profit organizational
the audiences of zip up; the use of condom environment to a commercial environment, the
and seat belts by macho-men; regular medical more extensive would the transfer. Also, the
check-ups and blood donations; speed limits; greater the similarity of the not-for-profit’s focal
and avoidance of some kinds of unacceptable transaction, the faster and more extensive would
social behavior. And finally, cross-sector transfer the adoption. Added to consumer transactions are
of intellectual armory creates new dimensions of organization-to-organization transactions involv-
organizations and new kinds of transactions as ing profit and not-for-profit sectors. Recognizing
well as different kinds of sponsorship. For that not all not-for-profit marketing is social
instance, a typical manager follows market marketing, Alan Andreasen suggested joint pro-
conditions, minimizes waste, misdirection, and motions and licensing as strategic options for
inefficiency, but a new kind of business cross-sector relationships. According to him,
philosophy emerges once deeply committed to not-for-profit organizations form partnership
the social causes that may demand overlooking relationship (joint promotion) with a profit-
such inhibiting factors in attempts to deliver making company to promote the former’s mes-
favorable outcomes. In both commercial and sage, image, or social causes. For instance, pri-
noncommercial entities, five classes of transac- vate health-care givers (e.g., hospitals, clinics,
tions, expanded from Alan Andreasen’s frame- and NGOs) and public health institutions and
work and Philip Kotler’s Consciousness 3, are agencies may form alliance to promote
distinguished at consumer’s level: breastfeeding and/or to avert HIV/AIDS and
• Transactions involving exchange of goods and breast cancer. Health Magazines partner with
services for money (Consciousness 1). health agencies to promote knowing your HIV
• Transactions involving the exchange of status and to discourage unprotected sex and
money for intangible goods, e.g., donations breast cancer. In the United States, McDonald
of money to Red Cross Society, Girls’ Guilds, House Charities works with several local and
etc. (Consciousness 3). This is an attempt to national not-for-profit organizations to help
positively relate to every public, not just the critically ill children and their families through
consuming public. difficult times.
• Transactions involving the exchange of On the other hand, licensing involves
money for intangible social benefits, e.g., a situation whereby commercial organizations
5 % of sales of Procter & Gamble (P&G) pay licensing fee to a not-for-profit organization
going into cause-related marketing, e.g., Red in return for using the latter’s name and/or logo.
C 562 Corporate Social Marketing
For instance, The Organization Save the Children corporate social marketing. Corporate social
Federation, which provides food, clothing, and marketing is a child of two disciplinary parents:
shelter to the impoverished children around the a social parent – social sciences and social policy
world, has 27 profit-making licensees that use the approaches, and a marketing parent – commercial
name of the organization on various products and as well as social media and public sector
donate portions of their proceeds to save the marketing.
children. Attempts by Philip Kotler and Gerald Zaltman
to formalize corporate social marketing empha-
size that the traditional economic domain of mar-
Introduction keting technology could be systematically
extrapolated to promote social issues and ideas,
Perhaps one of the most striking trends in the merit goods, attitudes, and social well-being and/
world that is speedily grabbing huge scholarship or to avoid demerit behaviors – public smoking,
in the recent moments is the convergence of answering calls on steering, etc. Marketing is
thoughts from traditional economic domain to a pervasive societal activity that transcends buy-
social causes bearing in mind that both differ ing and selling; increasing amount of society’s
greatly by their corporate objectives and mis- work is being performed by organizations other
sions. Statutorily, nonbusiness organizations, than business firms, and so every organization
such as War Museum, the Police and Army, performs marketing-like activities whether or
Red Cross Society, etc., provide economic, not they are recognized as such. The premise is
social, and political infrastructures in a society. that both commercial and social marketers pro-
Many corporate social marketing campaigns typ- mote values to their respective audiences, who
ically involve noneconomic transactions. Manag- may have varying needs that require differenti-
ing them poses almost same challenges as ated marketing efforts. For instance, Choosing
managing Procter and Gamble (P&G), General Health (2004), It’s our health (2006), and Health
Motors (GM), and Guinness Breweries; thus, Challenge England (2006) made operational and
interdisciplinary and intersector inquiries aimed strategic use of social marketing to convey social
at transferring knowledge acquired in other dis- values to the people.
ciplines makes for strategic achievement of Key structural and cultural characteristics
objectives. The convergence theorists believe fondly differentiate commercial and not-for-
that theories, concepts, hypotheses, postulates, profit marketing, and influence adoption. Studies
and paradigms developed in psychology, sociol- show that social marketing is affected by basic
ogy, anthropology, economics, management sci- conflicts among myriad of cultures. Tradition-
ences, and other relevant disciplines are ally, management emphasizes willingness to
technologies that somewhat apply to noneco- overlook cost-effectiveness if it is in good
nomic settings. Corporate social marketing is an cause. But recent development shows that social
evolving area with fascinating growth spanning marketing develops more sensitivity to providing
from Philip Kotler and Sidney Levy’s classic and services and to competing with other organiza-
most celebrated intellectual grenade on broaden- tions for donors’ favors hence the essence of
ing the concept of marketing and perhaps marketing in not-for-profit organizations. In
Theodore Levitt’s marketing myopia. The gre- most social sector organizations, costs rise faster
nade lobbed in a resounding morale and support than general inflation, and the underlying social
for a change in thought of the domain of market- problems increase in intensity and complexity,
ing scholarship and its relationships to thereby yearning for more sophisticated
noncommercial organizations. The transfer of responses from government and private dona-
commercial marketing’s tool kits and techniques tions and grants. The government itself is often
to achieve specific behavioral goals for social and constrained by balancing off budgets, and she and
not-for-profit causes precipitated the discipline of other providers of social capitals increasingly
Corporate Social Marketing 563 C
demand greater results and accountability from (b) Measurement metrics. Commercial market-
their social investments, forcing social enter- ing is characterized by very clear and rela-
prises to aggressively compete for scarce funds, tively simple line (perhaps uniform)
seek new ways to control costs, improve effec- measurement metrics (e.g., sales volumes,
tiveness, and increase revenue. They often need market positioning, market share upsurge,
to do more with less. profits, cost reduction, etc.) upon which efforts
The initial philosophy frequently conflicts that are evaluated and guided by stakeholders – C
of the marketers’ who through their emphases on employees, shareholders, and the organization
corporate mindset, attempt to increase efficiency itself. Consumers themselves are regarded as
and effectiveness perhaps via increasing the num- the most significant public to deal with, and
ber and range of programs offered. So while the consumer research guides decisions. On the
social service people accuse the proponents of other hand, social marketing is often besieged
corporate culture mindset of being heartless, with difficult-to-measure and time-consuming
uncaring, or even immoral, the corporate culture objectives, which perhaps are subject to com-
mindset group attacks their counterpart (the plexities of influences outside the marketer’s
social service people) as being ill-focused, waste- control. Such less-exact objectives relate to
ful, and somewhere on cloud nine. All things such causes as reduction of spousal and child
being equal, conflicts between these two cultures abuses, increasing physical activity, making
must be carefully addressed for effective social less stressful life/career, fighting corruption,
marketing programs: preserving wilderness, etc. Further, explana-
(a) Sponsorship and ownership. The Health tion to the measurement metric is the issue of
Media and Safety Campaigns, National multiple publics and multiple peculiarities in
Action Committee on AIDS (NACA), HIV/ terms of expectations and measurement stan-
AIDS Emergency Action Plan (HEAP), dards. This has caused not-for-profit firms to
among others, are directly funded by govern- remain competitive in packaging programs
ment grants and subsidies, revenues from that simultaneously win the favor of the target
sales (where necessary), individual and cor- audiences as well as that of individuals and
porate donors, foundations, licensing fees, groups who offer assistance and/or regulate
and royalties and indirectly from tax conces- activities. For instance, the Economic and
sions, donations of goods and services, and Financial Crime Commission (EFCC) has
voluntary labor. Quasieconomic transactions the ordeals of marketing itself simultaneously
exist here to the extent that there is money to the governments, to honorable members
exchanged, but the other side of the transac- and other politicians, and to other Nigerians/
tion does not involve goods and services. stakeholders, and each has a distinct measure-
Unlike for-profits, not-for-profits are not ment standard(s). Also, universities target pro-
keyed to profitability targets and they mobi- spective students as clients of its marketing
lize as much resources as possible from var- programs, and also current students, parents/
ious publics, thereby enforcing multiple guardians of students, alumni, government
objectives and differential measurement met- agencies, staff, etc.
rics. Sponsors or donors often have little or no (c) Public scrutiny. Consequent upon receiving
direct influence on corporate decisions; they donations and tax concession to achieve their
do not share in the organization’s surpluses multiple objectives, not-for-profit organiza-
and as such their commitment to organiza- tions are often subjected to ample measures
tional success may come about in some other of formal and/or informal public scrutiny,
ways, perhaps in psychic and social satisfac- which perhaps, among others, limits risk tak-
tion. They might interfere in marketing pro- ing and increases the relevance of politics and
grams in order to promote ideas they deem public relations in the design of marketing
relevant. mix strategy. Such scrutiny may come from
C 564 Corporate Social Marketing
the governments, funding sources, and/or the marketing. Recognizing that social marketing
general public(s) as may be represented by intends to achieve basic social service missions,
the press or academic researchers and critics. (e.g., to eliminate homelessness, destitutions,
(d) Acute budgetary control. Commercial mar- child abuse, drug abuse, and infant mortality or
keting takes more of strategic decision involv- to improve the physical and mental well-being
ing a long-range marketing plan of say 5 years of the elderly, disabled, and the motherless),
and rework it regularly to accommodate the basic issue is to direct scholarly thinking to
unforeseen environmental changes (rolling articulating a single unifying definition that
plan). This may call for beefing up budgets incorporates its entire activities.
and other variables that would inhibit the actu-
alization of the set objectives. Conversely,
not-for-profit organizations suffer severe bud- Future Directions
get restrictions, which are often placed by
watchdog groups who emphasize on limiting The business domain of marketing provides useful
expenditures on overheads irrespective of concepts that guide all manner of organizations,
changing situations and changing opportuni- including not-for-profits. Social marketing is car-
ties in the environment. The watchdog groups ried out by public sector and not-for-profit organi-
believe that high salaries and high commit- zations with contemporary focus on health care,
ments to sales commissions, advertising, and energy conversation, safety and environmental
other overheads may mean a waste of societal regulations, and recycling. The future is bright
funds. Even when being strategic is thought for the transfer of marketing tool kits to social
of, the red-tapism associated with decision causes. Recently, quite a number of key govern-
making in not-for-profit organizations frus- ment policies (e.g., Health and Safety Campaigns)
trates the exploitation of the right opportuni- in many countries, including Australia, United
ties at the right time. States, Canada, New Zealand, and United King-
(e) Fewer opportunities to modify market offer- dom adopt corporate social marketing approach to
ings. Many nonprofits operate in environ- the planned social change and achievement of
ments where the desired behavior involves specific behavioral goals for social goods. For
market offerings that are relatively stable and instance, the Victoria Cancer Council of Australia
less-than-desirable from the customers’ per- develops antitobacco campaign with slogan Quit
spective. For instance, in the crusade on quit- and its SunSmart campaigns against skin cancer
ting smoking, drug addition, cultism, or had the slogan Slip! Slop! Slap! The AIDS con-
unprotected sex (by government departments), trolling programs in India use social marketing
the marketers’ strategies often get frustrated and trained social workers, and the government
with products or behaviors that are rarely easy of United Kingdom in 2007 launched the first
to modify. In the private sector marketing, social marketing strategy for all aspects of health.
resources are strategically deployed to change Further, the state-run Occupational Health and
the situation to an exploitable one. Safety Organization in Australia with the theme
Work-safe Victoria uses social marketing to
reduce social and human impacts of workplace
Key Issues safety failures just as Dance-Safe exploited social
marketing ideas in its communications.
Social marketing is an evolving area with so Such intellectual migration has the potential of
much unknown; it is a relatively vague concept profoundly improving research/thinking and the
with mixed academic and operational excellence. general ways nonbusiness sectors operate, bear-
The yet to be exhausted scope as well as the ing in mind their need to redefine values as well
absence of generally accepted definition compli- as their chronic financial ordeals. Nevertheless,
cate understanding and cynicism toward social the transfer has been vigorously challenged by
Corporate Social Obligation & CSR 565 C
Robert Bartels and David Luck, among others, References and Readings
who indicated that the concept takes marketing
beyond its proper domain and plunges it into Andreasen, A. (1978). A marketing audit of the smoking
and breast cancer program of the Office of Cancer
confusion and identity crises. To Bartels, the
Communications, National Cancer Communications,
problem was to reconcile whether marketing National Cancer Institute. Washington, DC: Office of
was defined by its technology (Kotler and Cancer Communications, National Cancer Institute.
Levys’ position) or by the class or classes of Andreasen, A. (1995). Marketing social change: Chang- C
ing behaviour to promote health, social development
behaviors toward which marketing was directed
and environment. San Francisco: Jossey-Bass.
(Luck’s position). Luck posited that diversion of Andreasen, A., & Manning, J. (1978). Culture conflict
attention from critical issues and encroaching in healthcare marketing. Journal of Healthcare
into other disciplines may jeopardize the obvious Marketing, 7(1), 2–8.
Bartels, R. (1974). The identity crisis in marketing.
involvement of marketing. While it is obvious
Journal of Marketing, 38, 73–76.
that marketing goes beyond buying and selling, David, L. (1969). Broadening the concept of marketing –
Kotler and Levy warned that marketing is all too far. Journal of Marketing, 33, 53–55.
about transactions, not just market-based trans- Kotler, P., & Levy, S. (1969a). Broadening the concept of
marketing. Journal of Marketing, 33, 10–15.
actions. However, Nickels surveyed 74 market-
Kotler, P., & Levy, S. (1969b). A new form of marketing
ing professors on the extent of acceptance of the myopia: Rejoinder to Professor Luck. Journal of
broadened view of marketing within the market- Marketing, 33, 55–57.
ing academic circles, and found that 95 % agreed Kotler, P., & Roberto, E. (1989). Social marketing: Strategies
for changing public behaviour. New York: The Free Press.
with Kotler and Levy in furthering the applica-
Kotler, P., & Zaltman, G. (1971). Social marketing:
tion of marketing to social issues. Observations An approach to planned social change. Journal of
have shown that barely four decades now mar- Marketing, 35, 3–12.
keting scholars have widely and routinely Nickels, W. (1974). Conceptual conflicts in marketing.
Journal of Economics and Business, 27, 140–143.
embraced, discussed, researched, and taught sub-
jects on the application of marketing thoughts to
not-for-profit organizations, which is a clear indi-
cation of acceptance of the broadened scope. It is
Corporate Social Obligation & CSR
hoped that in the next few decades, the contro-
Kim Cheng Patrick Low1,2, Sik-Liong Ang3 and
versies raised by opponents of cross-sector trans-
Yue Shuang Ang4
fer will be completely addressed. 1
Universiti Brunei Darussalam, Gadong, Brunei
Today, there are full-fledged textbooks on the
Darussalam
subject, marketing texts and journals with well- 2
University of South Australia, Adelaide,
blown discussion on the subject, and specific
Australia
journals devoted to social and not-for-profit mar- 3
Faculty of Business, Economics & Policy
keting. One of the subthemes of the Marketing
Studies (FBEPS), Universiti Brunei Darussalam,
Educators Conference organized by National
Bandar Seri Begawan, Brunei Darussalam
Institute of Marketing of Nigeria (NIMN) in 4
Birmingham Law School, University of
University of Benin on August 9 and 10, 2006
Birmingham, Edgbaston, UK
was public sector marketing in a developing
economy. This shows that the broadening con- Synonyms
cept has permeated every economy.
Duty and obligations to society; Duty and respon-
sibility to community
Cross-References
Definitions
▶ Canadian Business for Corporate Social
Responsibility Corporate social responsibility (CSR) in its plain
▶ Cross-Transfer meaning is a social rather than a legal concept.
C 566 Corporate Social Obligation & CSR
The practice of CSR is not mandatory in many invariably in contradiction with each other.
countries around the globe. Thus, a business can Going by the phrase “no man can serve two
choose whether to adopt or disregard it. CSR masters,” it can be argued that a business
takes different interests of an entity’s stake- adopting the concept of CSR is embarking in
holders into account. costly venture (Johnson 1998).
The concept of corporate social obligation
(CSO) on the other hand has emerged from two The Problems of Bad Business Behavior
proposed changes – alterations to a paradigm of There are two schools of thought on business
what businesses are and an extension to the behavior. One of them believes that a business is
dimension of the concept of CSR. The concept a creation of law (Barry 2000). Thus, its obligation
of CSO is the engagement of three or more par- and responsibility should not go beyond what is
ticipants working together in a business venture stipulated by the law. CSR is a not a legal respon-
to maintain good business behavior. Its imple- sibility. A business has the choice of either to adopt
mentation should enable businesses to be or disregard CSR; this choice should not be
engaged in successful and profitable multilateral allowed to be influenced by some activist groups.
contractual agreements. The other school of thought takes the view that
organizations such as a business are social actors
(Meyer and Jepperson 2000). In addition to its legal
Introduction identity, a business as social actor also has its own
social identity. Thus, businesses can act for them-
This entry aims to examine and analyze the con- selves (e.g., in its quest to make a profit) and also
cept of corporate social responsibility and its they can act for others (e.g., to be accountable for
limitations. It introduces a concept of corporate the socioeconomic rights of stakeholders). Table 1
social obligation (CSO) in business practice. shows the contrasting opinions on CSR.
In doing so, it crosses over three disciplines – This entry adopts the view of a business as
business, law (or legal theory), and social philos- a social actor. It takes the view that a business can
ophy. It provides a number of brief case studies be utilized to do bad and good deeds. Here, “bad
and recommendations promoting socially deeds” are interpreted as referring to exploitative
responsible business behavior. business activities. They can include irresponsi-
ble outsourcing, unfair dealing with suppliers,
Corporate Social Responsibility (CSR) and engaging in sweatshops. Bad deeds promote
As CSR takes the interests of a business’s stake- bad image and reputation which are the conse-
holders into account, it may include a range of quential results of business’s greed. By contrast,
activities including the following: “good deeds” are interpreted as referring to
(a) Employees’ working conditions and well- socially responsible business activities. They
being at work can include responsible outsourcing, fair dealing
(b) Employees’ pay with suppliers, and refraining from the engage-
(c) Fair trade with suppliers (e.g., farmers and ment in sweatshops. Good deeds promote sus-
manufacturers) tainability. Bad business behavior is taken to
(d) Sustainable use of resources promote a business’s bad deeds (its greed) in the
(e) Business activities which are kind and disguise of engaging in good deeds.
friendly to the natural environment
Therefore, a business’s economic duty which CSR and Its Limitations
is profit maximizing for its owners is no longer its Here, it can be said that the concept of CSR has
sole priority. A business adopting CSR is taken to three limitations. First, businesses are the creations
satisfy two probably conflicting interests of its of law and thus, it can be argued that they should
shareholders and stakeholders. A criticism of only be regulated by law. Businesses have a legal
this concept is that these two interests are obligation and responsibility only toward their
Corporate Social Obligation & CSR 567 C
Corporate Social Obligation & CSR, Table 1 The key differences of opinion on the corporate social responsibility
issues
Arguments for corporate social responsible (CSR)
The free market case against corporate social responsibility behavior: CSR
The only social responsibility of business is to create shareholder Is the ethical or right thing to do
wealth
It is a great concern that the efficient use of resources will be Improves the firm’s public image and reputation
reduced if businesses are restricted on how they can produce
C
The pursuit of social goals dilutes businesses’ primary purpose Is necessary for the business in order to avoid
excessive law and regulation
Corporate management cannot decide what is in society’s best Leads to socially responsible actions that can be
interest profitable
Costs will be passed on to consumers Leads to improved social environment that will be
beneficial to the firm/corporation
It reduces economic efficiency and profit Will be attractive to some investors
Directors have a legal obligation to manage the company in the Can increase employee motivation
interest of shareholders – and not for other stakeholders
CSR behavior imposes additional costs which reduce Will help to provide solutions to some social and
competitiveness environmental problems caused by business
shareholders. Thus, one of the limitations of CSR 3. Businesses can at times fail or lose focus on
is its adaptation by businesses. It can be stated here their competiveness when applying the con-
that a business’s legal obligation and responsibil- cept of CSR.
ity trump social ones. Second, it is demonstrated in 4. Businesses with unilateral dimension of CSR
the arguments for and against CSR in Table 1 at times manipulate their businesses to pro-
above that the adaptation of CSR is a costly ven- mote their greed and self-interests.
ture. The priority of businesses is to be profitable, Using case examples, all these key issues are
not sustainable. Thus, it is logical for businesses to now being examined as follows:
avoid costly CSR ventures where possible. Third, 1. These case studies demonstrate that a business
a business choice of committing to socially can blatantly conduct its activities in a socially
responsible activities is a unilateral decision. In irresponsible manner.
other words, a business has the power to either a. The case of Sanlu
adopt or disregard CSR. Although a business’s In September 2008, the Chinese milk giant
adoption of CSR promotes its reputation, it is Sanlu was exposed by the media for trying to
criticized that this unilateral dimension of this hush up reports on its infant milk formula
adoption can lead to a business’s manipulation of which had been contaminated. It was one of
the concept of CSR to promote its greed as exem- China’s worst food safety scandals. Six babies
plified by the following key issues. died from kidney problems and some 860
were hospitalized. (Public outcry and anger
led to serious scrutiny of the integrity of
Key Issues China’s top Internet firms, with strong actions
taken against the culprits.) Soon after this
The key issues involving CSR are as follows: news broke out, a Sanlu memo which
1. A business can, in fact, blatantly carry out its suggested bribing a Chinese search engine
activities in a socially irresponsible way. Baidu to cover up the news surfaced online.
2. Businesses can also use a concept of CSR as Two men who were responsible for the con-
a disguise to hide or cover up their greed and tamination were executed while four others,
misdeeds. including the former head of Sanlu, were
C 568 Corporate Social Obligation & CSR
given life sentences (Ho 2011, p. D2 cited in undoubtedly be held responsible for their
Low and Ang 2011). In retrospect, the authors suppliers’ irresponsible actions.
questioned if these men were prosecuted and 3. The following two case studies demonstrate
convicted beforehand and that if the convic- how businesses failed or lost their
tions were carried out with a fair trial. competiveness in business when applying the
2. The following two case studies demonstrate concept of CSR.
how businesses utilize a concept of CSR as (a) The case of Coco-Cola (case study
a disguise to cover up their greedy ventures. extracted from (Barry 2000)).
(a) The case of Gap, Inc. In the United States in the early 1970s,
In 1996, Gap designed a “Code of Coco-Cola employed immigrants to work
Vendor Conduct” which aims to safeguard in its sub-conditioned factories. Its CSR
workers’ rights in the factories which are initiation was to commission a private
producing Gap products (Gap 2012). The enterprise welfare system. This system
adoption of this code puts Gap in ran without success. It was a costly exer-
a favorable light to its customers. Gap cise which resulted in job losses.
began to build itself an ethical image. (b) The case of Body Shop (case study
However, reports in 2004 found that Gap extracted from (Barry 2000)).
had been outsourcing to unethical subcon- Body Shop was well known for its
tractors and its adopted code was not ethical standing. Throughout Anita
abided to (Guardian 2007). In this case, Roddick’s life (while she was the
Gap’s reputation was tarnished. However, company’s founder and director), Body
there are many other businesses that Shop maintained its ethical boundaries. It
behave in a similar way as Gap which had not tested its products on animals and
have still not been exposed by the media. had not exploited labor and resources
These businesses continue to outsource from third world countries. The
irresponsibly. company’s competitive edge declined
(b) The case of Apple. when other business rivals began to pro-
In 2004, Apple designed an “Apple vide the same products and services at low
Supplier Code of Conduct” pledging that prices. Under this competitive pressure, it
all their suppliers are to provide “safe and eventually abandoned its ethical scheme
healthy working conditions” to their as it was seen to be costly.
workers (Apple 2012). They have also 4. The following case studies demonstrate how
promised that most audits are Apple-led. unilateral dimension of CSR can lead to
This boosted Apple’s reputation as an eth- a business manipulation to promote its greed
ical corporation. It subcontracts to other or self-interests.
businesses like Foxconn for the manufac- a. The case of Wal-Mart
ture of its products. In 2010, a number of In 2007, Wal-Mart, Inc. was sued by the
employees at Foxconn, China, committed employees of its outsourced partners (i.e.,
suicide (Forbes 2010). Although the head Wal-Mart’s stakeholders) for infringing
of Foxconn was scrutinized by the media their socioeconomic rights. Those stake-
to take accountability for these suicides, holders suffered physical and psychologi-
Apple had distanced itself from these inci- cal harm due to poor labor conditions. They
dents. Although Apple was reported to were badly paid and, at times, their pay was
have investigated these incidents, their withheld by their employers. Wal-Mart and
investigation was limited. Here, it is its outsourced partners had agreed on
shown that a business which subcontracts a bilateral outsourcing contract, into
to another business also passes on its which Wal-Mart’s codes of conduct were
social responsibility to others and would also incorporated. However, Wal-Mart did
Corporate Social Obligation & CSR 569 C
not enforce these codes against its A study of social philosophy can suggest
outsourced business partners. Therefore, a satisfactory explanation. Social agree-
Wal-Mart allowed its outsourced business ments between individuals who are work-
partners to exploit labor and resources. ing together in a society can be created and
Those stakeholders argued in front of the dissolved at any time without incurring any
Californian Court of Appeals that in the consequences (Gilbert 2008). At the point
light of that bilateral outsourcing agree- when individuals get together to form an C
ment (which the codes of conduct preserve agreement, a joint commitment between
and protect their socioeconomic interests), these individuals is created (Gilbert 2008).
they can hold Wal-Mart responsible. (U.S. At the point when these individuals decide
legal case 2007 cited in Low et al. 2012a to dissolve a joint commitment, it can be
forthcoming). said that the joint commitment was “legiti-
In 2009, the court held that these stake- mately forgotten” by them (Gilbert 1992).
holders cannot hold Wal-Mart responsible Furthermore, a dissolved joint commitment
for these infringements. Although Wal- can be replaced by a fresh one. With appli-
Mart had shown in its contract that it had cation of this social philosophy to the
social responsibility for its stakeholders, Wal-Mart case, it can be stated that busi-
owing to the privity of contract between nesses are social actors and therefore, they
itself and its outsourced partners, it owes can build agreements among themselves
no duty of care to those stakeholders (U.S. and also dissolve them. Wal-Mart’s bilat-
Appeal case 2009 cited in Low et al. 2012 eral contractual agreement with its partners
forthcoming). had shown that these two businesses had
It is important to note this unilateral agreed to a joint commitment. The incor-
dimension of CSR. The Wal-Mart case poration of CSR values in the contract had
study has demonstrated that a unilateral shown that these partners had agreed to
dimension of CSR enables a greedy busi- uphold CSR as part of their joint commit-
ness to externalize its cost and burden to its ment. The violation of the socioeconomic
business partner. While passing the cost rights of both the businesses’ stakeholders
and burden to others, a business is not could be seen as a legitimate avoidance of
accountable for the violations of socioeco- the socially responsible joint commitment
nomic rights of its stakeholders by others. by its partners and that they had replaced it
Since outsourcing is a legitimate form of with a socially irresponsible one. Further-
business practice, the forms of outsourcing more and very importantly, the legitimate
are also largely considered legal. act of omission of the socially responsible
Wal-Mart’s example has also shown that joint commitment between Wal-Mart
the incorporation of CSR principles into and its business partner had incurred no
a bilateral contractual relationship between cost or any consequences (Ang 2013
the business partners could not prevent the forthcoming).
act of irresponsible outsourcing. Here, it It has been demonstrated in this entry
is demonstrated that a legal document that the concept of CSR can be a costly
(i.e., this bilateral contract) had failed to business venture. CSR has a unilateral
regulate a business to adhere to socially dimension at which businesses can manip-
responsible business behavior which it ulate this concept to disguise their greedy
had promised its stakeholders. Thus, there ventures. A brief study of social philosophy
is a limitation of a law to regulate such has shown that businesses can bind and
business behavior. There is also a limitation unbind themselves from CSR promises to
of a legal theory to explain this lack of their stakeholders in the following ways.
regulation of business behavior. Firstly, they can choose not to adopt the
C 570 Corporate Social Obligation & CSR
CSR principles altogether. Secondly, they becomes easier to regulate its bad business
can choose to adopt the CSR principles, but behavior of irresponsible outsourcing.
not implement them. Thirdly, they can Second, a change of a dimension in the con-
choose to adopt the CSR principles, but cept of CSR is required. It is suggested that CSR
externalize all costly activities onto their has to change from a unilateral dimension to
business partners irresponsibly. Fourthly, a multilateral dimension. As it was mentioned
they can choose to adopt the CSR principles above, a unilateral dimension of CSR between
and create a binding promise to its business two partners is easily subjected to the process of
partners in a bilateral agreement to uphold legitimate act of omission. It is proposed that
these principles and then later they could a multilateral dimension of CSR minimizes the
legitimately forget about the promise. By process of legitimate forgetting (Ang 2013 forth-
the process of a legitimate act of omission, coming). In a multilateral dimension, all busi-
the promise they had made in a bilateral nesses which are working together either to
contract could then be replaced by a produce goods or to provide services are viewed
socially irresponsible business practice. as participants in a joint commitment. Thus, the
In essence, it is difficult to hold a busi- number of members of a joint commitment must
ness responsible for its violations of the surpass two.
socioeconomic rights of its stakeholders. For example, the participants in an
This is because a business’s corporate outsourcing activity involve an outsourcing part-
social responsibility can be passed onto ner (representing its shareholders’ interests), an
others. Thus, even if a business is not outsourced partner (representing its shareholders’
undertaking a socially irresponsible busi- interests), employees of the outsourced partner
ness activity, it can enter into an agreement (representing their stakeholders’ interests), and
with a partner who can undertake this activ- suppliers of raw materials and business logistics
ity on its behalf. (representing their stakeholders’ interests). It is
proposed that all of these participants are
involved in the joint commitment. Thus, an
Corporate Social Obligation (CSO) outsourcing agreement ought not to be a bilateral
contractual agreement, but a multilateral one.
The concept of CSO has emerged from the A multilateral contractual agreement includes
two proposed changes of the concept of CSR – the participation of a selection of stakeholders
alterations to a paradigm of what businesses are alongside with the shareholders of businesses.
and its CSR dimension. A multilateral contractual agreement satisfies
First, a change of a paradigm of what busi- the concerns of the critics of a concept of CSR
nesses are is required. Businesses are predomi- which was mentioned above. First, these busi-
nately taken as corporate entities with legal nesses which are in a multilateral contractual
identities. It is suggested here that businesses agreement have agreed to only be socially
should be taken to also have social identities. accountable to their stakeholders who are fellow
Therefore, businesses must be taken as social participants. Thus, the fear of a socially respon-
actors which can act in the pursuit of good or sible business being accountable to “a public at
bad outcomes. Although a business is a creation large” is avoided. Second, the concept of CSR is
of law, the law only protects its survival. Thus, it not a mere disguise for the exploitation of greedy
is argued that legal protection applies only during businesses. Rather, CSO enables participants in
the early stages of a business. Once a business a joint commitment to demand their obligations
starts creating interdependent commercial ties from their fellow participants (Ang 2013 forth-
with others, it is argued that its ongoing legal coming). Third, the cost of being socially respon-
protection must become secondary after its con- sible is spread across all the participants. Thus,
cept of corporate social obligation. In doing so, it the cost and burdens of outsourcing does not pass
Corporate Social Obligation & CSR 571 C
on from one business onto another, but they are alone does not provide a satisfactory solution for
shared among all the participants. Furthermore, these problems. It advances an idea that the con-
the sharing of the cost and burdens encourages cept of CSO coupled with CSR can promote
these businesses and their stakeholders to engage strong business relations between a business’s
in joint problem solving either to be profitable or shareholders and stakeholders by defining their
to maintain sustainability (GBC Impact Initia- parameters. It also advances the idea that the
tives, 2011 and GBC Coalition, 2011). concept of CSO can promote good business C
In essence, the concept of CSO is the engage- behavior and profitable business ventures.
ment of three or more participants working In essence, the concept of CSO is the engage-
together in a business venture to maintain good ment of three or more participants working
business behavior. The following are examples of together in a business venture to maintain good
businesses engaging in successful and profitable business behavior. The following are examples of
multilateral contractual agreements. businesses engaging in successful and profitable
multilateral contractual agreements.
Corporate Social Obligation (CSO) and (a) The case of Global Business Coalition
Corporate Social Responsibility (CSR) (GBC).
Here, a concept of corporate social obligation The Global Business Coalition is a group of
(CSO) is viewed in the light of the concept of individual corporations involved a collective
corporate social responsibility (CSR). CSR is action to fight against HIV, tuberculosis, and
widely practiced by businesses. It is a concept malaria. Corporate participants come from
which satisfies a business’s stakeholders’ inter- a range of multidisciplinary backgrounds includ-
ests while prioritizing its shareholders’ interests. ing agriculture, automotive, oil and gas indus-
A typical shareholders’ interest in a business is to tries, media and entertainment, metals and
achieve profit maximization. This interest can be mining, to name a few. The purpose of this coa-
achieved through a low cost of production with lition is to turn corporate philanthropic actions
a large production output. from unilateral to multilateral acts. Thus, corpo-
In the light of corporate responsibility, rations work together to fight diseases. Participa-
a business is only accountable to its shareholders tion ranges from simply showing solidarity by the
(e.g., one of the many directors’ duties). This is payment of a membership fee (GBC Q&A 2011)
a business’s legal responsibility. In the light of to the execution of an impact initiative (GBC
corporate social responsibility, a business is Impact Initiatives 2011). There is a competitive
accountable to its stakeholders. CSR is taken as edge among these participants. Participants are
an important practice to sustain a global business, encouraged to put as much effort as possible into
labor, and resources. However, the incorporation their commitment to collective action. Commit-
of CSR into business practices is not mandatory. ted participants win recognition for their efforts.
One criticism of the concept of CSR is that it The collective actions are in the form of impact
renders a business being accountable to the public initiatives. These impact initiatives have encour-
at large. In other words, the beneficiaries of aged all participants to share knowledge and
a business are indefinite. A business may find solve problems jointly for future improvements
that its CSR engagement is unfavorable as it in the initiatives (GBC Collaboration 2011). Cor-
may make the business less profitable. Therefore, porations also have opportunities to improve their
a business has a choice whether to adopt or dis- own internal corporate strategies and corporate
regard its CSR. structures. Thus, the impact initiatives have
This entry advances an argument that CSR can external influence in fighting diseases and also
be a profitable venture. It briefly explores the the internal influence which can change a corpo-
problems of bad business behavior which are ration’s culture. Here, a concept of CSO pro-
viewed in the light of labor and resources exploi- motes business sustainability through caring for
tations. It demonstrates that the concept of CSR their consumer’s health.
C 572 Corporate Social Obligation & CSR
(b) The case of the Equator Principles in Project noted not only to produce coffee, but it has also
Finance. produced “coffee inspectors, baristas, counselors
Project finance is defined as “a method of for the improvement of quality, environmental-
funding in which the lender looks primarily to ists, and groups of young planters.” The cooper-
the revenues generated by a single project, both atives share common goals for their community
as the source of repayment and as security for the such as to eradicate extreme poverty and hunger,
exposure” (Project Finance 2011). In other to promote gender equality and empower women,
words, risks of a project are spread out across to ensure environmental sustainability, and to
all the participants. The lenders are the Equator develop a global partnership for development.
Principles Funding Institutions (EPFIs) which are These goals are its multilateral agreements
mainly international banks which fund big pro- which empower these cooperatives to engage in
jects such as the building of power plants, trans- collective bargaining with the global business.
portation infrastructure or industries (oil and Although Soppexcca might lose out on business
gas), or mines. In October 2002, nine interna- agreements with trading bodies who may dictate
tional banks jointly created the “Equator Princi- the prices of coffee, there is still a niche in
ples.” These principles provide “a banking the global market for socially responsible
industry framework for addressing environmen- manufactured products. This niche is created by
tal and social risks in project financing that could business across those sectors in an industry which
be applied globally and across all industry sec- share collective goals with similar values. Here,
tors” (Equator Principles). The EPFIs produced a concept of CSO protects the socioeconomic
a set of principles according to which all partic- rights of stakeholders who can exercise collective
ipants (who are borrowers and lenders of funds) bargaining power with the bigger and more pow-
are required to do business. Participation in erful businesses.
a project is the voluntary act of a borrower or
lender of funds. Thus, the Equator Principles are
adopted through a multilateral agreement by all Future Directions
participants in a project. The bodies (i.e., corpo-
rations or States) which do not wish to agree with 1. In essence, it is difficult to hold a business
the “Equator Principle” are not participants in the responsible for socioeconomic rights viola-
project finance team. These bodies lose either tions of its stakeholders. This is because
the funding required for the project or business. a business’s corporate social responsibility
The model of this project is large scale can be passed onto others. Thus, even if
(Equator Principles 2011). For example, the a business is not undertaking a socially irre-
building of wind farms and a sugar cane planta- sponsible business activity, it can enter into an
tion, and mining. Here, the concept of CSO pro- agreement with a partner who can undertake
motes profitability through the spreading of risks this activity on its behalf.
of a project. It also promotes the socioeconomic It is suggested here that a study of social
well-being of their stakeholders and the philosophy can provide a solution to this weak
environment. concept of CSR. It has been mentioned above
(c) The case of Soppexcca that individuals who are working together can
Soppexcca is a movement in Nicaragua com- create and dissolve a joint commitment. Fur-
posed of 15 cooperatives. Cooperatives are “an thermore, it is being suggested that the easy
autonomous association of persons united volun- dissolution of a joint commitment between the
tarily to meet their common economic, social and two partners in an outsourcing agreement
cultural needs and aspirations through a jointly- could be due to a couple of factors. First,
owned and democratically-controlled enterprise” a unilateral dimension of a concept of CSR
(UCA Soppexcca 2011). It is a collectivity of enables a stronger and greedier partner to
coffee planters and producers. This movement is incorporate CSR values into its contracts
Corporate Social Obligation & CSR 573 C
solely for the sake of its reputation and not for ▶ Islamic Ethics and CSR
its cause. Second, there are only two members ▶ Open Source Solutions and CSR
in a joint commitment in a bilateral contract. ▶ Trust and CSR
Thus, this enables the stronger and greedier
member of the two to exercise power to make
a unilateral decision to dissolve their socially References
responsible joint commitments, leaving the C
weaker member with no choice but to forget Ang, Y.S. (2013 forthcoming). Solutions to outsourcing
about these CSR promises. abuses: The creation of collective obligations through
multilateral contracts, Unpublished PhD Thesis,
In essence, the concept of CSR is not University of Birmingham, UK
effective in its promotion of socially respon- Apple, Inc. (2012). Accessed May 25, 2012, http://www.
sible business activities in businesses. It is apple.com/supplierresponsibility/code-of-conduct
proposed here that a concept of corporate Barry, N. (2000). Respectable trade: The dangerous delu-
sions of corporate social responsibility and business
social obligation can strengthen the effective-
ethics. London: Adam Smith Institute.
ness of CSR. The creation of a concept of Equator Principles. (2011). History of the equator
CSO requires alterations to a paradigm of principles. Accessed August 14, 2011, http://equator-
what businesses are and a dimension of the principles.com/index.php/about-ep/faqs/38-about/
about/17
concept of CSR.
Forbes. (2010). Accessed May 28, 2012, http://www.
2. When introducing the concept of leadership forbes.com/2010/05/28/foxconn-apple-suicides-china-
and management for business, first of all, it is opinions-columnists-gordon-g-chang.html
important to start with the helping of an indi- Gap. (2012). Accessed on May 27, 2012, http://www.
gapinc.com/content/csr/html/OurResponsibility/
vidual to develop and self-cultivate oneself governance/codeofvendorconduct.html
through relationship and continuous learning GBC Collaboration. (2011). Collaboration, coordination
to be a better person (gentleman/lady) so that and collective action that will end disease faster.
she or he can later lead and manage more Accessed August 14, 2011, http://www.gbcimpact.
org/about-gbc
people to help themselves and contribute to
GBC Impact Initiatives. (2011). Collective action, cost-
the betterment of society. When good people sharing, bigger results: GBC impact initiatives.
lead, motivate, and influence other people to accessed August 14, 2011, http://www.gbcimpact.
be ethical and to do good for society, more org/about-gbc/impact-initiatives
GBC Q&A. (2011). Engineering higher impact: Q&A
people would become ethical and do more
with GBC Executive Director John Tedstorm.
good for society (Low and Ang 2012 forth- Accessed August 14, 2011, http://www.gbcimpact.
coming). This aptly matches with the concept org/itcs_node/0/0/article/908
of corporate social responsibility in which Gilbert, M. (1992). On social facts. Princeton: Paperback,
Princeton University Press.
business leaders are committed to contribute Gilbert, M. (2008). A theory of political obligation: Mem-
to sustainable economic development, work- bership, commitment and the bonds of society. Oxford:
ing with employees, their families, the local Paperback, OUP.
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guardian.co.uk/business/2007/oct/28/ethicalbusiness.
their quality of life (WBCSD 2002).
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Cross-References Johnson, J. F. (1998). No man can serve two masters.
London: Social Affairs Unit.
Low, K. C. P., & Ang, S. L. (2011). Information commu-
▶ Body Shop nication technology (ICT) for negotiations. Journal of
▶ Buddhist Ethics and CSR Research in International Business and Management,
▶ Christianity and CSR 1(6), 183–196, (ISSN: 2251–0028). August 2011,
http://www.interesjournals.org/JRIBM Copyright
▶ Confucian Ethics #2011 International Research Journals
▶ Dame Anita Roddick Low, K. C. P., & Ang, S. L. (2012). Confucian Leadership
▶ Equator Principles and Corporate Social Responsibility (CSR), the way
C 574 Corporate Social Performance
graduate employment intentions, students have readily available. The next step for research is to
claimed that they would be prepared to take attempt to quantify the benefits, and try to relate
a lower salary in order to work for a business the economic advantages directly to the level of
with high ethical standards and a commitment social responsibility a business adopts.
to socially responsible business practices.
When we are competing for the brains and
energy of the brightest and best against the fash- Cross-References
ionable and apparently lucrative world of the dot-
coms we do not ignore the values of the society ▶ Business Case for CSR
and particularly of the new generation. People ▶ Corporate Citizenship
want to work for something they believe in and ▶ Corporate Governance as a Tool for
to make a contribution to the progress of the world Alleviating Developmental Issues
in which they live. And if the business is to suc- ▶ Corporate Social Innovation
ceed, it has to offer them the opportunity to do that. ▶ Corporate Social Responsibility
The growth in ethically screened investment ▶ CSR and Poverty
funds has grown by over 238% since 1995. This ▶ Environmental Ethics
phenomenal growth is driven not only by the ▶ Transparency
demands from shareholders for ethical funds,
but also by a realization from investors generally
that socially responsible business has the poten- References and Readings
tial to be hugely profitable.
Ackerman, R. W. (1973). How companies respond to social
demands. Harvard Business Review, 51(4), 88–98.
Bauer, R. A., & Ackerman, R. W. (1976). Corporate
Future Directions social responsiveness: The modern dilemma. Reston:
Reston Publishing Company.
Environment issues in certain industries are some Berman, S., & Rowley, T. (2000). A brand new brand of
corporate social performance. Business and Society,
of the most complex challenges facing manage-
39(4), 397–418.
ment because of all the stakeholders, different Bovens, M. A. P. (1998). The quest for responsibility.
regulations, many things to measure, and a high Cambridge: Cambridge University Press.
degree of uncertainty. Doing a good job of man- Caldwell, C., & Karri, R. (2005). Organizational gover-
nance and ethical systems: A convenantal approach of
aging that high degree of complexity should be
building trust. Journal of Business Ethics, 58, 249–259.
transferable to other areas of business, and that is Culpan, R., & Trussel, J. (2005). Applying the agency and
why you see good environmental companies con- stakeholder theories to the Enron debacle: An ethical
sistently outperforming bad ones. perspective. Business and Society Review, 110(1), 59–76.
Recent financial scandals provide an illustra-
tion of managerial misconduct and unethical
behaviors within firms which calls into question
the corporate governance and financial informa- Corporate Social Performance (CSP)
tion disclosure systems. Moreover, certain firms
try to compensate for poor organizational behav- ▶ Corporate Social Responsibility in Tourism
iors by means of better corporate social perfor- ▶ CSR Measurement
mance (CSP) (Caldwell and Karri 2005).
The benefits from being socially responsible
appear not only to be diverse, but from an eco-
nomic point of view, worth having. Not only is Corporate Social Performance and
business performance likely to be enhanced, but Africa
brand image will be strengthened, employee turn-
over minimized, and access to stock market funds ▶ CSR and Africa
Corporate Social Performance Measurement 577 C
Businessman” Bowen (1953) stated that every
Corporate Social Performance corporation has a degree of responsibility for the
Instrument well-being of its community. McGuire’s (1963)
book, “Business and Society” is believed to be
▶ Corporate Social Performance Measurement the first study to explore the rationale behind
CSR. Carroll’s (1979) article described the first
conceptual model of CSP by specifying four C
domains of CSR, namely, economic, legal, ethi-
Corporate Social Performance cal, and discretionary. Aupperle’s (1984) instru-
Measurement ment of CSR orientation was developed, based on
Carroll’s pyramid, and measured managers’ per-
Shuo Wang and Yuhui Gao ceptions of the importance of CSR. The measure-
DCU Business School, Dublin City University, ment of CSP has developed in conjunction with
Dublin, Ireland the evolution of the concepts that underlie CSP
and the understanding of these concepts. Using
Orlitzky et al.’s (2003) meta-analysis, we herein
Synonyms summarize the widely used methods of measur-
ing CSP in Table 1.
Corporate citizenship measurement (instrument); Of the corporate social performance instru-
Corporate philanthropic measurement (instru- ments listed in Table 1, the KLD technique (here-
ment); Corporate social performance instrument; after “KLD”) is believed to be the most useful
Corporate social responsibility measurement approach. Having been involved in the collection
(instrument) of comprehensive data on CSP since May 1991,
the aim of KLD is to provide ratings of CSP in
order to assist managers and investors to make
Definition investment decisions that take social factors into
account. KLD thus makes use of a variety of
There is no universally accepted definition of sources of information, such as annual reports,
corporate social performance (CSP). Some financial statements, firms’ CSR disclosures, aca-
scholars believe that CSP is an outcome of activ- demic journal articles, and public government
ities related to corporate social responsibility reports. KLD evaluates the CSP of each firm
(CSR) (Waddock and Graves 1997), while others based on eleven dimensions. Table 2 provides
argue that CSP is a set of structural categories, a brief description of the five most important of
which include the principles of social responsi- these and lists indicators of particular concern in
bility, the processes of social responsiveness, and each case.
the outcomes and impacts on performance (Wood
1991). Although a number of studies of CSP use
instruments that cannot easily be categorized into Key Issues
the principles, processes, or outcomes involved,
these three descriptors nevertheless represent the To a certain degree, the process of measuring
issues of greatest interest in CSP. CSP is perhaps not transparent. Scholars do
not always have access to data of the requisite
quality, because companies may have
reasons for concealing certain activities and
Introduction outcomes. A further concern is that there is
no universally accepted measure or standard of
The concept of CSP became popular in the 1950s, CSP, and most measures are deficient in
when in his book “Social Responsibilities of the some way.
C 578 Corporate Social Performance Measurement
Definition
References and Readings
Corporate social responsibility (CSR) denotes
Aupperle, K. E. (1984). An empirical measure of corpo- a philosophy – and a corresponding set of tools –
rate social orientation. Research in corporate social
according to which a company acknowledges and
performance and policy, 6, 27–54.
Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. manages responsibilities to a wider group of
(1999). Does stakeholder orientation matter? The rela- stakeholders than just the providers of capital.
tionship between stakeholder management models and The Commission of the European Communities
firm financial performance. The Academy of Manage-
(CEC 2001, p. 6) defined CSR as “a concept
ment Journal, 42(5), 488–506.
Bowen, H. R. (1953). Social responsibilities of the busi- whereby companies integrate social and environ-
nessman. New York: Harper & Row. mental concerns in their business operations and in
Carroll, A. B. (1979). A three-dimensional conceptual their interaction with their stakeholders on
model of corporate performance. The Academy of
Management Review, 4(4), 497–505.
a voluntary basis.” CSR has become a global
Cochran, P. L., & Wood, R. A. (1984). Corporate social phenomenon which is not only practiced by busi-
responsibility and financial performance. Academy of nesses from all continents but is also promoted
Management Journal, 27(1), 42–56. by national governments, intergovernmental orga-
McGuire, J. W. (1963). Business and society. New York:
nizations, and civil society organizations. At the
McGraw-Hill.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). same time, it has remained an ambiguous concept
Corporate social and financial performance: A meta- that is open to a multitude of interpretations. CSR
analysis. Organization Studies, 24(3), 403–441. can thus be perceived as (1) a call on business to
Waddock, S. A., & Graves, S. B. (1997). The corporate
provide welfare services where national
social performance-financial performance link. Strate-
gic Management Journal, 18(4), 303–319. governments, the traditional provider of these,
Wood, D. J. (1991). Corporate social performance are not willing or able to do so; (2) a regulatory
revisited. The Academy of Management Review, framework that imposes novel demands on
16(4), 691–718.
business and does so predominantly through
Wood, D. J. (2010). Measuring corporate social perfor-
mance: A review. International Journal of Manage- voluntary commitments and soft rather than hard
ment Reviews, 12(1), 50–84. law; (3) a new management trend that is dissemi-
nated by a myriad of consultants, standards orga-
nizations, and rating agencies; or even (4) an
ideological concept that distracts from the exploit-
Corporate Social Reporting ative relationships that underlie modern capital-
ism. In any case, CSR highlights a seismic shift
▶ Social Accounting in the relationship between government and
C 580 Corporate Social Responsibility
business, where the latter has evolved from being Friedman’s second objection addresses the
a recipient of regulation to becoming its coauthor. principal-agent problem in corporate governance
Another novel development that is cast into sharp that modern corporations are characterized by
relief by CSR is the increasing role of civil society a separation between those who own it and
organizations (CSOs) into shaping regulation. those who manage it. This situation does provide
opportunities for managers to act in their own
interest rather than those of the company owners;
Introduction however, this applies not only to CSR projects.
Studies into mergers and acquisitions, for
Economist and Nobel Laureate Milton Friedman example, have concluded that such projects too
(1970) challenged the concept of CSR on three may be driven as much by personal motives of
major grounds, namely: executives, such as empire building, than
• Only humans can have responsibilities but not increasing shareholder return. Friedman’s
organizations or business as a whole. second point is thus first and foremost a critique
• Corporate executives are employees of the of nontransparency in corporate projects, whether
owners of the business and hence have the in the area of CSR or not. Furthermore, there is
fiduciary responsibility to make as much no unequivocal evidence that CSR amounts to
money for the owners as possible. a destruction of shareholder wealth. At
• CSR equals the imposition of taxes on least some CSR initiatives may actually
business but without the checks and balances increase a company’s financial performance
through which the political process safeguards (this business case for CSR is discussed in more
government expenditure and without detail below).
managers being experts in addressing social Friedman’s third objection de-emphasizes the
issues. embeddedness of business in society. In return for
Regarding his first criticism, a company is of the privilege of existence and those necessary for
course a legal person, not a natural one. However, further growth, such as limited liability, business
companies plan objectives, evaluate alternatives, can be urged to give something back to society.
and collect information on the impact on their An alternative argument regarding the emergence
actions – in short, companies can act rationally. of business is that the political system only
Where a group of individuals are organized to act recognized what had developed autonomously:
as a unit, organizational features have an impact that business is merely a matter of people having
on the individual’s functioning within the certain rights, including rights to exchange and to
organization and may induce members to act cooperate. Contractual agreements are seen as
in a way they would not choose outside made between those individuals, with all rights
the organization. Corporations are capable of and duties resting on them too. Yet this view
committing, as well as not preventing would not preclude corporate social responsibil-
the committing, of wrongful acts and they can ity either, as recognition of something is usually
be said to act intentionally. Hence, it achieved in a trade-off against something else.
seems meaningful to allocate responsibility to Business can thus be seen as existing by permis-
a company and not just its managers (Moore sion of society because it is recognized as an
1999). However, to avoid, on the one hand, efficient form of economic wealth creation for
individuals hiding behind the organization and, its members. The relation between business and
on the other, to free the organization from any society can hence be seen as a hypothetical
responsibility, the notion of a secondary respon- contract, the conditions of which can change
sibility can be used: A human being still holds (Donaldson and Dunfee 1999). This has existed
primary responsibility for his or her actions, but in various forms in all ages, but due to
the corporation would hold a secondary moral the deterritorializing effects of globalization
responsibility for corporate actions. the link between a particular company and
Corporate Social Responsibility 581 C
a particular society is being eroded. CSR can thus The intermediate circle encompasses responsi-
be seen as an attempt to re-create this link. bility to exercise this economic function with
a sensitive awareness of changing social
values and priorities, for example, with
Key Issues respect to environmental conservation, hiring
and relations with employees, and more rigor-
If companies have responsibilities that go beyond ous expectations of customers for information, C
a responsibility to their owners, what do these fair treatment, and protection from injury.
look like? Giving a precise and generally The outer circle outlines newly emerging and
accepted answer to this question is difficult still amorphous responsibilities that business
because CSR falls into the category of an “essen- should assume to become more broadly
tially contested concept.” This has been defined involved in actively improving the social
by British philosopher Walter Bryce Gallie as environment (e.g., poverty and urban blight).
a concept that is seemingly shared but is none- Carroll’s (1991) pyramid sees CSR as
theless construed by different individuals in consisting of four layers of a pyramid:
vastly differing ways so that agreement on its • As the basic economic unit in society, the
precise meaning is impossible to achieve. CSR principal role of business is to produce goods
is essentially contested because it is appraisive, and services that consumers want and to make
internally complex, and relatively open in terms an acceptable profit in the process. Hence,
of its definition. The concept is appraisive as it the fulfillment of a business’ economic
expresses a phenomenon that is not just captured responsibilities is the foundation for all other
in empirical terms but is seen as something responsibilities.
desirable. CSR is internally complex because it • Business is, however, also subject to govern-
involves balancing various responsibilities to ment laws and regulation. Hence, the second
various members of society, which furthermore layer of legal responsibilities requires business
differ between firms, industrial sectors, and to pursue its economic responsibilities within
nations. Last but not least, it is open to new the framework of the law.
developments in the socio-physical context of • Since the law cannot cover all eventualities,
business, shifts in stakeholder priorities, and business furthermore has the ethical responsi-
attention cycles for media, governments, and the bility to comply with all standards, norms, or
general public (Moon 2007). expectations that express what consumers,
In the absence of generally accepted concep- employees, shareholders, the local commu-
tualizations of CSR, there are nonetheless some nity, and other stakeholders regard as fair,
that are more accepted than others. Particularly just, and morally right, irrespective of whether
influential are the conceptualizations by the these issues are codified into law or not.
Committee for Economic Development (CED), • At the top of the pyramid, there are
a nonprofit business-led public policy think tank philanthropic responsibilities, business
based in Washington, DC, and the pyramid of contributions to the arts, education, or other
CSR by Archie Carroll, Professor Emeritus of local community initiatives. Unlike the other
the University of Georgia. In its 1971 publication three levels, these are not expected in an
Social Responsibilities of Business Corporations, ethical or moral sense but are nonetheless
the committee presented a model of CSR as desirable.
consisting of three concentric circles (quoted in The weighting given to each of these
Carroll 1999, p. 275): responsibilities varies according to the particular
The inner circle includes the clear-cut basic sets of stakeholder interests (across sectors and
responsibilities for the efficient execution of specific to individual corporations) which
the economic function – products, jobs, and a business needs to acknowledge and engage
economic growth. with. Edward Freeman (1984, p. 46) of the
C 582 Corporate Social Responsibility
some evidence for individual stakeholders, such above, the range of recipients of accountability
as employees, that a positive CSR profile aids has increased widely from an accountability only
recruitment. Overall, however, an irrefutably to shareholders to one to a range of stakeholders
established causal connection between social if not to wider society as a whole. At the same
and financial performance does so far not exist, time, the focus on the bottom line has given way
yet as a rule of thumb, investment into CSR to the “triple bottom line” of economic, social,
seems at least not to hurt corporate financial and environmental responsibility. In this context,
performance either. the distinction is useful between “extensive” and
“intensive” accountability (Donahue 2002).
The former is an accountability to a wide range
Recent Developments of constituents involving a range of criteria
according to which accountability can be
Models like Carroll’s pyramid of CSR have been discharged; this situation is typical of many
criticized for failing to capture the complexity of public sector organizations not least government
CSR, in particular for not paying enough itself. By contrast, the latter involves a narrower
attention to the cultural context of specific set of constituents with generally much more
societies. In the USA, for example, historically detailed expectations, which would be typical of
grown features of the national business system businesses. Following this distinction, CSR can
have created greater incentives and opportunities be conceptualized as a move from “intensive” to
for companies to engage explicitly with CSR, more “extensive” accountability.
while the systems of wider organizational respon- Demands for increased accountability have
sibilities in continental European countries have led to a tremendous increase in formal and
led companies to adopt a more implicit approach systematic reporting on social and environmental
to CSR. It is only recently that various forms of issues, predominantly through voluntary self-
coercive pressures, for example, resulting from reporting. By 2005, 64 % of the Fortune Global
a decreasing ability of European governments to 250 reported on their social and environmental
continue funding the welfare state, or normative performance, often through stand-alone reports.
pressures, such as the global rise of the MBA as Social and environmental reporting is particu-
standard management qualification, have led to larly widespread in Europe (where 90 % of the
convergence in approaches to CSR (Matten and Fortune Global 250 member firms published
Moon 2008). The importance of the cultural con- a report), followed by Japan (83 %), while the
text for the design of appropriate CSR priorities USA (35 %) lags behind (Kolk 2008). Academic
and programs becomes particularly evident in the research has, however, pointed to tensions
context of developing countries, where the between an upbeat tone often used in the
current dissemination of CSR and CSR reporting and an selectivity in terms of the issues
instruments has often been portrayed as that are addressed or between the dominant incre-
a “Northern” response to challenges regarding mental approach in improvements to social and
the role of business in society, that is, one that is environmental reporting and the trends in the
based on (and perhaps even restricted to) planetary data that would suggest a need for
multinational enterprises from OECD member much more radical changes. Corporate critics,
countries. such as NGO Friends of the Earth, argue that
Such criticism has led to new foci for recent accountability involves not just the discharge of
CSR research, in particular regarding the need for information but suggest that corporations must be
accountability and the role of governance in CSR. “held to account,” that is, implying enforceabil-
From an accountability perspective, CSR turns ity. The NGO thus demands fundamental changes
into the question to whom business is and should to the legal framework in which companies
be accountable. In similarity to Friedman’s operate, which are to include environmental
position and the counterarguments presented and social duties being placed on directors to
Corporate Social Responsibility 585 C
counterbalance their existing duties in financial • The Extractive Industry Transparency
matters. Such debate over corporate accountabil- Initiative, which sets a global standard for
ity thus highlights issues of information the transparency of company payments and
provision, bargaining and negotiating power, as government revenues in the oil and gas and
well as adjudication, remedy, and relief in the mining sectors
relationship between a company and its • The Forest Stewardship Council, which
stakeholders. promotes responsible forest management C
CSR highlights governance issues since many through certification schemes as a response
societies, in particular developing countries, have to concerns over global deforestation
longstanding deficits in their governance • The Marine Stewardship Council, which in
structures. Under such conditions, local first a similar fashion aims to address the problem
movers face first-mover disadvantages of a scale of global overfishing through a certification
that can lead to a failure of important public and seafood eco-labeling program
goods, such as environmental protection, health • The Equator Principles, a set of standards
care, or peace, being delivered (Zadek 2007). financial institutions can use to assess and
Due to their vastly greater access to resources, manage the social and environmental risk in
MNEs find themselves called upon to solve social project financing
and environmental issues. Yet this may lead to • The Global Reporting Initiative, which
raising expectations of what the MNE can and pioneered the development of the world’s
should deliver, which may furthermore get tied to most widely used sustainability reporting
local political agendas. In such circumstances, framework
corporations need to become proactively Such frameworks vary in the range of
involved in moving local governance toward actors they involve, and in the aspects of
accountability and inclusiveness – without, of rule-making, they seek to include – from design-
course, taking over political processes. The ing rules through developing these further to
other arena where CSR points to gaps in ensuring their enforcement – but they do
governance structures is the transnational one. represent a significant widening of the range of
Governments have struggled to cover this terrain actors involved in these processes. In contrast to
through norms generated by transnational traditional regulation, there is no assumption here
organizations, such as the Organisation for of a formal hierarchy of more or less
Economic Co-operation and Development legitimate rules – as, for example, exists between
(OECD) or the International Labour a country’s constitution, its national government
Organization (ILO). In the wake of globalization, laws, and its local government bylaws – rather
however, transnational rule-making and these new forms of regulation may be more or
implementation have become more diffused and less stable, well defined, or overlapping
have begun to involve multiple layers of actors, (Zadek 2007). Cross-sectoral partnerships
including business. receive intellectual support from the concept of
One mechanism through which frameworks of a deliberative democracy developed by German
rules for the corporate sector can be designed in a sociologist and philosopher J€urgen Habermas,
more inclusive, and hence legitimate, manner are which conceptualizes political decision-making
partnerships of private sector, public sector, and as being based on dialogue by and public justifi-
civil society organizations (Zadek 2007). cation of interests by all citizens.
Prominent examples of such frameworks are:
• The Ethical Trading Initiative (UK-based) or
the Fair Labor Association (US-based), which Future Directions
set standards for working conditions in the
supply chains of retailers from industrialized Much of the CSR debate to date has focused on
nations large corporations that have a global presence,
C 586 Corporate Social Responsibility
Actual Forecasts
1,600
1.6 bn
1,400
1,200
Middle East
Africa 940 mn
1,000
million
400
200
0
1950 1960 1970 1980 1990 1995 2000 2010 2020
Corporate Social Responsibility in Tourism, Fig. 1 International tourist arrivals by region, UNWTO (2011a), p. 11
and media. In this context, stakeholders are not worldwide (UNWTO 2011a). Despite tourism’s
only the beneficiaries of CSR practices but also large positive socioeconomic effects, rapid
partners for realizing and implementing CSR tourism development entails also a huge num-
strategies and projects. CSR is closely linked ber of negative environmental and social
with the principle of sustainability and is seen as impacts. Rising energy consumption and the
an instrument for implementing those principles. related pollution issues, increased charges by
Based on the triple bottom-line approach, CSR in garbage and sewage disposal, surface consump-
tourism businesses implies assuming responsibil- tion and loss of biodiversity put heavy pressure
ity for the natural environment, employees, tour- on the environment. The loss of values and
ists, partners, and businesses in the supply chain, effects of acculturation through tourism,
the local community in the destination as well as and financial and sexual exploitation of the
the society as a whole. host population have become major social
issues. But intact nature, beautiful landscapes,
cultural heritage, foreign cultures, and a sound
Introduction infrastructure represent the core elements of the
tourism supply side. To maintain these ele-
Throughout the last 50 years, worldwide travel ments, tourism supplies should be managed in
volume has been rising substantially. From 25 a sustainable way and the preference for sus-
million travelers in 1950, the international tour- tainable products and services should be
ist arrivals have increased to 940 million trav- encouraged.
elers, and it is expected to reach 1 billion In 2005, UNWTO together with UNEP
travelers in 2012. In 2020, about 1.6 billion defined goals for sustainable tourism develop-
tourist arrivals are expected (Fig. 1). Global ment (UNWTO/UNEP 2005). These goals are
tourism generates an estimated 5 % of world- based on the triple bottom line comprising the
wide gross domestic product (GDP) and pro- three spheres of sustainability: the environmen-
vides 6–7 % of the overall number of jobs tal, social, and economic spheres. According to
Corporate Social Responsibility in Tourism 589 C
UNWTO/UNEP the goals for sustainable tourism Key Issues
are “to ensure the viability and competitiveness
of tourism destinations and enterprises, to maxi- CSR for tourism businesses means assuming
mize the contribution of tourism to the prosperity responsibility for six main areas. The first area
of the host destination, to increase the number is the natural environment. Tourism
and quality of local jobs created and supported strongly depends on an intact nature and beautiful
by tourism, to seek a widespread distribution of landscape, and therefore, it is the obligation of C
economic and social benefits from tourism tourism businesses to engage in environmental
throughout the recipient community, to provide protection, primarily via the minimization of
a safe, satisfying and fulfilling tourism experi- pollution and waste as well as the conservation
ence for all people, to engage and empower of landscapes and biodiversity. Effective
local communities in planning and decision mak- environmental measures include efficient
ing about the management and future develop- energy and water management, wastewater and
ment of tourism in their area, to maintain and waste management, reducing the use of
strengthen the quality of life in local communi- chemicals as well as the selection of suppliers
ties, to respect and enhance the historic heritage, and partners based on ecological criteria and
authentic culture, traditions and distinctiveness contributions to the preservation of biodiversity
of host communities, to maintain and enhance and nature conservation. The second area refers
the quality of landscape, both urban and rural, to the fair and responsible treatment of
and avoid the physical and visual degradation of employees in order to respect and adhere to
the environment, to support the conservation of human rights regulations as well as fair working
natural areas, habitats and wildlife, and minimize conditions, the prohibition of child labor, and
damage to them, to minimize the use of scarce the protection of children and women of sexual
and non-renewable resources in the development harassment. To take responsibility for the tour-
and operation of tourism facilities and services, ists means informing them in a transparent and
and to minimize the pollution of air, water and honest way about the travel products and ensur-
land and the generation of waste by tourism ing the quality of the products in order to achieve
enterprises and visitors” (TSG 2007). customer satisfaction. In tourism where often
The Tourism Sustainability Group (TSG) different products from different suppliers are
which was launched in 2004 by the EU Commis- bundled to a tourism product or travel package,
sion in order to provide guidance for the process CSR is not only limited to an individual business
of sustainable tourism development in Europe but must take the whole supply chain into con-
identified eight key challenges to ensure sustain- sideration. Therefore, it is important to select
able tourism development: “reducing the season- partners and suppliers (e.g., hotels, local agen-
ality of demand, addressing the impact of tourism cies) which follow CSR standards as well. CSR
transport, improving the quality of tourism jobs, also means taking responsibility for the host
maintaining and enhancing community prosper- destination and supporting the local economy
ity and quality of life, in the face of change, through the use of local products and services
minimizing resource use and production of end keep the added value in the host destination.
waste, conserving and giving value to natural Responsible use of cultural and natural
and cultural heritage, making holidays available resources, the conservation of cultural heritage,
to all, and using tourism as a tool in global sus- the involvement and cooperation with local
tainable development” (TSG 2007). These key communities to improve the quality of life of
challenges provide a wide range of opportunities the host community are further CSR measures
for tourism businesses to engage in sustainable of tourism businesses. The last area of responsi-
tourism development and take on social respon- bility addresses the society as a whole. Everyone
sibility for the natural and social environment in should be able to participate in tourism, regard-
which they operate. less of their age, social class, income, or
C 590 Corporate Social Responsibility in Tourism
physical condition. Tourism should be accessi- Continental Hotels, NH Hotels, Banyan Tree,
ble for all. Club Méditerranée, etc.).
There are a number of basic international In order to integrate CSR into the business, the
strategy papers which may serve as guidelines commitment of the company’s management to
for businesses integrating CSR measures. One is taking an approach that is both environmentally
the “Global Code of Ethics for Tourism” which and socially responsible is absolutely necessary.
sets a frame of reference for the responsible and A series of voluntary instruments support
sustainable development of tourism (http://www. businesses in implementing CSR practices. This
unwto.org/ethics/index.php). Child protection in starts with embedding the principle of CSR in the
tourism is another important CSR-related issue. company vision. This must be supported by both,
The UNWTO has established a Task Force management and employees. Some important
(a global action platform of key-players from CSR-programs or codes of conducts, such as
the government and the tourism industry sectors, the Earth Guest-Program of Accor Hotels
international organizations, nongovernmental (www.accor.com/en), which was awarded with
organizations (NGOs), and media associations) the Tourism for Tomorrow Award by the World
which focuses on protecting against sexual Travel and Tourism Council (WTTC) in 2010,
exploitation of minors, child labor, and the traf- contests in ecologically and socially responsible
ficking of children and young people. ECPAT, tourism activities, such as EcoTrophea, the inter-
a global network of organizations and individuals national environmental award of the German
working together for child protection developed Travel Association (DRV), (http://www.drv.de/
the Code of Conduct for the Protection of fachthemen/nachhaltigkeit/ecotrophea.html), the
Children from sexual exploitation in TO DO! – Award for projects and measures
travel and tourism which many tourism relevant to tourism development whose
businesses have signed (http://www.thecode.org/). planning/realization ensure the involvement of
Further important initiatives in the context of CSR the different interests and requirements of the
in tourism are the “Davos Declaration,” which local people through participation (www.to-do-
contains adaption and mitigation strategies contest.org), or the Tourism for Tomorrow Award,
for tourism to respond to climate change an annual award of the Travel and Tourism Council
(http://www.unwto.org/climate/index.php) as well (WTTC) (http://www.tourismfortomorrow.com/).
as the Tour Operators’ Initiative for Sustainable Some more formalized instruments include Eco-
Tourism Development (TOI), founded in or CSR-management systems standards for envi-
2000 as a network of tour operators committed ronmental management in companies (ISO 14001),
to “developing, operating and marketing tourism standards for social responsibility (ISO 26000),
in a sustainable manner” and to “make a positive eco-management and audit schemes (EMAS) as
contribution to the natural and cultural well as certification schemes and quality labels
environment, which generate benefits for the for environmental and social responsible tourism
host communities, and which do not put at risk products. Common to all of them is the principle
the future livelihood of local people” (http:// of volunteerism with origins frequently going
www.toinitiative.org). back to private initiatives. Yet, certification
Corporate Social Responsibility (CSR) was schemes and quality labels are subject to a more
first implemented in the late 1990s by interna- formalized process of evaluation. Certification
tional hotel corporations. Many international schemes for sustainable tourism products and
hotel chains have integrated CSR measures such eco-labels are part of an effort to create a more
as Marriott International with the program Spirit transparent and generally comprehensible desig-
to Serve Our Communities, or Street Children of nation of sustainable tourism products. Their
NH Hotels. Today, many hotel chains publish functions and aims, though, go far beyond that.
annual CSR reports on their websites (e.g., The tourism businesses may use the certification
Accor, Hilton Hotel Corporation, Inter scheme or eco-labels as a guideline to improve
Corporate Social Responsibility in Tourism 591 C
the ecologically and socially responsible activi- when convinced that these measures will
ties within a company. These schemes “motivate reduce operational costs and create competitive
businesses to implement and continuously advantages in the market. Other motivations
improve ecologically and socially responsible comprise of improving the company image
measures within the company” (UNWTO 2004). and increased publicity and promotional
Tour operators benefit from certification schemes opportunities. In addition to these motivations,
to achieve a more efficient orientation when personal values as well as awareness and C
selecting the contracting partners within their knowledge levels are of great importance to
sustainable supply chain. Certification schemes managers when considering implementing CSR
and eco-labels help the traveler to gain a better in their tourism business. There are also
understanding of products. They offer a kind of impediments to implement CSR practices.
assurance that certified products or suppliers Managers worry about the necessary amount of
meet particular standards and criteria even time and effort to introduce CSR measures as
though not every detail is visible and known by well as the high investments and operation
the customer. And last but not least, certification costs. Often managers lack the awareness and
schemes and eco-labels are recognized as mar- knowledge of sustainability which prohibits the
keting instruments. They may help consumers in introduction of CSR measures.
their decision-making efforts by reducing the There is an increasing awareness and interest
cognitive burden when considering abstract of consumers for CSR when considering tourism
signs and signals from certificates and labels. products. Environmental protection, careful use of
Currently, CSR certification schemes for natural resources as well as security issues, pro-
sustainable tourism products are still rare. tection of human rights, social justice, and fair
Certification is mainly found in the form of working conditions are topics which are of inter-
eco-labels which are characterized by a large est to the tourists. According to an international
scope and complexity. The majority of eco-labels hotel guest survey, guests see the efficient energy
can be found in Europe and target the accommo- and water consumption, the reduction of waste
dation sector. They consist primarily of a set of and the protection of children as the main CSR
environmental indicators and incorporating practices for hotels (Earth Guest Research 2011).
aspects of social responsibility is still rare. Tourists show a positive attitude toward CSR-
However, this is about to change because more certification schemes and eco-labels. But despite
and more socioeconomic and cultural aspects this increasing interest in CSR-related topics, the
are considered relevant indicators for CSR demand for CSR-certified tourism products
certification schemes that embrace all aspects of remains low. Tourists attribute the social respon-
sustainability. sibility mainly to tourism providers. Tour opera-
Several studies report on the effectiveness and tors have recognized this trend and are
the benefits of certification schemes for tourism increasingly engaged in designing and offering
businesses. According to these studies, whereas sustainable tourism products.
the effectiveness as marketing instrument Two major categories of tourism businesses
was seen as limited, the main benefits from the which have different foci for their CSR practices,
business perspective are cost savings, particularly the hospitality industry and the tour operator
for water and energy supply, a capacity building industry, will be discussed separately.
process due to education and knowledge transfer The hospitality industry consists of a broad
to management and employees, the implementa- range of businesses (e.g., hotels and restaurants)
tion of an effective management system, which offer food services and accommodation for
increased employees’ motivation, and improved people who are staying and eating away from
standards with regard to quality and sustainabil- home. CSR in the hospitality industry has to be
ity. Managers are primarily motivated to imple- considered in project planning, construction, out-
ment CSR measures in tourism businesses side facilities, energy and water supply,
C 592 Corporate Social Responsibility in Tourism
disposable systems, housekeeping, food & bev- consists of waste reduction followed by reusing
erage, programs for (guest) mobility, communica- and recycling measures. Good practices include
tions, marketing and customer service points. buying products with less packaging or
Energy management which aims to reduce energy collecting, separating, and recycling waste.
consumption and to enforce the use of renewable CSR measures addressing the social dimension
energy is seen as one of the most effective CSR are twofold: on the one hand, hospitality businesses
measures referring to the ecological dimension of should contribute to the welfare of the local com-
CSR. The hospitality industry is very energy- munities. Good practices include employing local
intensive since many recreational facilities, such people and providing fair and safe working condi-
as pools and saunas, as well as general infrastruc- tions, offering training programs to develop the
ture require a large amount of fossil fuels for oper- local labor force, purchasing goods and services
ation. Effective practices for reducing energy from local providers, engaging in cooperation
consumption include replacing energy-inefficient with local providers as well as supporting social
heating and air conditioning systems as well as projects to enhance community well-being. The
other inefficient F&B and housekeeping equipment second pillar refers to the employees of the hospi-
(e.g., refrigerator, oven, dishwasher, laundry tality businesses and their well-being. Hospitality
machine, etc.) with modern technologies prefera- businesses have to respect employees’ human
bly using renewable energy. Insulation of the build- rights, which emphasize concern for working con-
ing and switching to renewable energy sources, ditions, child labor, and sexual harassment as well
such as wind, solar, or geothermal power, can as fair and equal treatment and wages especially
reduce fossil fuels and decrease air pollution. with respect to women and indigenous people.
Another important area for CSR practices is Working conditions in the hospitality industry are
water management. Water, a scarce resource in known to be difficult due to unusual opening hours
many regions of the world, is used extensively (weekend and night shifts), long working days,
in hotel rooms (sanitary equipment) as well physical and mental stress, and low career develop-
as supporting facilities, such as kitchens, ment opportunities. Therefore, CSR measures can
laundry rooms, swimming pools, and others. improve the working conditions and the motivation
The reduction of water usage and the reduction of employees. Successful CSR measures are job
of wastewater are the primary goals of an rotations, offering advanced training opportunities,
efficient water and wastewater management team-building activities (e.g., joint travel or excur-
plan. Water-saving practices include the installa- sions), and workplace health promotion.
tion of water-saving devices, such as low-flush The second category refers to tour operators
toilets and low-flow shower heads and faucets, and travel agencies. A tour operator typically
the continuous detection and maintenance of combines different travel components, such as
damaged devices (e.g., faucets), the use of transportation, accommodation, and site visits to
recycled water and the training of guests and create a travel package, whereas a travel agency
staff in water-saving practices. In order to avoid is a retailer who sells travel components and
ground pollution through wastewater containing package tours on behalf of suppliers to the
chemicals as well as fecal matter, appropriate public. Tour operators and travel agencies
wastewater treatment systems are necessary. also see an increasing need to implement
Good practices include the installation of CSR measures due to consumer awareness and
grease/oil separators in kitchen, the use of biode- increasingly see it as a positioning dimension for
gradable detergents and cleaning supplies, or the companies to gain a competitive advantage. It
active oxygen for cleaning swimming pools. is particularly challenging for tour operators to
Reusing treated water for flushing the toilets or integrate CSR into their business because they
watering the garden is another possibility. also have to be concerned about their partners
Another ecological burden consists of solid and suppliers which contribute to package their
waste. An effective waste management system tourist products. Therefore, tour operators not
Corporate Social Responsibility in Tourism 593 C
only have to evaluate CSR measures within their Cross-References
own company but also along the value chain.
Some larger tour operators have developed their ▶ Corporate Social Responsibility
own CSR management systems, but they lack ▶ Corporate Social Responsibility Strategy
external verification. An effective tool for moni- ▶ Ecolabel
toring, evaluating, and improving CSR practices ▶ Human Rights
in tour operator or travel businesses is TourCert, ▶ ISO 26000 C
a CSR certification scheme for tour operators and ▶ Mission Statements (Credo, Way, Vision)
travel agencies whereby the company considers ▶ Motives of CSR
all business operations and evaluates its sustain- ▶ Natural Environment
ability performance. Key indicators, such as ▶ Supply Chain Management
financial data, number of employees, mission ▶ Sustainable Tourism
statement, consumption of water, power and ▶ Triple Bottom Line
heat, staff satisfaction and training measures, ▶ UN Global Compact
among other figures, are relevant aspects ▶ Waste Management
concerning the company. However, since tour
operators’ core business consists of bundling
travel packages with travel products from differ- References and Readings
ent suppliers, the operations of all suppliers have
to be thoroughly analyzed by evaluating their Earth Guest Research (2011). Sustainable hospitality:
value chains as well (www.tourcert.org). There Ready to check in? – The first international
tracking study on guest expectations regarding
are three main areas which have to be established: sustainable development in the hospitality industry.
CSR has to be integrated in the mission and http://www.accor.com/fileadmin/user_upload/Contenus
strategies of the company, a CSR manager has _Accor/Developpement_Durable/pdf/earth_guest_research
to be appointed, and a sustainability report /20110618_Accor_HospitalidadeSustentavel_EN.pdf.
Accessed 26 June 2011.
including a program for improvement has to be European Commission. (2011). Sustainable and responsible
created. business. Corporate Social Responsibility (CSR). Brus-
sels: European Comission. http://ec.europa.eu/enter-
prise/policies/sustainable-business/corporate-social-
responsibility/index_en. htm. Accessed 30 May 2012.
Future Directions Swarbrooke, J. (2005). Sustainable tourism management.
Wallingford: CABI.
For tourism businesses, the concept of Corporate Sweeting, J. A. N., & Sweeting, A. R. (2009). A practical
Social Responsibility has become a central part in guide to good practice – Managing environmental
and social issues in the accommodations sector.
companies’ strategies. Environmental protection, http://www.toinitiative.org/fileadmin/docs/publications/
fair working conditions for employees, and HotelGuideEnglish.pdf. Accessed 1 April 2012.
contributing to the welfare of local communities TSG (2007). Action for more sustainable European tourism.
are key issues in the strategies of international Report of the Tourism Sustainability Group. http://ec.
europa.eu/enterprise/sectors/tourism/files/docs/tsg/tsg_
tourism corporations. Tourism businesses have final_report_en.pdf. Accessed 30 May 2012.
strong relations to the local communities in UNEP, GTZ (2003). A manual for water and waste
which they operate and, therefore, also management: What the tourism industry can do to
have a strong influence on the socioeconomic improve its performance, Paris: UNEP. http://www.
unep.fr/shared/publications/pdf/WEBx0015xPA-WaterWa
development of these regions. For customers ste.pdf. Accessed 14 Sept 2009.
as well as for employees, the integration of UNEP (2006). Tourism certification as a sustainability
CSR strategies is becoming more and more tool: Assessment and prospects. Paris: UNEP.
important. To operate successfully in the future UNEP, IHRA, EUHOFA (2001). Sowing the seeds of change:
An environmental teaching pack for the hospitality
it will be necessary for tourism businesses to industry. Paris: EUHOFA, IHRA, UNEP. http://www.
continuously implement and realize long-term unep.org/publications/search/pub_details_s.asp?ID¼437.
CSR strategies. Accessed 4 Apr 2012.
C 594 Corporate Social Responsibility Measurement (Instrument)
A particular global American corporation in many of them have noted in their CSR reports
their 2010 CSR report calls these aforementioned a series of actions which they are taking with
four headings their “four global pillars.” Compa- regard to the natural and physical environment.
nies issuing CSR reports have a choice of either Actions on climate change, sensible use of man’s
issuing a standalone CSR report or embed the natural resources, and waste management activi-
CSR report in their traditional annual report and ties appear to be of paramount importance to
accounts. Most large companies have now taken companies around the world.
a stance in this area by issuing a standalone CSR These companies disclose information on the
reports either on paper or electronically on their actions they are taking in order to tackle the
corporate web sites. It must be noted that the problems posed by climate change and reducing
nonlegal compulsion on the part of corporate their direct carbon footprints. For example,
entities in most countries of the world gives a particular company notes under the heading of
senior executives of these entities to disclose Environment in its 2010 CSR report that by 2050,
whatever information they believe would not it will become a zero-carbon business.
harm or damage their entities’ reputation which A particular UK company also provided in its
perhaps limits the reliance readers could place on 2010 CSR report that it has formed professional
such reports. links with the Institute of Environmental
Since Idowu and Towler (2004), some com- Management and Assessment (IEMA) and par-
panies have now improved on the above- ticipated in some IEMA and government spon-
mentioned headings and extended them to sored consultation on Guidance for Greenhouse
include other perspectives. For example, Tesco Gas Reporting and has initiated the commence-
Plc (a leading retailer headquartered in the UK ment of a 12-month implementation plan to
with operations in 14 different countries around achieve ISO14001 accreditation. Another com-
the world including the UK) in their 2011 CSR pany in their 2011 CSR report makes the follow-
report provided information to readers from the ing assertion “Our planet is getting warmer –
following perspectives: mainly because of an increase in greenhouse
• Customer gases produced by human activity – with many
• Community damaging consequences. It’s a global problem
• Operations but one that we’re helping to address.” The
• People company recalls that in order to help reduce
• Finance food product carbon footprints, it has launched
These five dimensions are similar in contents a series of low-carbon projects covering
when compared with the previous four perspec- everything from chocolate, alternatives to bottled
tives noted above albeit with better quality infor- water, and healthy dairy to on-farm composting
mation than those used in the 2004 study by and anaerobic digestion which can generate
Idowu and Towler; this of course should be the energy from farm waste. Another company
case. notes in its 2011 CSR report that its focus
Let us now look at the sort of information on help the environment has widen its
disclosed by companies under each of these four business activities into new areas such as home
perspectives in their CSR reports: efficiency which involves the company offering
installation and solar energy products to UK
Environment homeowners.
Companies around the world as a result of the Companies are now reporting on many initia-
adverse effects of global warming or climate tives they are taking to protect the environment
change, which have resulted in a series of envi- and reduce the adverse impacts of their activities
ronment related problems, appear to be more on the environment and consequently on man and
environmentally conscious and responsible than other life forms. This can only be good for the
they were some 50 or so years ago. As a result, environment and planet Earth.
Corporate Social Responsibility Report 597 C
Marketplace Workplace
The marketplace dimension of a CSR report typi- The workplace is another perspective of the CSR
cally looks at issues relating to the market where report which attracts the attention of a reporting
raw materials are sourced and where the entity’s entity. This perspective looks at issues relating to
products or services are sold. Reporting entities health and safety of both the staff and the general
believe that they have a strong influence in ensur- public who might need to. It is typical to see
ing responsible behavior on the part of all partic- information in the section of the report with C
ipants in the market, for instance, in ensuring that regard to actions the entity has taken to ensure
human rights are respected, equitable prices are equality of opportunities among the staff, diver-
paid to the less well-off suppliers of raw materials sity, benchmarking index on gender, disability
from the developing parts of the world (fair trade), employment policy, actions on work-life balance,
prevention of child labor in the so-called sweat- supports provided to staff with young families,
shops and a series of other irresponsible attitudes and job-sharing and home-working issues.
from any sector of the market. With regard to the This section would also disclose actions taken to
products and services they sell in the market, implement Government Legislations in areas
dialoguing with customers on a regular basis and such as Health and Safety at Work Act, Disability
ensuring that the products and services supplied in and Discrimination Act, Race Relations Act, and
the market meet customers’ requirements are safe other relevant issues which affect the workplace.
for use by them and are offered to them at the right
prices. These are issues which reporting entities Future Directions
would provide information on.
Companies would disclose information in Several countries around the world are developing
their CSR reports to the world at large in regard new frameworks for implementing CSR initiatives
to all actions they have taken or propose to take in by companies operating within the borders of
a forthcoming financial year which affect the these countries. Stock exchanges and trade associ-
marketplace will be the focus of this perspective ations are equally developing guidelines which
of the CSR report. they expect their members to follow when
reporting on their social and environmental
Customers impacts on society. International organizations
A famous UK retail stores notes in their 2011 such as the United Nations (UN) and International
CSR report “Our biggest impacts on the environ- Labor Organization (ILO) have also championed
ment and society come through the product we some conventions which they encourage countries
sell and the way they’re used and - so we want to to adopt in this regard. It was noted above that two
make it easier for our customers to live more countries, Indonesia and Mauritius, have manda-
sustainably” The chain stores notes in its CSR torily compelled countries operating with their
report that it provides environmentally and borders to annually report on their CSR activities
socially responsible products to its customers in just as they do in their annual reports for their
the form of fair trade organic, free-range prod- trading or operating activities. Is this a sign of
ucts, sustainable wood and fish, energy effi- what other countries would do? We would need
ciency, supplier excellence, and use of recycled to watch this space and see what happens in this
materials. Customers are made aware of what the area 10 or so years down the line!
company is doing and encourage customers to
identify how they can help to realize their sus-
tainable development objectives through some of Cross-References
the modern social networking media such as
Facebook and Twitter. The company also notes ▶ ACCA
that it reduces food waste by discounting short- ▶ Fair Trade
life food to customers. ▶ UN Global Initiatives
C 598 Corporate Social Responsibility Reporting
Coca-Cola Corporate Responsibility Report. (2010). CSR has been receiving increasing attention of
http://www.thecoca-colacompany.com/citizenship/pdf/
practitioners and academics due to changes in the
sustainability_reports/2010_CCA.pdf. Accessed 25
April 2011. business context, especially over the last half
Gray, R., Owen, D., & Adams, C. (1996). Accounting and century. According to neoclassical view of the
accountability: Changes and challenges in corporate firm, the only social responsibility of a firm is to
social environmental reporting. Englewood Cliff:
provide employment and pay taxes. Such views
Prentice-Hall.
http://www.norway.org.my/News_and_events/Business/ are in harmony with profit-only idea of Milton
Bedriftenes-Samfunnsansvar/. http://www.norway. Friedman. However, complying with tax obliga-
org.my/News_and_events/Business/Bedriftenes-Sam tions is not apparently sufficient to convey the
funnsansvar/. Accessed 29 May 2011.
level of corporate social responsibilities of firms.
Idowu, S. O., & Papasolomou, I. (2007). Are the corporate
social responsibility matters based on false pretences Moreover, as a result of significant reductions in
or good intentions? An empirical sty of the motivations government spending on social welfare, public
behind the issue of CSR Reports by UK companies. policy makers expect greater social involvement
Corporate Governance, 7(2), 136–147.
from corporations (Bowen 1953).
Idowu, S. O., & Towler, B. A. (2004). A comparative
study of the contents of corporate social responsibility
of UK companies. Management of Environmental
Quality, 15(4), 420–437. Introduction
Kotler, P., & Lee, N. (2005). Corporate social responsibility:
Doing the most good for your company. Hoboken: Wiley.
Marks & Spencer. (2011). http://corporate.marksand As of late, CSR has gained notoriety as businesses
spencer.com/documents/publications/2011/how_we-do_ have responded to two major changes in the last
business_report_2011. Accessed 10 Sept 2011. 5–10 years: the increase of public concern over the
Tesco. (2010). Corporate social responsibility report.
environment and the free flow of information
http://cr2010.tescoplc.com/. Accessed 25 April 2011.
Tesco. (2011). Corporate social responsibility report. afforded by the Internet. In the last several years,
http://www.tescoplc.com/media/60113/tesco-cr-report- movies like An Inconvenient Truth and events
2011.pdf. Accessed 5 Nov 2011. such as Live Aid and Earth Day have brought
climate change and protection of the Earth’s envi-
ronment into the forefront of people’s minds. As
Corporate Social Responsibility stakeholders in any organization’s strategic plan,
Reporting the public represents shareholders, customers,
employees, suppliers – everyone. Whatever issues
▶ Global Reporting Initiative that the public sees as important, organizations
▶ Social Accounting should take notice of. An organization seen as
harmful to the environment is very likely to be
seen as socially irresponsible, and therefore risks
Corporate Social Responsibility the relationship with all of its stakeholders (Bowen
Strategy and Poer 1993).
Another trend increasing the importance of
Ananda Das Gupta CSR is the increased use of the Internet to access
HRD, Indian Institute of Plantation Management, and trade information. Whereas in the past, the
Bangalore, Karnataka, India details of a company’s actions may have been
restricted to newspaper clippings from the busi-
ness section or academic discussions in the class-
Synonyms rooms of business schools, these days any
company seen being socially irresponsible may
Business policy; Changing social context; Long- show up in mass emailings, blogs, facebook post-
term business vision ings, or even mySpace bulletins – seen by tens or
Corporate Social Responsibility Strategy 599 C
even hundreds of thousands of people in a day. CSR actions of firms are essential for the well-
Today, more than ever, companies are under the being of society and, therefore, it is important to
watchful eye of their stakeholders. ensure firms’ continuous engagement in CSR.
Self-motivation or internal motivation of firms
to engage in CSR is superior to external coercive
Key Issues persuasion by means of legal and other pressures.
From a rational view point, firms’ motivation is C
Over the past few decades, the notion of CSR has dependant on the quantum of benefits that are to
been taking its form as a concrete concept. How- be derived from CSR engagements. If a clear
ever, still it is apparent that the notion of CSR is relationship between CSR and profitability is
varied and has many dimensions. The broad established, it is likely that firms are certain to
nature of the concept and the lack of precise incorporate CSR in to the main business strategy.
definition indicate that CSR is still taking its Evidence from business cases corroborates this
shape as a business philosophy and a practice. assertion.
Initially, corporate donations and other philan- Some of the drivers pushing business toward
thropic actions were identified as CSR and these CSR include:
were considered “out side” of core business func- The shrinking role of government: In the past,
tion. Organizations embraced CSR by engaging governments have relied on legislation and
in it more and subsequently, the scope of CSR regulation to deliver social and environmental
began to expand to cover a wider spectrum of objectives in the business sector. Shrinking
areas. government resources, coupled with
So what is Strategic Corporate Social Respon- a distrust of regulations, has led to the explo-
sibility? By taking a strategic approach, companies ration of voluntary and nonregulatory initia-
can determine for what CSR activities they have tives instead.
the resources to incorporate CSR as an important Demands for greater disclosure: There is
business function (http://mystrategicplan.com/ a growing demand for corporate disclosure
resources/strategic-corporate-social-responsibility/). from stakeholders, including customers, sup-
Another trend increasing the importance of pliers, employees, communities, investors,
CSR is the increased use of the Internet to and activist organizations.
access and devote to being socially responsible Increased customer interest: There is evidence
and thus firms can choose that which will that the ethical conduct of companies exerts
strengthen their competitive advantage. By a growing influence on the purchasing deci-
including CSR as part of a company’s overall sions of customers.
plan, organizations can ensure that profits and Growing investor pressure: Investors are chang-
increasing shareholder value do not overshadow ing the way they assess companies’ perfor-
the need to behave ethically toward their mance, and are making decisions based on
stakeholders. criteria that include ethical concerns.
Strategic CSR provides companies with solu- Competitive labor markets: Employees are
tions for: increasingly looking beyond salary and
Balancing the creating of economic value with benefits, and seeking out employers whose
that of societal value philosophies and operating practices
Managing their stakeholder relationships (espe- match their own principles. In order to
cially those with competing values) hire and retain skilled employees, companies
Identifying and responding to threats and oppor- are being forced to improve working
tunities facing their stakeholders conditions.
Developing sustainable business practices Supplier relations: As stakeholders are becoming
Deciding the organization’s capacity for philan- increasingly interested in business affairs,
thropic activities many companies are taking steps to ensure
C 600 Corporate Social Responsibility Structures
that their partners conduct themselves in agree to a social contract which is just and
a socially responsible manner. Some are intro- fair for all. CSR is an essential condition for
ducing codes of conduct for their suppliers to such a social contract. What is good for business
ensure that other companies’ policies or prac- should be good for society and what is good
tices do not tarnish their reputation (http:// for society should be good for business. There-
www.iisd.org/business/issues/sr.aspx). fore, the conceptual correction that maximization
of self-interest and social well-being are not
mutually exclusive concepts is needed. So, the
Future Directions notion of “doing well by doing well” is
reaffirmed.
There has been considerable debate over whether
organizations have a corporate social responsibil-
ity (CSR), as well as whether socially responsible Cross-References
initiatives predict subsequent financial perfor-
mance. Business leaders are increasingly ▶ Coalition of Environmentally Responsible
concerned with how their organizations can Economies (CERES)
grow and thrive from addressing societal ▶ Code of Best Practice
challenges. Strategic CSR can benefit organiza- ▶ Vision and Mission
tions through growth in market share and
organizational learning, as well as more
committed and engaged employees, supportive References and Readings
external stakeholders, and positive investor rela-
tions. We discuss how organizations around the Bowen, H. R. (1953). Social responsibilities of the busi-
nessman. New York: Harper & Row.
world are prospering by proactively engaging
Bowen, M., & Poer, F. (1993). The moral manager: Com-
with social and environmental challenges. municative ethics and Exxon Valdez disaster. Business
CSR principles should be seen as a stimulus for Ethics Quarterly, 3(2), 97–115.
designing financially viable and prudent CSR Brown, T. J., & Dacin, P. A. (1997). The company and
the product: Corporate associations and consumer
initiatives, given each organization’s combina- product responses. Journal of Marketing, 61(Jan),
tion of mission, resources, challenges, and 68–84.
opportunities. http://mystrategicplan.com/resources/strategic-corporate-
If CSR is expected from private firms as social-responsibility/.
http://www.iisd.org/business/issues/sr.aspx.
a voluntary altruistic commitment, it could be
said to be both unrealistic and against the princi-
ples of free market mechanism. Thus, the imple-
mentation and operationalization of CSR tend to
pose serious problems. To overcome these diffi- Corporate Social Responsibility
culties, firms are expected to devise their corpo- Structures
rate strategies in such a manner that CSR action
will derive benefits for both the firm and the ▶ CSR Frameworks
society. This is a “win-win” situation. Friedman’s
notion of self-interest of firm is “win-loose” and
the altruistic CSR is “loose-win” situation
(Brown and Dacin 1997).
The firms, consumers, shareholders, and all Corporate Social Responsibility-
the other community members belong to Oriented SMEs
one social system. All of them share limited
resources. To enhance the sustainable use of ▶ Territorial Social Responsibility and Territo-
the limited resources, all members need to rial Small and Medium-Sized Enterprises
Corporate Social Responsiveness (Carroll, Frederick, and Ackerman) 601 C
Introduction
Corporate Social Responsiveness
(Carroll, Frederick, and Ackerman) Nowadays, corporate social responsibility–
related terms are legion. One of such terms is
Branco Manuel Castelo that of corporate social responsiveness. It has
Faculty of Economics, University of Porto: been one of the first to emerge during the 1970s,
OBEGEF (Observatory in Economics and and it has appeared in the form of a challenge to C
Management of Fraud), Porto, Portugal the term “social responsibility.” Several authors,
among them a few major writers in the area, such
as Robert Wallace Ackerman, Archie B. Carroll,
William C. Frederick, Edwin M. Epstein, and S.
Synonyms Prakash Sethi, proposed distinctions between
corporate social responsibility and corporate
Corporate response to social demands social responsiveness.
By the 1970s, a need to shift attention from
social responsibility to social responsiveness was
felt by a number of authors. In the words of
Definition Archie B. Carroll, the “basic argument was that
the emphasis on responsibility focused explicitly
The field of corporate social responsibility has on the notion of business obligation and motiva-
evolved substantially since Howard R. Bowen tion and that action or performance were being
marked the beginning of the modern period of overlooked” (Carroll 1991, p. 40). A much-
literature on this theme with his book Social needed reorientation of thought to an emphasis
Responsibilities of the Businessman published in on “corporate action, pro-action, and implemen-
1953. The concept of corporate social responsi- tation of a social role” was felt (p. 40).
bility itself has evolved substantially, and its William C. Frederick (1978/1994) has proba-
meaning has become more precise. It has bly been the author who more accurately distin-
been criticized as early as in the 1970s for focus- guished social responsibility from social
ing on obligations and motivation and neglecting responsiveness when he identified two stages of
performance and actions. As a result of development in the thinking about corporate
such criticisms, related concepts, such as those social responsibility. He labeled the first stage
of corporate social responsiveness and corporate as CSR1. In this stage, there was a focus on
social performance, have emerged. Whereas the corporate social responsibility as an examination
term social performance is mainly concerned of companies’ “obligation to work for social bet-
with accomplishments and results, the term cor- terment” (Frederick 1978/1994, p. 151). He
porate responsiveness emphasizes actions and labeled the second stage, which emerged in
activities. the 1970s, as CSR2. This second stage meant a
The concept of corporate social responsive- shift to corporate social responsiveness, which he
ness emerged as a response to criticisms that defined as “the capacity of a corporation
the concept of corporate social responsibility is to respond to social pressures” (Frederick
implying merely the assumption of an obligation. 1978/1994, p. 154), thus distinguishing it
Corporate social responsiveness was conceptual- from corporate social responsibility. The
ized either as an alternative for that of social “philosophical imponderables” of the first stage
responsibility or as a different dimension of cor- (“Why? Whether? For whose benefit? According
porate social environment. Either way, the latter to which moral principles?”) were superseded by
is an action-oriented variant of the former and a set of “more answerable considerations”
pertains to a firm’s capacity of responding to (“How? By what means? With what
social pressures. effect? According to which operational
C 602 Corporate Social Responsiveness (Carroll, Frederick, and Ackerman)
guidelines?”) (Frederick 1978/1994, p. 156). This Another early challenger of the term “social
reorientation of thought meant a shift from a responsibility” was S. Prakash Sethi (1975). Sethi
normative stance to a more descriptive (1975) discussed the “dimensions of corporate
approach in the understanding of the process of social performance,” and referred to three stages
engagement in corporate social responsibility of adaptation of corporate behavior to social
activities. needs: social obligation, social responsibility,
The earlier proponents of the notion clearly and social responsiveness. In his discussion,
intended it to be a substitute for the term of companies are considered as an integral part of
“social responsibility.” Robert W. Ackerman society and as being dependent upon acceptance
(Ackerman 1973; Ackerman and Bauer 1976) of their role and activities for their existence,
has been one of the first authors to propose the continuity, and growth. A legitimacy gap
concept of corporate social responsiveness. For emerges when corporate performance becomes
him, what was really important was “converting incongruent with social expectations for such
the rethoric of corporate responsibility into mean- performance. In Sethi’s view, the crucial issues
ingful action” (Ackerman 1973, p. 98). He clearly in the concept of corporate social responsibility
preferred the term social responsiveness to the are the search for legitimacy by companies and
term social responsibility. In a book he wrote the doubts by its critics about the legitimacy of
with Raymond A. Bauer (Ackerman and Bauer their actions. For him, corporate behavior can be
1976), this preference is explained on two defined as social obligation, social responsibility,
grounds. The first pertained to the “inappropri- or social responsiveness. He defines social obli-
ateness of the label ‘social responsibility’ as gation as corporate behavior in response to mar-
a description of the process involved.” Regarding ket forces or legal constraints and suggests that
this matter, they argue that the connotation of the such notion is proscriptive in nature. This author
first term “is that of the process of assuming an sees social responsibility as implying congruence
obligation” and that it “places an emphasis on of corporate behavior with prevailing social
motivation rather than on performance” norms, values, and expectations of performance,
(Ackerman and Bauer 1976, p. 6). In the view and as a notion, which is prescriptive in nature.
of theses authors, “responding to social demands Furthermore, Sethi contends that a final notion,
is much more than deciding what to do” the notion of social responsiveness, suggests that
(Ackerman and Bauer 1976). In effect, “there what is important is not how a company should
remains the management task of doing what one respond to social pressures, but what should be
has decided to do, and this task is far from triv- their long-term role in a dynamic social system.
ial.” The second was related to the lack of guid- The basic idea is that business orientation in any
ance of the corporate social responsibility social dimension must be anticipatory and
concept “as to the content of what is to be done” preventive.
(Ackerman and Bauer 1976, p. 7). Contrary to Ackerman and Sethi, who view
At this point, it is important to note that the notion of social responsiveness as an alterna-
Ackerman and Bauer were associated to tive for that of social responsibility, Carroll views
a research program focused on corporate social social responsiveness as “the action phase of
responsiveness, launched by the Harvard Busi- management responding in the social sphere”
ness School in 1971, of which their book from rather than an alternative to social responsibility
1976 mentioned above was a notable outcome. (Carroll 1979, p. 502).
The focus on corporate social responsiveness Carroll proposed in 1979 a “three-dimensional
instead of on corporate social responsibility conceptual model” of corporate social perfor-
allowed the researchers associated to this project mance (Carroll 1979). His contribution to the
to link the analysis of social issues with the areas corporate social responsibility literature was two-
of strategy and organization (Freeman et al. fold (Freeman et al. 2010). First, based on previ-
2010). ous definitions of corporate social responsibility
Corporate Social Responsiveness (Carroll, Frederick, and Ackerman) 603 C
which referred to the responsibility to make attitude. He argues that: “responding to social
a profit, obey the law, and “go beyond” these demands is much more than deciding what to
activities, he included in his definition of corpo- do. There remains the management task of
rate social responsibility four components: eco- doing what one has decided to do, and this task
nomic, legal, ethical, and discretionary (or is far from trivial” (Carroll 1979, p. 498). Carroll
philanthropic). Economic responsibilities reflect articulated his three-dimensional model by inte-
the belief that companies have an obligation to grating two aspects in addition to that of social C
produce goods and services that consumers need responsibilities. A first additional aspect was the
and want and to be profitable in the process. Legal identification of the social issues to which these
responsibilities indicate that companies are responsibilities are connected (e.g., consumer-
expected to pursue economic responsibilities ism, environment, employment discrimination,
within the confines of written law. Ethical and product safety, occupational safety, and health).
discretionary responsibilities encompass the The other additional was the philosophy of
more general responsibilities to do what is right responsiveness, that is, the philosophy, mode, or
and avoid harm. Ethical responsibilities indicate strategy behind the response to social responsi-
a concern that companies meet society’s expec- bility and social issues of corporations (reaction,
tations of business conduct that are not codified defense, accommodation, and proaction). For
into law, but rather are reflected in unwritten Carroll, corporate social responsiveness could
standards, norms, and values implicitly derived “range on a continuum from no response (do
from society. Companies’ discretionary respon- nothing) to a proactive response (do much)”
sibilities are volitional or philanthropic in nature, (Carroll 1979, p. 501).
in the sense that they represent voluntary roles This three-dimensional model developed by
assumed by companies for which society’s Carroll has been subsequently extended and mod-
expectations are not as clear-cut as in the ethical ified namely by Wartick and Cochran (1985) and
responsibilities. Wood (1991). These authors have integrated
Carroll (1991) argues that these four catego- a notion of corporate social responsiveness in
ries of corporate social responsibilities can be models of corporate social performance. Wartick
depicted as a pyramid, in which economic and Cochran (1985) presented a “Corporate
responsibilities are considered the foundation Social Performance Model” which also integrates
upon which all other responsibilities are predi- three areas: the principles of corporate social
cated and without which they cannot be achieved, responsibility (using Carroll’s four categories of
and discretionary responsibilities are the apex. social responsibilities as “principles”), the pro-
Notwithstanding, companies are expected to ful- cesses of corporate social responsiveness (reac-
fill these four social responsibilities simulta- tive, defensive, accommodative, and proactive),
neously. An important note regarding this and the policies developed to address social
perspective, which needs to be made at this issues (social issues management). Wartick and
stage, pertains to the view that economic respon- Cochran (1985, p. 765) hold that social responsi-
sibility is something that is as important to cor- bility and social responsiveness “are equally
porations as it is to society. This is contrary to the valid concepts and that both should be included
more common proposition that economic respon- as separate dimensions of corporate social
sibility pertains only to things the companies do involvement.”
for themselves and the other responsibilities are Building on the earlier attempt by Wartick and
related to what they do for others. Cochran of constructing a model of corporate
Second, building upon the work of the earlier social performance, Wood (1991) proposes
promulgators of the corporate social responsive- a model consisting of three elements: principles
ness, Carroll noted that to respond to societal of corporate social responsibility, processes
expectations by merely assuming some kind of of corporate social responsiveness, and
responsibility would not be a satisfactory outcomes of corporate behavior. As Wartick and
C 604 Corporate Social Responsiveness (Carroll, Frederick, and Ackerman)
Cochran (1985), Wood considers that corporate results of bringing principles into practice within
social responsiveness complements but does not the economic, legal, ethical, and discretionary
displaces responsibility. It “provides an action domains and categorizes them in terms of social
counterpoint to the principled reflection of social impacts (beneficial or negative), social programs
responsibility” (Wartick and Cochran 1985, (which refer to the actions companies take to
p. 703). manage their social impacts in a favorable man-
For Wood (1991, p. 695), the basic idea of ner), and social policies (which emerge to guide
corporate social responsibility “is that business decision making).
and society are interwoven rather than distinct Another influential perspective on corporate
entities; therefore, society has certain expecta- social responsiveness is that of Edwin M. Epstein
tions for appropriate business behaviour and out- (1987), who wrote an important article proposing
comes.” She used Carroll’s four categories the concept of “corporate social policy process.”
and identified how they relate to the principles This new concept incorporates elements from
of corporate social responsibility (the principle of business ethics, corporate social responsibility,
legitimacy, the principle of public responsibility, and corporate social responsiveness concepts.
and the principle of managerial discretion), con- He endeavored to coordinate these terms. Epstein
sidering that the first can be viewed as domains (1987, p. 104) sees business ethics as concerning
within which the latter are enacted (Wood 1991). “systematic, value-based reflection by managers,
The principle of legitimacy operates on an insti- traditionally individually but increasingly in
tutional level and is based on the overall respon- collective settings, on the moral significance of
sibilities of a corporation to the society in which it personal and organizational business action and
operates, establishing what is expected of all cor- its consequences for societal stakeholders”
porations. It “implies that society has available (Epstein 1987). Corporate social responsibility
sanctions that can be used when these obligations is conceptualized as being related “primarily to
are not met,” thus amounting to a proscriptive achieving outcomes from an organization’s deci-
principle (Wood 1991, p. 699). The principle of sions concerning specific issues or problems
public responsibility functions on an organiza- which (by some normative standard) have bene-
tional level. It states that corporations are ficial rather than adverse effects on pertinent
“responsible for solving problems they have corporate stakeholders” (Epstein 1987). Finally,
caused, and they are responsible for helping to corporate social responsiveness pertains to the
solve problems and social issues related to their development of “processes whereby, consistent
business operations and interests” (Wood 1991, with the limitations of incomplete information,
p. 697). Lastly, the principle of managerial dis- corporate decision-makers collectively antici-
cretion functions on an individual level. It pate, respond, and manage the total ramifications
stresses the responsibilities of managers to of organizational policies and practices” (Epstein
behave as moral actors and make choices about 1987).
activities conceived to attain socially responsible The corporate social policy process is con-
outcomes. ceived as the “institutionalization within the cor-
According to Wood (1991, p. 706), “respon- poration of processes facilitating value-based
siveness contributes an action dimension, a ‘how individual and organizational reflection
to’ component, that is needed to complement the and choice regarding the moral significance
normative and motivational concept of corporate of personal and corporate action” (Epstein 1987,
social responsibility.” She suggests that compa- p. 107). Corporate social responsiveness is, thus,
nies use three main kinds of “processes of corpo- a component of this process. It focuses on the
rate social responsiveness” to bring principles of “individual and organizational processes for
corporate social responsibility into practice: envi- determining, implementing and evaluating the
ronmental assessment, issues management, and firm’s capacity to anticipate, respond and manage
stakeholder management. She then presents the the issues and problems arising from the diverse
Corporate Social Responsiveness (Carroll, Frederick, and Ackerman) 605 C
claims and expectations of internal and external being responsive may not be the same as being
stakeholders” (Epstein 1987). responsible, and it may even be at odds with it.
For Epstein (1987, p. 106), the nub of the Thus, rather than being considered a replacement
concept of corporate social policy process “is for responsibility, responsiveness provides an
the institutionalization within business organiza- alternative, complementary research strategy.
tions of the following key elements from business
ethics, corporate social responsibility, and corpo- C
rate social responsiveness”: Future Directions
• “From business ethics – value-based moral
reflection and choice concerning individual The development of instruments to monitor the
and organization action behavior. evolving social pressures and demands relevant
• From corporate social responsibility – an to a particular corporation, as well as of instru-
issue-oriented concern with the specific prod- ments of responding to such pressures and
ucts (consequences) of corporate actions. demands, is still an area in which major efforts
• From corporate social responsiveness – are being made and in which important develop-
a focus upon the individual and organizational ments are needed.
processes through which value-based, issue-
oriented moral reflection and choice occurs.”
Cross-References
Key Issues
▶ Carroll, A.B.
▶ Corporate Social Performance
The concept of corporate social responsiveness
▶ Corporate Social Responsibility
brings to the forefront the idea of response of
▶ Pyramid of CSR
a corporation to the evolving social pressures, as
well as a set of fundamental questions, such as the
following (Frederick 1994): Can the company
respond to social pressure? Will it respond? References and Readings
Does it respond? How does it do it? To what
Ackerman, R. W. (1973). How companies respond to
extent? And with what effect? Nowadays, there
social demand’s. Harvard Business Review, 51(4),
seems to exist a consensus around the idea that 88–98.
corporate social responsibility, corporate social Ackerman, R. W., & Bauer, R. A. (1976). Corporate
performance, and corporate social responsive- social responsiveness. Reston, VA: Reston Publishing.
Branco, M. C., & Rodrigues, L. L. (2007). Positioning
ness are all valid concepts and that they should
stakeholder theory within the debate on corporate
all be considered as different dimensions of cor- social responsibility. Electronic Journal of Business
porate social involvement. Ethics and Organization Studies, 12(1), 5–15.
A number of reasons can be adduced as to why Carroll, A. B. (1979). A three-dimensional conceptual
model of corporate social performance. Academy of
the emergence of corporate social responsiveness
Management Review, 4, 497–505.
has not led to the displacement of corporate social Carroll, A. B. (1991). The pyramid of corporate social
responsibility (Vallentin 2009). First, the replace- responsibility: Toward the moral management of orga-
ment is often considered unsatisfactory since it is nizational stakeholders. Business Horizons, 34(4),
39–48.
not able to provide real guidance in terms of Epstein, E. M. (1987). The corporate social policy
specific values of response. Second, the social process: Beyond business ethics, corporate social
responsiveness approach evades the issue of responsibility, and corporate social responsiveness.
defining the content and meaning of corporate California Management Review, 24(3), 99–114.
Frederick, W. C. (1994). From CSR1 to CSR2: The matur-
social responsibility in more exact terms. Third,
ing of business-and-society thought. Business and
given that responding effectively may not mean Society, 33(2), 150–164 (Original work published
doing what is desirable for society in general, 1978).
C 606 Corporate Social Responsiveness and Africa
Freeman, E., Harrison, J., Wicks, A., Parmar, B., & of corporate strategy: “Corporate strategy is the
De Colle, S. (2010). Stakeholder theory: The state of pattern of decisions in a company that determines
the art. Cambridge: Cambridge University Press.
Sethi, S. P. (1975). Dimensions of corporate social perfor- and reveals its objectives, purposes, or goals,
mance: An analytical framework. California Manage- produces the principal policies and plans for
ment Review, 17(3), 58–64. achieving those goals, and defines the range of
Vallentin, S. (2009). Private management and public opin- business the company is to pursue, the kind of
ion: Corporate social responsiveness revisited.
Business & Society, 48(1), 60–87. economic and human organization it is or intends
Wartick, S. L., & Cochran, P. L. (1985). The evolution of to be, and the nature of the economic and non-
the corporate social performance model. Academy of economic contribution it intends to make to its
Management Review, 10(4), 758–769. shareholders, employees, customers, and com-
Wood, D. J. (1991). Corporate social performance
revisited. Academy of Management Review, 16(4), munities.” Andrew’s definition clearly precedes
691–718. Mintzberg’s concern to pattern, plan, and per-
spective. Andrews also delineates a separation
between “corporate strategy” that settles the
activities in which a corporation will compete,
Corporate Social Responsiveness and “business strategy,” which clarifies the base
and Africa of competition for a certain business, in spite of
most of the times the boundary between these two
▶ CSR and Africa is quite unclear. Thus, he had foreseen “position”
as a type of strategy. According to others,
corporate strategy can be considered as a value-
creating path of activity for all stakeholders by
virtue of using and harmonizing resources in dis-
Corporate Standards tinctive marketplaces and corporate activities.
This characteristic of multi-market performances
▶ Corporate Governance distinguishes a corporate strategy from a business
strategy, product strategy, or any functional strat-
egy. Accordingly, it can be consented upon that
corporate strategy has a holistic outlook of the
Corporate Strategy whole corporation and seizes the integrated strat-
egy of all distinctive component organizations,
Catalina Soriana Sitnikov functional sections, and divisions into account for
Faculty of Economics and Business joint sustainable competitive advantage.
Administration, University of Craiova, Craiova,
Dolj, Romania
Introduction
and highest utilization of resources, concerted on • Fusions, acquisitions, associations, and joint
a characteristic industry, resulting in extra com- ventures
petence and potential economies of scale com- • Combined strategies
pared to competitors. It was suggested, by Nevertheless, it was also noticed that
Sekulić (2009), that operating inside one industry a portfolio approach rates the probability in rela-
might, nevertheless, result in sensitivity to tion to foreseeable revenues and, therefore, fre-
a perpetually dynamic business cycle, due to quently results in small incremental operations
modification in request or market entry or mar- and goods enhancement due to elevated uncer-
ket-existed competitors can impact market attrac- tainty in essential, high-risk-high-return projects.
tiveness. They suggest that sensitivity, due to Furthermore, fusions and acquisitions finally
uncertainties originated from existing in a single have defective results. Corporations that buy
industry, can be handled at the same time, by companies occasionally end up comprehending
diversification, having the corporate presence in that “the real assets were the brains of the entre-
more than one industry, which can result in preneurs and could not be bought.” By combined
a firmer industry or activity. strategies, it is meant that a corporation concom-
In addition, according to Jones and Haigh itantly attempts to address requirements of pre-
(2007), it is probably for a corporation either to sent consumers while trying to put the
diversify into new or connected businesses. It is corporation into a more advantageous market-
suggested that the most usual rationale for diver- place in the future. It determines that if
sifying into different business, characteristically a corporation opts for using any of the approaches
with no equivalences or complementarities with aforementioned, in the end the corporation will
the present business field, is the corporation’s be confronted with treats to its lasting wealth and
request to assess profit opportunities. The most survival. The efforts for survival might be com-
common motive for diversifying into connected bated by ceaselessly shaping, integrating, and
businesses is the chance to capitalize on corre- monitoring an R&D strategy correctly joined
spondences and complementarities. If top man- with corporate strategy to assist in distinguishing
agement chose to compete on a single market or and managing technical change. Wright et al.
preferred to diversify into various markets, the (1996) assert that strategic management relates
decision will influence extensive corporate strat- to the process that initiates with deciding the
egy, and this settlement will finally have impact mission and the objective of a corporation inside
over an analogous technology management strat- the framework of its external opportunities and
egy. The technology management strategy will threats and its internal strengths and weaknesses.
be founded in such a style that it helps the corpo- Doyle (1994) concludes that strategic manage-
ration accomplish the technological needs, origi- ment concentrates on the corporation’s market-
nated from the corporate strategy, to help attain place opportunities and tries to produce change
the objective and mission of the corporation. by recognizing and utilizing strategic windows or
Alignment of corporate strategy and technology prototype changes. To be able to recognize and
management strategy is crucial to acquire and use these strategic windows and prototype
maintain a beneficial competitive position. No changes, corporations require to supervise
matter what general technology strategy is actively technology.
selected by top management to apply, corpora- According to Jones and Haigh (2007), strategy
tions have to improve and renew their technology can be, and is, designed by corporations, while
to be ready for the tomorrow. others, on the other hand, conclude that strategy
In addition, it was established that founded cannot be designed. Nevertheless, if one accepts
corporations take on various approaches for that strategy is probably to design, there were
administering their road to the future: distinguished three main types of corporate
• Varied portfolios of R&D programs and strategy designing. The first is named strategic
engineering planning, i.e., corporations have headquarters’
Corporate Strategy 609 C
crews undertaking comprehensive designing. Corporate Strategy Regulations
Headquarter takes the initiative to create strate-
gies to create long-run competitive benefit, to Corporate strategy, according to Johnson et al.
make distinctive businesses expand, and to (2008), is the system of decisions in a company
recognize and improve synergies among them. that settles and displays its corporate goals,
The second type is titled financial control; affects the main policies, and plans for complet-
headquarter is very small, compared to the ing those goals and, therefore, sets the extent, C
dimension of headquarter when administering nature, and outcomes of projects of a company
the strategic planning, and does not impede in and its parts. The interdependency of goals, pol-
strategy evolution of its business components. icies, and systematized action is decisive to the
Alternatively, the headquarters will control rev- uniqueness of a distinctive corporate strategy and
enue for every business unit, i.e., the headquar- its chance to create competitive advantage. It is
ter act more or less as a holding corporation. the agreement, consistency, and internal steadi-
Such corporations without exception have no ness of strategic decisions that place the company
long-time perspectives, anticipate rapid pay- in its business setting and decide its particularity,
back, and expand via acquisitions rather than the authority to activate its strengths, and proba-
internal progress. bility of accomplishment in the marketplace.
The third type is titled strategic control and Successful corporate strategy, according to
plunge in between the two extremes depicted Lynch (2009), leads to synergic effects of busi-
earlier. The headquarter grants strategic design- ness units’ mixture with comprehensive perfor-
ing to the business units but attempts to balance mance that are bigger than individual
long-term effects by financial control. The pre- performance of each unit.
ferred, if any, type of corporate strategy design- Every company has its own easy regulations,
ing considerably influences which technology which balance it on what is called in complexity
strategy, management of technology strategy, theory “the edge of chaos,” providing just rea-
and R&D strategy to embark on to most effec- sonably framework to enable the company to
tively and productively assist corporate strategy. catch the best quick opportunities. Consequently,
The major component in administering corporate in conventional strategy, benefits come from
business is an adequately founded corporate strat- using resources or firm marketplaces. In strategy
egy. The corporate strategy is a fundamental tie as easy regulations, by contrast, corporate
between effective business mission and advantage comes from prosperously catching
comprehending determined portfolio of corpo- brief opportunities. This type of strategy makes
rate goals in the market environment. It assists sense for all classes of companies – large and
in diminishing or removing the gap between pos- small, and old and young – in fast-moving mar-
sible and actual performance of business actions ketplaces like those in the advanced economies.
by a suitable link between environment and Various forms of regulations assist managers in
resource opportunities of the company. managing distinctive characteristics of catching
Consisting of business portfolio creation, defini- opportunities. The regulations have general
tion, and allotment of sources for producing implications, containing definite changes and
competitive advantages, the corporate adjustments to specific types of companies and
strategy leads to business performance improve- business circumstances. During researching,
ment as well as shareholder value added. The a considerable number of companies and the sim-
imperative of a market-oriented company has ple regulations could plunge into five large
grown into founding and completing so-called groups:
disciplined corporate strategy, singular among • How-to rules – establish the major character-
all parts of the company. In other respects, it istics of how a business system is applied.
will be vulnerable to unexpected whims of mar- • Boundary rules – delineate border setting
ket competition. (center on clients, geography, or technologies)
C 610 Corporate Strategy
that assists the managers categorizing numer- advantage are found only in market disorder;
ous opportunities fast and effectively. therefore, the companies investigate for opportu-
• Priority rules – assist managers in classifying nities and catch them, with free and successful
the approved opportunities (mainly for modification to active market conditions. Clear
resource allocation). rules found a strategic framework to assist man-
• Timing rules – determine the pulse of major agers catch quick opportunities successfully.
strategic practices and improve synchronize The organizational feature is also typical to
a company with growing opportunities and new corporate strategy, and new actualities need
harmonize the company’s different units to a quite distinctive approach to this matter. Partic-
catch the opportunities in an effective style. ularly, programming the strategy from the
• Exit rules – assist managers in choosing when highest and afterward thinking up an organization
to draw out of former opportunities. The crit- to perform it might work in slow markets. Nev-
ical matter is to compose the accurate rules, ertheless, in active markets, strategy is carried out
mainly founded on managerial experiences. by selecting an outstanding team; deciding the
However, it is also significant to have the accurate tasks for team members and enabling
favorable sum of rules. Little number of rules them work.
can put aside managers from determining Improving internally originated business
opportunities and acting fast and effectively enlargement through pointing up human
enough to catch them. On the other hand, too resources as the central strategic resource has
numerous rules can mix up managers about come to be a pattern in preparation and execution
the opportunities to catch and to overlook. of corporate strategy in modern business setting.
Therefore, the optimal ensemble of rules is Thus, valid strategy has turned out to be the
normally somewhere amid two and seven. outcome of having the best employees in the
The optimal sum of rules for a specific com- most suitable positions to help different strategic
pany can be changing in time, relying on the enterprises. This means that organizational strat-
character of the business opportunities. When egy for companies is the only mapping (fre-
the opportunities are anticipated and concen- quently designated patching) of modular
trated by the company, it must have additional businesses into precise market opportunities to
rules to raise competence. When the opportu- produce the corporate advantage.
nities are not so foreseeable and more impre- Lastly, the new corporate strategy is depen-
cise, it makes sense to have fewer rules to raise dent on time. In usual strategy, duration is not so
adaptability in catching them. The basic idea significant, as markets are supposed to act
that “strategy is about being different” (Lynch steadily and predictably. In comparison, time is
2009) persists to be regular in application of decisive for active and high-speed markets. The
new corporate strategy. However, the new simplest method to imagine a temporal strategy is
strategic watchwords have come to be clarity, by comprehending the notion of corporate fac-
organization, and scheduling. Primarily, tors. Particularly, a company’s unique combina-
a strategy has to be clear. Clarity means devis- tion of factors is its integrated end products,
ing a strategy as clear rules, which guide brand name, technology, production capacities,
streams of strategic procedures and clarify geographic position, and so on. Corporate man-
suitable course of action. agers employing the temporal strategy run a sort
The idea is founded on choosing a little num- of genetic technology by a set of unique strategic
ber of strategically important procedures and movements in which one or more factors are
designing several clear rules to direct them. The adjusted (genetic evolution). They might institute
central strategic processes have to place the com- a new technology, modify a label, or go in a new
pany where the opportunities for acquiring the country. Valid temporal strategy is one of mix of
competitive advantage are swiftest and biggest. small, incremental modifications, midsize, and
In rough markets, the opportunities for an big, fundamental modification.
Corporate Strategy 611 C
It is evident that a corporation success primar- responsible for carrying out corporate gover-
ily rests on the vision declared by the top man- nance in the company. This complementarity
agement of the corporation (Goold et al. 1994). of a role guarantees that corporate governance
Functioning corporate strategy joined with the process and corporate strategy process are
vision performs a crucial part in improving per- interdependently comprehensive of each other.
formance of a successful company. When the This interactive reliance has a mutual value-
organizational structure as a whole uses dubious added outcome on both governance and strategy C
practices and falls apart due to nonconformity to as well as on the corporation as a whole. The link
conventional customs, standards, and values, it is between corporate governance and corporate
considered as failed corporate governance. Stra- strategy is that of authenticity and reliability,
tegic matters dealt with by a corporation are which reveal the point to stakeholders that what-
distinct from other kinds of business organiza- soever actions and results company has obtained
tions. The corporation has an interactive outlook in the previous years, it has realized by right
of its acting field. By administering its portfolio means and at an optimal degree. Any actions
of end products, services, business, and opera- the company is doing currently, it is also in
tional activities at different organizational levels, conformity with regulations, benefits, and
a corporation principally looks at the entity as assumptions of all concerned. Moreover, the
a whole. Enterprises such as internationalization, value formation method that the company will
new business drives, business enlargement, search for in the future, it will as well be realized
fusions, purchases, strategic associations, acqui- in the accurate way and that too in the best
sitions, joint ventures to involve resource, interest of all stakeholders.
actions, and image implications for the company Any deficits or variance from an acceptable
as a whole, improving shareholder value. Corpo- plan will be reported accurately and well timed to
rate strategy setting stage is an extremely elabo- the stakeholders and suitable alterative rules will
rate procedure and involves continuous be applied (Johnson et al. 2008). Based on this
knowledge drift among all components, middle implicit validating and validating tie, the corpo-
and top management. Any time a corporate ration draws faith of investors, creditors, strategic
strategy is developed, examined, or investigated, associates, and community at large to meet its
it has to encounter prerequisites of uncovering significant demands for value-creating drives.
clarity, and responsibility, delivering best atten- Thus, it can be claimed that without a corporate
tion to the interest of all stakeholders. As these governance method, corporate strategy is point-
are mandatory principles of a durable corporate less and nonsustainable. Consequently, corporate
governance method, in consequence, it can be governance can be regarded as an umbrella –
claimed that corporate governance is bedrock in a field under which all main players of the strate-
strategic matters. In a well-ruled corporate struc- gic system act by a process of interaction and
ture, prerequisites of uncovering, clarity, and reliance. It defines tasks, duties, and boundaries
responsibility give adequate support to the of power of all major sides within a company.
company’s future path of action. Consequently, The duty to carry out corporate governance, i.e.,
the matured strategy is conceivable, dependable, suitable disclosures, ethical submission, and
and value added. It justifies the trust of all main approvals, lies with the board. As a result, corpo-
stakeholders. rate governance must be perceived as
However, in Bocean (2006), there ought to be a supervising, validating, confirming, and
joint complementarity among the tasks of top supporting method for corporate strategy by
management (who are primarily responsible for which investors, creditors, and other stakeholders
corporate strategy making) and the board of increase faith about corporate affairs, thereby
directors (who are needed to supervise the action guaranteeing accessibility of resources and car-
of the company on behalf of the stakeholders). In rying out other business relations with the corpo-
their role as board members, they are ration. It brings integrity and trust in management
C 612 Corporate Strategy
decisions, hence attracting further investment, performance, corporate strategy is greatly deter-
credit, alliances, and business. Consequently, it mined by different elements, market strengths,
is clearly connected with corporate strategy. and internal course of data, absorption, action,
Without suitable corporate governance, corporate and behavioral characteristics of decision
strategy would be useless. makers. Strategy can thus be rated as a function
Durable corporate governance framework of the mixture of these forces.
guarantees corporate reliability in the eyes of all
stakeholders – thereby enhancing the net worth of
the corporation. It can be claimed that corporate Future Directions
governance and corporate strategy are two jointly
complementary notions. If profitability and value The corporate strategy in modern times has
creation are the outcomes of corporate actions, altered. These days, corporations should investi-
strategy functions as the way to attain these aims. gate a variety of possible plans to reveal new
Hence, corporate governance functions as the opportunities and threats to their business and
frame under which strategy is matured and react with winning strategies. As a result, the
assessed. It strengthens the strategy. Anyway, formula for efficient strategy must center on sin-
successful corporate strategy enhances corporate gle strategic practices with easy rules, on the
governance method. As there is a component of modular patching of units to quick market oppor-
mutuality between these two notions, in conse- tunities and on evolutionary scheduling for stra-
quence, they both shape a structure of decision- tegic movements.
making and impact, both inside and outside the Furthermore, corporations must create practi-
corporation. Therefore, it can be claimed that cal scenery of the area they compete on. This area
there subsists in a systemic outlook of corporate must combine a comprehension of possible plans,
governance and corporate strategy. Seized in the variety of strategic alternatives and handles
cooperation, they both shape an integrated man- the corporation can pull, and the financial and risk
agement system consisting of major players and connections of each alternative under various
stakeholders. They affect the conduct of plans. Considering the trials and skepticism
a corporation. adjoining the existing environment, the stakes
for building valid corporate strategy outcomes
are especially high.
Key Issues The late years have witnessed a growing num-
ber of scientific reports directing to potential win-
Corporations are at present operating in demand- win schemes, where a corporation can increase
ing and highly unsure periods, facing a mixture of profits while at least making some movement
increased macroeconomic need, competitive and close to the application of sustainable business
capital market dangers, and in many cases, the conventions. Many experts have deduced that
prospect for significant technical and regulative corporations have to embody sustainability inside
gap. More precisely, powered by the current new the strategy to stay competitive.
financial crisis, corporations across areas and
geographies are facing an economic downswing
with significant connections for their positioning
and economic basics. Throughout these demand- Cross-References
ing and highly unsure times, the corporations
must embody skepticism into strategic decision- ▶ Business Strategy
making. Hence, corporate strategy must be per- ▶ Code of Best Practice
ceived and used as a function of various fields, ▶ Competitive Advantage
covers, and characters as well as a highly inter- ▶ Corporate Mission, Vision and Values
active system. Separately, from quantities and ▶ Corporate Sustainability
Corporation as Psychopath 613 C
References and Readings
Corporate Volunteering Programs
Andrews, K. R. (1987). The concepts of corporate strat-
egy. Homewood: Richard D Unwin.
▶ Employee Volunteer Programmes
Bocean, C. G. (2006). Corporate governance: Theories,
challenges and paradigms. In Man in the knowledge
based organization XIth International Conference,
Sibiu. Ministry of Defence Academy, November C
23–25, 2006. Corporate Volunteerism
Doyle, P. (1994). Marketing, management and strategy.
Essex: Prentice Hall. ▶ Employee Volunteer Programmes
Goold, M., Campbell, A., & Alexander, M. (1994).
Corporate-level strategy: Creating value in the
multibusiness company. New York: Wiley.
Johnson, G., Scholes, K., & Whittington, R. (2008).
Exploring corporate strategy (8th ed.). Essex: FT Corporate Water Sustainability
Prentice Hall.
Jones, M. T., & Haigh, M. (2007). The transnational
corporation and new corporate citizenship theory: ▶ Water
A critical analysis. Journal of Corporate Citizenship,
27, 18–29.
Lynch, R. (2009). Corporate strategy. Harlow: Pearson
Education. Corporate-NGO Partnerships
Sekulić, V. (2009). Corporate strategy development and
competitive advantage of enterprise (FACTA
UNIVERSITATIS Series: Economics and organiza- ▶ Global Governance and CSR
tion, Vol. 6, No. 3, pp. 269–279). Serbia: The Faculty
of Economics, University of Niš.
Wright, P., et al. (1996). Strategic management concepts
and cases. New Jersey: Prentice Hall.
Corporate-Sponsored Volunteering
▶ Good Corporation
Corporate Tax Evasion
▶ Tax Evasion
Corporation as Psychopath
Martin Brueckner
Corporate Trust Institute for Social Sustainability, Murdoch
University, Murdoch, Perth, WA, Australia
▶ Trust
Synonyms
Introduction
Key Issues
Recent history saw an intensifying debate about
corporate conduct in light of widely publicized The corporate psychopathy thesis is rooted in the
corporate scandals involving companies such as legal status of the corporation. In historical terms,
Enron, Monsanto, and WorldCom. Issues sur- the corporation has a long-standing tradition with
rounding immoral, even psychopathic, corporate early references to stock trading entities dating
conduct arise out of the conflict between legal back to medieval European times. The expansion
and socially expected standards of corporate con- of international trade across Western Europe
duct and the corporate pursuit of profit. The from the fifteenth century onward saw the estab-
quasi-personification of corporations under cor- lishment of the first limited liability companies
porate law is coupled with the concept of moral whose stock owners could not be sued for the
agency, which ascribes corporate entities the recovery of debt; limited liability is still one of
quality of being able to act intentionally and the key characteristics of corporations today as
with independent volition. The investment of under corporate law, the company, but not an
corporations with these anthropomorphic quali- individual shareholder or employee, is solely
ties gives rise to the argument of moral projec- responsible for the company’s losses. Over the
tion. This suggests that corporations should be centuries, the legal status of corporations became
held accountable to human moral principles, more refined, with corporations being granted
even though they are not real people. This pro- a suite of different rights and responsibilities.
jection principle fuels the contemporary debate The late nineteenth century saw the introduction
surrounding deplorable corporate conduct, which of the most profound changes in corporate law,
emerged in response to corporations violating which granted corporations the attribute of being
moral principles in the pursuit of economic return a separate legal personality, also known as “per-
without legal constraint. In contrast, identical sonhood” or “artificial personality.” This change
conduct perpetrated by a “real” legal person occurred in English law in 1895 by the House of
would be subject to criminal law. Lords in Salomon v. Salomon & Co. and across
The corporate profit motive is at the core of the the Atlantic in 1886 in the case of Santa Clara
conflict between corporate conduct and social County v. Southern Pacific Railroad in the US
expectations on companies’ behavior, especially Supreme Court. Back then, US Chief Justice
in countries like the USA. In this regard, the Morrison R. Waite gave an obiter dictum, refer-
raison d’être of Anglo-American corporations is ring to corporations as “persons” and granting
seen to be defined rather narrowly, focused solely them some human rights based on the 14th
Corporation as Psychopath 615 C
amendment to the US Constitution. While in the while no longer part of the legal debate – provides
US disunity remains among law experts about the the platform of the corporate psychopathy thesis
applicability of the 14th amendment to the legal popularized in the book “The Corporation” by
person status of corporations (see Noble v. Union Joel Bakan and the accompanying documentary
River Logging R. Co., 147 U.S. 165 (1893)), film released the same year.
corporate personhood granted under corporate Bakan’s work rests on the observation that
law paved the way for the contemporary debate corporations are edified to the status of ordinary C
on corporate conduct and its comparability to persons and possess privileges beyond the reach
human, moral behavior. of mortal individuals. In this context, he
Internationally, corporate law can vary questions what kind of person the corporation
widely, and many forms of corporations exist. would be, if its behavior was to be assessed
However, private, for-profit corporations repre- using a human psychiatric framework. To this
sent the majority of corporations today and can be end, Bakan explores – using a personality diag-
regarded by far the most dominant form of insti- nostic checklist based on the World Health Orga-
tution worldwide. Despite national differences in nization’s (WHO) ICD-10’s Manual of Mental
corporate law, corporations share a set of legal Disorders DSM-IV – the behavioral characteris-
characteristics which define this type of organi- tics of the corporation when treated as a flesh-
zation; these include (a) having legal person and-blood human being. His analysis reveals that
status, (b) having limited liability, and (c) having the actions of a corporation resemble those of
the ability to transfer shares, as well as (d) sharing human psychopaths when measured against
ownership of resources and (e) having a central- WHO’s six criteria for human psychopathy listed
ized management under a company board. In this below:
sense, corporations today are granted most of the • Callous unconcern for the feelings of others
rights usually extended to ordinary people such as • Incapacity to maintain enduring relationships
the right to own property and to enter into con- • Reckless disregard for the safety of others
tracts but also some of the responsibilities such as • Deceitfulness: repeated lying and conning
needing to pay taxes. While other rights such as others for profit
those relating to holding public office and the • Incapacity to experience guilt
permission to vote are generally denied, corpora- • Failure to conform to social norms with
tions have the right against self-incrimination, the respect to lawful behaviors
right to privacy, and the right to lobby. In addi- Balkan explores cases and examples of
tion, corporations, unlike human beings, are deplorable corporate behavior and applies them
immortal due to continued succession. In this to the above psychiatric criteria. Callous uncon-
regard, body corporates enjoy a special legal sta- cern for the feelings of others was illustrated by
tus beyond the reach of ordinary people in that the sweatshop labor scandal that erupted in the
they continue to exist perpetually and enjoy lim- mid-1990s involving the sport equipment and
ited liability. apparels designer Nike. Back then, the company
Many of the rights granted to corporations are stood accused of allowing, and at times mandat-
essential to carry out a business such as those ing, inhumane working conditions in the factories
rights that enable a company to own and sell of its contractors operating in the Middle East and
resources. As such, corporations are granted the South-East Asia. It was revealed, inter alia, that
same rights as a person acting as a sole proprietor. workers in overseas factories were being exposed
Corporate personhood or having an artificial per- to toxic fumes well over the respective host
sonality can also to some extent be seen as country’s legal limit and that children as young
a requirement for companies for the purposes of as 14 years made up a large part of the workforce.
conducting business. This resemblance in law At the time, Nike defended its position claiming
between a natural person and corporations has not to be responsible for working conditions in
led to the personification of companies, which – contract factories.
C 616 Corporation as Psychopath
Examples highlighting the incapacity of cor- IBM and its infamous connection to Nazi
porations being able to maintain enduring rela- Germany during the Second World War retold
tionships drew attention to companies’ relentless in Edwin Black’s book “IBM and the Holocaust.”
search for means of reducing their costs of pro- IBM was found to have provided database assis-
duction, resulting in the frequent relocation of tance to the Hitler regime, supplying punch card
manufacturing plants to low-cost-labor countries. technology used for the counting and identifica-
This corporate practice was found to fuel tion of Jewish people during the Holocaust.
a competition among host countries on the basis The corporate psychopathy thesis is being crit-
of low labor prices, driving an international “race icized for generalizing corporate conduct. Critics
to the bottom” to the detriment of their local allege that the thesis is based on unrepresentative,
populations. negative examples and only applicable to the US
The characteristics of reckless disregard for context due to the legally mandated maximiza-
the safety of others and deceitfulness, with tion of stockholder wealth under the US corporate
repeated lying and conning others for profit, charter. Issue is also taken with the transition
were shown in the Posilac example, a bovine drawn between psychopathy in the human indi-
growth hormone (BGH) made by the Monsanto vidual to psychopathy in a corporation and the
corporation to improve milk yields in dairy cows. projection of human morals on company conduct.
In the late 1980s, the Journalists Jane Akre and Moral projection rejects the amorality of compa-
Steve Wilson, who were working for the Fox nies, arguing that people working for corpora-
News television station, investigated and tions are subject to the ethical standards and
reported on animal welfare concerns and poten- mores of society which gives rise to company
tial health and safety problems, including cancer accountability. Critics of the moral agency argu-
and birth defects, associated with the use of the ment suggest that the corporation is a mere prod-
synthetic hormone. The company insisted on the uct of law for it does not exist in corporeal form.
safety of its product and threatened to take legal It is argued that corporations are mere “artificial
action against the journalists who subsequently persons,” representing nothing more than
lost their employment with Fox News after refus- a legally binding contract between capital pro-
ing to change their story and to play down the viders (e.g., investors) and the management of
risks. While in response to independent studies a company. As such, corporate personhood does
Posilac was banned from use in most European not allow for the conflation of the corporation
countries as well as Canada, Australia, and with the responsibilities of the individual and
New Zealand, the journalists’ whistle blower maintains the distinction between a legal person
lawsuit fought to defend the public interest was and a moral person.
dismissed by the US courts at the time. The 1970s also saw growing interest among
Monsanto also featured as an example for the scholars in corporate psychopathy understood in
corporate incapacity to experience guilt in con- terms of the behaviors of individuals in the work-
nection with the use of Agent Orange, a herbicide place. The epidemic growth of corporate scandals
used to deforest land during the Vietnam war. has been linked in recent years to what has been
The chemical caused a legacy of birth defects coined a “plague of poor leadership” character-
and cancers among the Vietnamese population ized by frequent and far-reaching misdeeds of
and American troops, with many hundred thou- company managers. Corporate psychopathy,
sand people affected. When the company was a still emerging field in organizational psychol-
sued by American war veterans, Monsanto settled ogy, in this context explains the rise of “poor”
the case out of court but never admitted guilt. managers to the helm of companies and into
Lastly, the failure to conform to social norms positions of leadership, resulting in poor levels
with respect to lawful behaviors was illustrated of ethical decision-making within those compa-
by a selection of US corporations that were found nies. The scale, importance, and level of impact
guilty of criminal conduct. One example was of corporations globally magnify the risks
Corporation as Psychopath 617 C
psychopathic senior corporate managers can pose calls for corporate self-restraint under the ban-
to society as their leadership decisions affect the ner of corporate social responsibility (CSR),
social responsibility of their firm. others favor regulatory intervention and
Corporate psychopaths, also referred to as a tightening of the laws governing corporate
industrial psychopaths, organizational psycho- conduct. Again, others call for the reassertion
paths, organizational sociopaths, or executive of the democratic rights of citizens and the
psychopaths, are described as individuals who assumption of the responsibilities of consumers C
have the personal and social abilities to facilitate and investors.
their rise to positions of leadership. They display CSR as a form of corporate self-constraint is
a disregard for the needs and wishes of other promoted as a voluntary measure premised on the
employees and are prepared to bully and deceive, business case for ethical corporate conduct,
ignorant of the harm caused to the welfare of which promises economic and strategic benefits
others. While criminal and violent forms of cor- to companies in return for demonstrating civic
porate psychopathy exist, successful corporate virtue. Critics of the voluntary approach, how-
psychopaths are believed to resort primarily to ever, point to the irreconcilability of corporate
nonviolent and legal means to further their cause, self-interest and the public good, which has
allowing them to climb the corporate ladder with- given rise to the corporate psychopathy phenom-
out coming into conflict with the law and enon. They argue in favor of regulatory measures
remaining largely undetected by their superiors. to curb corporate powers and to enhance the
The skilful combination of charisma, manipula- transparency and accountability of firms. In this
tion, and remorselessness enables corporate psy- regard, recent years also saw a shift away from
chopaths to move up the corporate hierarchy. the issue of corporate personhood per se toward
Their dedicated pursuit of success irrespective a series of other rights granted to corporations
of the cost to others and unemotional decisive- such as the right to political lobbying, which has
ness can make them appear to be ideal leaders, evolved into a multibillion dollar industry that
paving the way for quick promotion. Their para- stands accused of having subverted the demo-
doxical likability is also believed to facilitate cratic process. Increasingly, calls are made for
their steep ascent within companies, as their government intervention, either mandating the
interpersonal skills enable corporate psychopaths curbing of corporate influence in the political
to present themselves as well-adjusted individ- sphere or for greater scrutiny of the econo-
uals who are trustworthy and competent. In light political entanglements of the corporate sector
of their damage potential for companies and on with more exacting public reporting require-
society at large, there is growing interest in cor- ments. Demands for a stronger regulatory role
porate psychopathy among business scholars and are linked to calls for active citizenship and
practitioners alike. a stronger stance taken by consumers and inves-
tors alike as their passivity makes them complicit
in corporate psychopathy, being the respective
beneficiaries of cheap consumer products and
Future Directions high investment returns.
It ought to be notable that numerous principles of to any sum of enterprises, from Lyndon
the early New Deal were next claimed as uncon- Johnson’s Great Society to Richard Nixon’s sal-
stitutional and given up, but several principles ary and cost controls, as an indication of lasting
such as the National Labor Relations Act that tendency. Progressives, on the contrary, will
advertised unionization of the American work- claim that America has been administrated over
force are yet, in effect. One section of the New that same period by a corporatist administration
Deal was the development of the Tennessee River of large industry scheming with government ver-
Valley under the state corporation titled the Ten- sus the middle and lower classes so that just the
nessee Valley Authority (TVA). Several New rich profit.
Dealers saw TVA as more than a state power The realities conceal both variants. If corpo-
business. They wished to make TVA an example rations have been running American economy for
for the formation of local political units, which their own aims, or together with large govern-
would come instead state governments. ment, they have not been doing a very good job of
The pattern for TVA was the stream evolution guarding their benefits, considering how fast US
designs carried out in Spain in the 1920s under companies progress and plunge and how the For-
the regime of Miguel Primo de Rivera. Jose tune 500 transforms. If just the wealthy are get-
Antonio Primo de Rivera, the son of Miguel ting wealthier somebody must tell Bill Gates,
Primo de Rivera, was the founder of Franco’s a child from a middle class upbringing with no
National Syndicalism. academic title, or Warren Buffett, who bred up
Corporatist regime normally promotes big working in his grandfather’s food market shop,
governmental programs such as TVA on the that they have to return their fortune, they have by
base that they are too huge to be supported by some means obtained to the Rockefellers, the
a private company. In Brazil, the Vargas admin- Astors, the Vanderbilts, and other once-rich
istration created numerous state companies such dynasties whose richness have long been on the
as in iron and steel manufacture which it felt up decay.
were required but private firm refused to create. It Nevertheless, considerable economic disrup-
also created a systematized labor movement that tions carry out the corporatist, which is why at
came to control those public firms and present USA has a government committee super-
transformed them into over employed, uneco- vising General Motors, and the Treasury Depart-
nomic outlets on the public finances. ment has released the first car guarantee program
Nowadays, several American conservatives in its history. This is the reason why several banks
will claim that corporatism of the USA during were coerced to consent bailout funds they did
the New Deal was never set apart. They can point not require and have been coerced not to return it
Corporatism 623 C
to take out from under federal micro manage- the Americas, but also the East Asian and
ment. And it is why the federal incentive pack Islamic fundamentalist leaderships such as Tai-
incorporates such “goodies” as capital to increase wan, Singapore, and Iran. The Islamic socialist
wideband infrastructure, which arrives with all countries such as Syria, Libya, and Algeria are
types of links bound by the FCC, since USA by more corporatist than socialist, as was Iraq under
some means cannot depend on phone, cable, or Saddam Hussain. The previously communist
Internet corporations to supply consumers with governments such as Russia and China are at C
the bandwidth they request in networks that will this point unmistakably corporatist in the eco-
fit modern economy. nomic system of beliefs, even if not in the
Corporatism is particularly attractive to mem- appellation.
bers of parliament, public specialists who func- Nowadays, corporatism or neo-corporatism is
tion as policy creators, and Nobel Laureates since used in reference to trends in politics for law-
it is eventually a world administered by several makers and executives to be impacted or con-
elected through the state. If people are told suffi- trolled by the interests of business companies
ciently times that nothing, even technical inven- (limited liability corporations).
tion, is reasonable anymore without relevant
inputs and guidelines from the state, perhaps
they will come to hold it, even though the Future Directions
designers of the printing press, the steam
machine, the light bulb, the phone, internal com- Nowadays, specialists have forecasted for the
bustion motor, and other technologies might national structures, a deterioration of corporatism
question in what way they mastered what they and concentration of industrial relationships on
did without authority implication. Corporatism is the track of disorganization. Three leading ratio-
not about managing capitalism best as businesses nales have been followed to emphasize this ten-
develop. It is few moves apart from. It is alterna- dency: deregulating decentralization of
tively about those who trust in “the beauty of negotiation and disorganization in the restricted
pushing a button to solve problems,” as Paul comprehension, i.e., the deterioration in setting
Krugman lately depicted his enchantment to the up roles of the main interest groups. There were
social disciplines. Some individuals are anticipated productivity alliances within singular
concerned about what occurs when the governors companies to replace corporatist structures at the
get in charge of national or global economy. macro- and mesoeconomic and organizational
Nevertheless, the true worry is what occurs levels. The significant aspects to such hypotheses
when the button pushers get in charge, for them were transformations in manufacture systems and
are the corporatists. methods and the progress of the third sector,
together with liberalization and raised competi-
tion in world businesses.
Key Issues Also, in his book The Triple Helix: University-
Industry-Government Innovation in Action, Henry
In spite of the fact that Corporatism is not a well- Etzkowitz says Corporatism, the European
known notion to the public, the majority world doctrine of cooperation between government,
economic systems are corporatist in character. industry, and labor, is superseded by a “triple
The sections of socialist and uncontaminated capi- helix” of academic-industry-government relations.
talist economy are more or less meaningless. There A model of shared state authority is being
are just corporatist economies of different tastes. transformed into one in which new forms of author-
These tastes of corporatism comprise the ity and legitimation arise from the bottom up as
social democratic governments of Europe and well as top down.
C 624 Corporativism
Cross-References
Corruption and National
▶ Corporate Governance Development
▶ Globalization
▶ Lobbying John O. Okpara1 and Nicholas Koumbiadis2
1
Department of Management, College of
Business, Bloomsburg University of
Pennsylvania, Bloomsburg, PA, USA
References and Readings 2
Department of Accounting, Finance, and
Bramble, T., & Ollett, N. (2007). Corporatism as Economics, School of Business, Adelphia
a process of working-class containment and roll- University, Garden City, NY, USA
back: The recent experiences of South Africa and
South Korea. Journal of Industrial Relations, 49(4), Synonyms
569–589.
Edsforth, R. (2006). The new deal: Americans’ response
to the great depression (p. 145). New York: Blackwell. Bribery; Dishonesty; Embezzlement; Exploita-
ISBN 1-57718-142-5. tion; Extortion; Fraud
Encyclopædia Britannica Online. (2010). Corporatism,
http://search.eb.com/eb/article-219369. Retrieved 17
June 2011.
Etzkowitz, H. (2008). The triple helix: University- Definition
industry-government innovation in action (p. 72).
New York: Routledge. http://books.google.com/ The term “corruption” has generally been used in
books?id¼KC4T9-P0o_4C&dq¼future+directions+in+
corporatism&source¼gbs_navlinks_s&redir_esc¼y. a rather loose manner in literature as well as in
Samuel, G. (2007). The commercial society: Foundations everyday context; there is no agreement on the
and challenges in a global age, Lanham, USA (p. 109). definition of corruption either in literature or in
Plymouth: Lexington Books. practice. Corruption has been defined by different
Wiarda, H. J. (1996). Corporatism and comparative
politics. Armonk: M.E. Sharpe. ISBN 978-1-56324- authors in different ways. Generally, corruption
715-6. is defined as the abuse of public power for private
gains in violation of rules (Rose-Ackerman 1999;
Manion 2004). Corruption is also described as
illegal actions carried out by government officials
to enrich themselves. Denis (2001) defines cor-
Corporativism ruption as giving something to someone with
power to obtain a favor. Corruption is the misuse
▶ Corporatism of public power for private gain (Youthink 2011).
Although these definitions are quite popular, they
are often seen as narrow because they do not take
into account all forms of corruption. Because of
the narrow definition of corruption found in the
Corporatocracy literature, some scholars have proposed what is
known as the market-centered view of corrup-
▶ Corporatism tion. They believed that corruption takes place
only when a person uses his or her office as a way
to maximize his or her income (Tilman 1968).
There is yet another perspective, the public
interest–centered view of corruption. According
Corrupt to this view, corruption is a violation of public
interests and it includes actions which favor
▶ Bribery and Corruption whomever provides the rewards and thereby
Corruption and National Development 625 C
does damage to public and its interests (Friedlich agreement on what approaches work and what
1966). It is obvious from the definitions presented explains the success and failure of anticorruption
above that corruption involves actions on the part strategies. Notwithstanding this, combating cor-
of public officials that are regarded as improper ruption or promoting integrity has become
and unlawful in which they seek to promote pri- a major component of governmental reforms in
vate benefits at the expense of the public interests. many countries. In appreciation of the significance
It is seen as a deviant behavior associated with of good governance for sustained economic C
a specific motivation, namely that of private gains growth and prosperity, most governments in
at public cost. developing countries have renewed their commit-
ment to fighting corruption. Anticorruption agen-
cies are being set up with clear mandates to
Introduction effectively fight and contain corruption and all
forms of maladministration in society. Since fight-
Corruption has become a matter of growing con- ing corruption has been firmly on the agenda of
cern all over the world. This is partly because of most governments, a variety of new initiatives and
the changing economic and political environ- strategies have been devised and implemented in
ments around the world, and partly because of many of these countries. Yet the level of corrup-
the growing consensus of both academic and tion has remained high and the plethora of strate-
policy issues regarding the negative impact of gies and the recent campaigns appear to have
corruption on development. Corruption is mor- made little difference in containing and combating
ally wrong; it undermines good governance, dis- corruption in most of these countries.
torts public policy, leads to misallocation of
resources, and hurts economic growth (Bardhan
1997; Rose-Ackerman 1999). Due to the negative Causes of Corruption
consequences of corruption, governments and
international organizations have focused their Though many studies have examined the roots of
efforts on searching for effective ways to control corruption, it is difficult to determine why cor-
and eradicate corruption. These efforts have pro- ruption is more prevalent in one country than it is
duced a variety of strategies and institutional in another (Lambsdorff 2007). Developing coun-
innovations around the world, such as the tries face both real and perceived problems with
establishment of a strong and centralized corruption. The causes of corruption are numer-
anticorruption agency modeled along the lines ous and include misery caused by inequality and
of those in advanced industrialized countries pervasive poverty which may encourage people
with clear mandates to confront the problems of to break the rules of honesty and decency. Peo-
corruption. Another popular choice has been ple’s access to or shortages of resources often
adoption of a multiagency model to tackle cor- develop a self-perpetuating momentum so that
ruption by many countries. The multiple agency the well endowed get more and the poor get
models involve creating anticorruption capacities less. Major development-related assets in this
across several governmental agencies, but the regard are land, educational opportunities, and
results achieved are far from uniform. While access to capital. The distribution of land affects
some countries have achieved considerable suc- income distribution in most developing countries
cess in containing corruption, others have failed because income from land constitutes a major
to make significant headway despite having share of household income in such countries.
followed similar anticorruption reforms and strat- Furthermore, land is often used as collateral for
egies. Attempts to draw lessons for policy trans- borrowing and investing. Hence, the lack of land
fers have proved difficult given the differences in among those who are poor constrains their access
the contexts and a host of other factors (Klitgaard to loans and other forms of financial assistance.
1988; Quah 2003). Thus, there is a general lack of The income-earning potential and productivity of
C 626 Corruption and National Development
There has also been growing concern over corruption. The extent of corruption cannot be
corruption in large infrastructure projects such precisely measured because a large proportion
as dams and bridges where substandard materials, of it is never detected, nor reported (Caiden
and disregard for proper design and engineering et al. 2001). Thus, a key issue is how to measure
specifications, are rampant because of corruption. corruption, which can be exceptionally difficult.
This deliberate disregard of laws, rules, and reg- How corruption and its prevention, detection,
ulations because of corruption has caused bridges investigation, and prosecution are to be measured
to collapse and dams to burst, which has in turn has been the subject of much academic and pro-
resulted in a heavy loss of life and property. fessional debate. The problems with current mea-
Additionally, obscure insider trading practices sures of corruption such as the Corruption
and financial scams that can result from poorly Perception Index (CPI), The Bribe Payers Index
supervised financial systems have had serious (BPI), and World Governance Indicators (WGI)
economic and social consequences (Samanta are that official corruption statistics are less reli-
et al. 2010). People have lost their life savings able partly because they focus on cross-country
and fortunes in financial scams, which have led to analysis and data on corruption derived from
massive street demonstrations and civil unrest in perception indices, and partly because no party
several countries. Lack of transparency, shady to the transaction has much incentive to report it
deals, and corrupt practices have also been (Miller et al. 2001). For instance, bribes paid by
a contributing factor to the financial and macro- various households to access education, health
economic crisis that has swept across the globe. care, and other social services are correctly mea-
Unfortunately, corruption places severe con- sured because they are made in secret. Since
straints on a country’s capacity to develop, and corruption is carried out clandestinely, there is
elimination of corruption in any society, espe- still more information about corruption that is
cially in developing economies, requires strong hidden and cannot be known. For example,
commitment on the part of the government, many crimes like embezzlement are not reported
strong regulatory and monitoring environment, because they are not committed openly but
greater transparency, accountability, free and behind closed doors. Corruption is an act that is
fair competition, limiting discretionary powers, taken seriously only when the culprit is caught.
and special privileges, all of which will reduce Hence, everyone is in the dark about the real
opportunities for economic rent on which corrup- extent of corruption. Some of the measurement
tion thrives. challenges generally faced by anticorruption
agencies, governments, scholars, and practi-
tioners include the lack of corruption metrics
Key Issues that are useful in day-to-day policy and program-
matic work, the need for more disaggregated data
Corruption is a problem that has dire conse- that move beyond single-country rankings to
quences for a country’s development. To be more discrete measures within sectors, institu-
effective, measures against corruption must tions, and population groups, and the need to
address the underlying causes that are identified move beyond perceptions-based data as the
in this entry. Emphasis must thus be placed on basis for corruption measurement.
preventing corruption by tackling the root causes
that give rise to it through undertaking economic,
political, and institutional reforms. However, Future Directions
before any credible reform can be made in terms
of eliminating corruption, two key issues about Because corruption leads to social and political
corruption need to be addressed. Corruption is instability and impedes economic development
difficult to measure because of the illegal nature of a nation – particularly developing nations – it
of the transaction and inexact definition of is important that more research be devoted to
Corruption and National Development 629 C
explore its causes and how to eradicate it. There- can get more bribes. Consequently, rooting out
fore, academic researchers and scholars should corruption helps a country to overcome other
continue to study the primary underlying causes institutional weaknesses, and inversely, reducing
of corruption. Understanding these causes can a country’s institutional weaknesses helps to con-
help policy makers devise an appropriate method trol corruption. It can be concluded that under-
to address the challenges of corruption. taking measures such as economic and political
Researchers should attempt to incorporate the reforms by reducing institutional weaknesses C
role of various members of civil society and offers the best hope for eradicating corruption.
voluntary organizations in eliminating corrup- We believe that political and economic reforms
tion. In this era of globalization, important insti- will bring corruption under control and minimize
tutions extend beyond national borders. its adverse consequences so that countries can
Fortunately, globalization has helped to expand proceed with their efforts to successfully achieve
the intelligence and power of civil society in the their developmental goals.
form of a variety of nongovernmental organiza-
tions and other activist stakeholder groups that
can have an impact on eliminating corruption. Cross-References
Researchers should vigorously continue to search
for an accurate and reliable means to measure ▶ Bribery
corruption. An accurate measurement of corrup- ▶ Embezzlement
tion will be helpful in determining the degree of ▶ Fraud
corruption in a country, and a reliable reporting
process will inform governments and stake-
holders about the extent to which corruption is References and Readings
prevalent, and identify which sector or sectors of
the economy corruption exist. Bardhan, P. (1997). Corruption and development:
A review of issues. Journal of Economic Literature,
35(3), 1320–1346.
Caiden, G. E., Dwivedi, O. P., & Jabbra, J. (2001). Where
Conclusion corruption lives. Bloomfield, CT: Kumarian.
Denis, O. (2001). Leadership governance and corruption.
A note for the international conference on leadership
A useful conclusion that has emerged from the
held at Abuja.
current discussion and ongoing debate on the Friedlich, C. J. (1966). Political pathology. Political
subject of corruption is that corruption has Quarterly, 37, 70–85.
adverse consequences to economic development. Idakwoji, S. P. (2010). Leadership, corruption and devel-
opment. Canadian Social Science, 6(6), 173–179.
To be effective, emphasis must be placed on
Klitgaard, R. (1988). International cooperation against
preventing and tackling the causes of corruption. corruption. Finance and Development, IMF,
Anticorruption enforcement measures such as Washington, DC, 35(1), 3–6.
oversight bodies, a strengthened police force, Lambsdorff, J. (2007). The institutional economics of
corruption and reform: Theory, evidence and policy.
and a more effective and efficient legal system
New York, NY: Cambridge University Press.
will be vital when addressing the fundamental Lipset, S. M., & Gabrel, S. L. (2000). Corruption, culture,
causes of corruption. Another observation that and markets. In L. E. Harrison & S. P. Huntington
may be useful to bear in mind is that corruption (Eds.), Culture matters. New York: Basic Books.
Manion, M. (2004). Corruption by design: Building clean
is most prevalent where there are institutional government in Mainland China and Hon Kong. Cam-
weaknesses, such as political instability, bureau- bridge, MA: Harvard University.
cratic red tape, and weak legislative and judicial Mauro, P. (1995). Corruption and growth. Quarterly Jour-
systems. Institutional weaknesses are intertwined nal of Economics, 110(3), 681–712.
Mauro, P. (2004). The persistence of corruption and slow
and feed upon each other. For example, red tape
economic growth. IMF Staff Papers, 51(1), 1–18.
makes corruption possible and corrupt officials Miller, W. L., Grodeland, A. B., & Koshechkina, T. Y.
may increase the extent of red tape so that they (2001). A culture of corruption? Coping with
C 630 Countering a Stream
toxic materials were put into the air, oceans, and reduce, reuse, and recycle – which ranks the
earth on a continual basis. Typically, large methods associated with mitigating environmen-
amounts of waste are created, much of which is tal impact of production or use of a product.
valuable yet put into holes in the ground through Applied to the production process, the reduce
landfill schemes; other waste is burned releasing element relates to the eco-efficiency movement
toxins into the atmosphere and losing forever the which was largely born from the 1992 Rio Earth
potentially reusable elements. The industrial rev- Summit involving 30,000 people from around the
olution created a “cradle to grave” system where world, including representatives from 167 coun-
resources from the earth are extracted, made into tries. Eco-efficiency also involves the principle
products (e.g., some of which require thousands elements commonly referred to as the triple bot-
of different chemical components – over 4,000 in tom line, economic, environmental and ethical
a domestic television) and after use are disposed concerns, often related to the 3Ps of profit, planet,
of in landfill or incinerators. and people.
A typical manufacturing organization is Taking the principles of industry under the
often likened to an open system with inputs, influence of the eco-efficiency movement rather
a conversion process, and outputs (Fig. 1). than the basic elements arising from the indus-
Within an open system such as this, the trial revolution, Braungart and McDonough
outputs are the desirable elements which cus- state that a retrospective look at the results
tomers directly pay for; however, it is recognized might show it to be the design of a system of
that there are externalities which are undesirable. industry that:
These elements, whether gaseous, liquid, or solid – Releases fewer pounds of toxic waste into the
are the direct residue of the conversion process; air, soil, and water each year
some accounts report that more than 90% of – Measures prosperity by less activity
materials extracted to make durable goods in the – Meets the stipulations of thousands of com-
United States become waste almost immediately plex regulations which reduce, without elimi-
(Ayres and Neese 1989). nating, poisoning
In more recent years, efforts have been made – Produces fewer materials which can be so
to reduce the impact of the externalities through dangerous that future generations are required
more efficient processes – much of the effort to maintain constant vigilance
being centered on the principle of the 3Rs – – Results in less externalities, especially waste
C 632 Cradle to Cradle
– Puts smaller quantities of valuable materials elements are included, and if they did, they may
into landfill where they can never be retrieved not want them as they could potentially be harm-
Essentially, they state that it makes the ful to the user and future generations through the
destructiveness of the production process emissions they create, especially when the
developed through the industrial revolution current practice of using low-quality materials
a little less so. to produce low price goods is involved. In partic-
Braungart and McDonough state that the goal ular, products can include ingredients such as
of an eco-efficient system is zero: zero waste, benzene which is banned for certain uses in
zero emissions, and zero “ecological footprint,” some Western countries yet still allowed in low-
based on the principle that human beings are cost manufacturing countries, meaning that it is
regarded as “bad” and that zero is a good goal imported as part of a whole product – affecting
but question what it would mean to be 100% products today and landfill for the future.
good. These areas relate to the externalities of Recycling is not without its disadvantages –
the open system. many products lose vital characteristics or gain
Before considering the alternative, there are undesirable chemicals as a part of the recycling
additional areas of the “cradle to grave” industrial process – paper being a prime example. Paper can
system which should be considered – those only be recycled a finite number of times, at
relating to the actual product produced – the present technology only allows for seven cycles,
“desirable” element of the open system. One and uses chlorine for bleaching – it is only virgin
major element, a criticism of modern commerce paper which may be chlorine free. Plastic milk
and marketing in particular, is that it creates bottles are regularly recycled to produce fleece
homogenous societies in which there is material for clothing; however, at the end of the
a commonality of design in both products and life of the jacket, it is likely to be sent to landfill,
architecture which has led to a one size fits all only prolonging the time taken for the plastic to
strategy. Braungart and McDonough state that end up there rather than going directly from the
“imposing universal design solutions on an bottle. The alternative, however, for a fleece
infinite number of local conditions and customs jacket is to use virgin polyester which would
is one manifestation of this principle and its also end up in landfill so overall less polyester,
underlying assumption, that nature should be and therefore oil, is used. Clothing company
overwhelmed.” A point they make, however, is Patagonia claims to save 42 gal of oil and prevent
that nature’s entire energy requirement comes a half-ton of toxic air emissions for every 150
from the sun. Humans extract and burn fossil jackets made from postconsumer recycled (PCR)
fuels, incinerate waste, and use nuclear reactors polyester rather than virgin polyester (Chouinard
to provide energy despite “thousands of times the 2006). Ultimately, unless the initial material in
amount of energy needed to fuel human activities a product is specifically designed to be recycled,
hits the surface of the planet every day in the form it can often be no better to recycle, and sometimes
of sunlight.” worse, than it would be doing nothing.
In current production systems, products are Aluminum is a rare product which becomes
designed to appeal to customers at an affordable more efficient with recycling and can fit well to
price while meeting performance and life expec- a cradle to cradle system – in addition to being
tations and complying with legislation for the indefinitely recyclable, it takes only 5% of the
markets they are sold in and produced according energy and produces only 5% of the emissions to
to the regulations in place where manufactured. recycle aluminum compared with aluminum
A problem identified with this type of product is made from virgin ore. These benefits grow incre-
that it not only meets these criteria but often mentally each time aluminum is recycled.
includes elements which make the production In overall terms, the value of nations and orga-
more efficient, potentially in terms of the 3Rs. nizations is measured through gross national
Buyers may not know that these additional product (GNP) which only measures the sales
Cradle to Cradle 633 C
rather than the cost of goods sold. This can lead to reflect the full ability which ants display to work
anomalies such as when a national catastrophe, with, and for, nature rather than against it.
for example, an earthquake, destroys resources Braungart and McDonough suggest a new
yet causes GNP to increase because money is design assignment to encompass the broad ideas
spent on labor and materials despite the loss of of cradle to cradle. “Instead of fine tuning the
the natural resources affecting the long-term existing destructive framework, why don’t peo-
capability of the nation. ple and industries set out to create the following: C
The difference between efficiency and effec- – buildings that, like trees, produce more energy
tiveness is always an important distinction, often than they consume and purify their own waste
determined as efficiency being doing things right water
while being effective means doing the right – factories that produce effluents that are drink-
things. Eco-efficiency can be seen as doing things ing water
right – more efficiently, reducing, reusing, and – products that, when their useful life is over, do
recycling, but it does not always mean doing the not become useless waste but can be tossed
right things. A basic tenant of cradle to cradle is onto the ground to decompose and become
doing the right things – being effective. food for plants and animals and nutrients for
Braungart and McDonough define their concept soil; or, alternatively that can return to indus-
“eco-effectiveness means working on the right trial cycles to supply high-quality raw mate-
things – on the right products and services and rials for new products
systems – instead of making the wrong things less – billions, even trillions, of dollars’ worth of
bad.” materials accrued for human and natural pur-
Contrasting this with the GNP measurement poses each year
currently used for countries and the turnover and – transportation that improves the quality of life
profit measures for organization, effectiveness while delivering goods and services
and doing the right things in organizations – a world of abundance, not one of limits, pol-
means creating genuine growth taking the full lution, and waste”
cost of production into account not just now but For millions of years, the natural cyclical,
for generations to come. biological system using the Earth’s major nutri-
An example of a natural cradle to cradle ents of carbon, hydrogen, oxygen, and nitrogen
system highlighted by Braungart and has nourished a thriving planet with diverse abun-
McDonough is a community of ants. They cite dance. The industrial revolution has changed
Hoyt 1996 in stating that as part of the daily much of that with the extraction of a multitude
activity, ants: of constituents which are transformed and
– Safely and effectively handle their own mate- merged into materials which cannot be recycled
rial waste and those of other species by the Earth and therefore create problems of
– Grow and harvest their own food while nur- waste and a reduction of resources. With growth
turing the ecosystems of which they are a part and success measured purely by output of prod-
– Construct houses, farms, dumps, cemeteries, ucts rather than the full cost and effect of inputs,
living quarters, and food storage facilities this non-cycle could continue until the resources
from materials that can be fully recycled expire. However, the cradle to cradle principle
– Create disinfectants and medicines that are requires humans to learn to imitate nature’s
healthy safe and biodegradable highly effective system of nutrient flow and
– Maintain soil health for the entire planet metabolism, in which the very concept of waste
Despite this parallel, cradle to cradle does not which serves no ongoing purpose does not exist
advocate returning to a pretechnological state. and will allow continual, sustainable growth.
Instead, it works on the principle that it is possible For true sustainability within the cradle to
to incorporate the best of technology and culture cradle system, products are composed of mate-
to reflect a new view where products are made to rials that biodegrade and become food for
C 634 Cradle to Cradle
biological cycles or of technical materials that either biologically or technically can be very
stay in closed-loop technical cycles, in which different in different regions.
they continually circulate as valuable materials A current world situation is that there are
for industry, and sometimes a combination of the countries which do accept types of waste that
two, provided they are designed to be separable at others do not. This means that waste of some
the end of the “life” of the product. The cradle to types is transported to countries where it can
cradle process travels full circle starting off with legally be disposed of, even though the issue
the creation of products that are safe for both meaning it is not allowed elsewhere still exists.
human and environmental health and ending Because sustainability should be regarded as
with the easy recovery and reuse of the materials local, national, and global, cradle to cradle rec-
in the products (Nahikian 2007). ognizes that it is not viable to allow externalities
In the early 1990s, DesignTex, a division of of emissions, effluents, or waste to pollute
Steelcase, set out, with the help of Braungart and locally; it is also wrong to ship them elsewhere
McDonough, to conceive and create just because there is less regulation. “Connecting
a compostable upholstery fabric, after rejecting to natural flows allows us to rethink everything
proposals for materials using a combination of under the sun: the very concept of power plants,
cotton and recycled soda bottles (PET) due to the of energy, habitation, and transportation”
potential harmful effects of particles from the (Braungart and McDonough 2008).
PET materials eroding during use the PET Buildings are an area where cradle to cradle
would make the end of life fabric a waste – the can be, and is being, applied. Buildings utilize
PET would not go back to earth safely, and the a large percentage of the energy, electricity, and
cotton could not be separated to be used again. raw materials used in the world while producing
The eventual material chosen was a combination a significant amount of greenhouse gas emissions
of wool and ramie. The production process for the and waste (Nahikian 2007) Cradle to cradle can
new materials was such that the water which play a significant part in both the fabric of the
exited the factory (an externality in the open building and the environmental footprint of com-
system previously described) was as clean as or mercial interiors. In the USA, there is a rating
cleaner than the water entering. As Braungart and program from the Green Building Council –
McDonough say, “Not only did our new design Leadership in Energy and Environmental Design
process bypass the traditional responses to envi- (LEED) which promote sustainable building
ronmental problems (reduce, reuse, recycle), it design and manufacturing processes. This is
also eliminated that the need for regulation, another area in which aluminum can play a
something that any sane businessperson will role – recycled aluminum building products,
appreciate as extremely valuable.” along with other recycled materials, are routinely
Steelcase have now worked with cradle to used with other recycled materials to earn points
cradle concepts for nearly 20 years and find that toward LEED ratings. One example of the use of
as consumers become more educated on issues of aluminum in buildings is for roof shingles; they
sustainability and they enforce stricter environ- have many benefits over typical asphalt shingles
mental guidelines when purchasing products, so including the ability to reflect 95% of sunlight to
much so that nearly 85% of their client proposal significantly reduce the requirement for air con-
requests have an environmental component ditioning in the summer, in addition to being
(Nahikian 2007). 100% recyclable at the end of their lives. Cur-
While the industrial revolution has led to rently used asphalt shingles are dumped into
a “one size fits all” approach, cradle to cradle landfill at the rate of 20 billion pounds per year
needs to take a more local approach, recognizing (Sustainability Working Group, Aluminum
that people and environments vary considerably – Association 2009).
local materials, resources, energy requirements Taking this further, working with others at
and availability, and abilities to reuse elements Oberline College, Braungart and McDonough
Cradle to Cradle 635 C
“conceived the idea for a building and its site being reported to reduce absenteeism by 15%,
modeled so the way a tree works. We imagined increasing overall employee productivity
ways that it could purify the air, create shade and (Nahikian 2007).
habitat, enrich soil, and change with the seasons, As durable objects buildings can be designed
eventually accruing more air than it needs to to be adaptable for different uses in the future –
operate.” The building featured solar panels, changing from commercial use to domestic and
wind protection from a grove of trees on the back again as demands and needs change. C
building’s North side, water storage for irrigation Products can be designed with future use in
through a pond, and a separate pond for cleaning mind, when the Ford Motor company was
effluent through specially selected organisms and manufacturing the Model T Henry Ford specified
plants. The building did require upgrading of the the size of the packing crates used for shipping
initial solar-powered supply before it became components from suppliers. This was done so the
a “net energy exporter” (Sacks 2008), but the crates could be dismantled and the wood they
fact it does this at all puts it ahead of most were made from could then be utilized, without
buildings. further modification, for the floorboards of the car
One large project which has embraced cradle (Womack and Jones 2008). In a similar way,
to cradle has been the revitalization of the Ford Maille, the French mustard producer, packages
Rouge Centre – a US$2 billion price tag which mustard in pots which can be used as drinking
included the redevelopment of a 600-acre brown- glasses once the mustard is finished – a design
field site into a 2.3 million-square foot truck with future upcycling included.
manufacturing plant. William McDonough The Sustainable Packaging Coalition, which
worked with Ford primarily on landscaping, includes 190 companies – Procter & Gamble,
producing the world’s largest living roof (10.4 Kraft, and Starbucks, among them – is working
acres) which provides insulation and acts as to develop environmentally sound packaging
a storm water retention area. The parking lot is practices (Sacks 2008). The coalition may help
porous to collect water which is used elsewhere in overcome the issues such as the one in China
the plant, and there is a “fumes to fuel” system where Styrofoam packaging represents such
which recycles paint fumes high in volatile a disposal problem that people often refer to it
organic compounds (VOCs) into fuel to supply as “white pollution” (Braungart and McDonough
electricity to the paint shop (Business and the 2008).
Environment 2006). Braungart and McDonough Braungart and McDonough state that while “It
report that “the health of the site is measured not has famously been said that form follows
in terms of meeting minimum government- function, the possibilities are greater when form
imposed standards, but with respect to things follows evolution” – using soap as an example
like the number of earthworms per cubic foot of they point out that manufacturers could
the soil, the diversity of birds and insects on the reconceive soap as a service based product,
land and of aquatic species in a nearby river and designing washing machines to recover detergent
the attractiveness of the site to local residents. and use it again and again based on the fact that
The work is governed by a compelling goal: only 5% of a standard measure of detergent is
creating a factory site where Ford employees’ consumed in the laundry cycle.
own children could safely play.” As the eco-effectiveness principles of cradle
Other advantages accrue to organizations to cradle should celebrate commerce, Braungart
adopting cradle to cradle products and buildings. and McDonough have created a visualization tool
Eliminating harmful chemicals from business which allows a proposed design’s relationship to
and manufacturing processes provides a cleaner, a multiplicity of factors to be creatively examined
less toxic environment within which the (Fig. 2).
employees work. This typically leads to reduced This tool allows the questions from people
absenteeism due to sickness – green buildings with different priorities to be addressed, while
C 636 Cradle to Cradle
Cradle to Cradle, Fig. 2 Triple top line design factors Key Issues
balancing them with other areas required for A key issue for cradle to cradle as terminology is that
cradle to cradle ethos. Balancing the money it is potentially “owned” by William McDonough
(economy) with fairness toward others (equity) through trademarking. Certification to cradle to cra-
and the impact in relation to nature’s laws dle standard is through McDonough Braungart
(ecology). Design Chemistry (MBDC) which to date has certi-
The phrase “triple bottom line” is often used in fied only a relatively small number of products.
relation to sustainability, although often with Fundamentally, however, cradle to cradle can
economic factors taking precedence with organi- be seen as needing a backward step – not techno-
zations giving secondary consideration to how to logically as already discussed but in design terms.
maintain the profit while aiding the environment Stepping backward is required to consider all of the
and ethical considerations. Using the above tool component parts and their material makeup, along
allows consideration of a “triple top line” moving with the process through which those components
from the conventional design criteria of cost, have been made. This is not a job which can be
aesthetics, and performance which can be seen undertaken lightly or quickly – when Patagonia
with the questions: changed to organic cotton from conventionally
– Can we profit from it? grown cotton, it required a two-year process and
– Will the customer find it attractive? a reduction in the cotton product line from ninety
– Will it work? one styles down to sixty six (Chouinard 2006).
The tool allows the factors to be incorporated The issue is something which has to be
in the initial design stages, gaining greater advan- addressed at the highest strategic level in an orga-
tages than can be achieved by starting from nization, but experience from those who have
a purely economic perspective. adopted the principles is that it does bring bene-
Timberland is an organization which has fits economically to the organization, in addition
introduced a product which closes the loop in to all the wider social benefits accrued.
many areas in terms of the biological and techni-
cal nutrients used for manufacture. The
Earthkeepers 2.0 Boot brings Timberland closer Future Directions
to a closed-loop system. The boots are
manufactured with: In the book Cradle to Cradle, Braungart and
– Leather from a tannery-rated Silver for its McDonough outline the key steps organization
improved water, energy, and waste manage- can take to reach implementation of cradle to
ment practices cradle:
Cradle to Cradle 637 C
Step 1: Get “Free of” Known Culprits a positive list, an organization might be encoding
Eliminating the products and processes known to information about all the ingredients in the mate-
be harmful and ensuring that they are not just free rials themselves, in a kind of “upcycling
of these but also that any replacements used do passport” that can be read by scanners and used
not cause harm. productively by future generations.
In the 1980s, a stagnant US economy, lower All these steps may be worthwhile but they are not
productivity, and reduced government support of undertaken because they are socially responsible.
They’re done to reduce costs. To credit these cor-
labor gave way to “the relative autonomy of porations with being ‘socially responsible’ is to
management” (Marens 2009: 113). The increased stretch the term to mean anything a company
managerial power, indicated in part by the greater might do to increase profits if, in doing so, it also
degree of legitimacy, authority, and remuneration happens to have some beneficial impact on the rest
of society. Taken to the logical extreme is the
given to the Chief Executive Officer (CEO) posi- textbook economics argument that whenever
tion, provided the basis for Freeman’s stake- a company increases its profits it has a positive
holder theory (1984). A theory that, when effect on society because it thereby utilizes assets
perfectly implemented, mandates managers to more efficiently, releasing those that are no longer
needed to be used more efficiently elsewhere.
weigh the interests of each stakeholder together In this sense, all profitable companies are socially
with corporate objectives, as opposed to man- responsible. (Reich 2007: 171).
agers making decisions based primarily on
achieving greater profitability. Under stakeholder Accordingly, corporate social responsibility
theory, the corporation was thereby imbued with practices are not a repositioning of business deci-
moral leadership. In this economic climate, sions within the sphere of social values or the
corporate social responsibility policies became a balancing of shareholder earnings and commu-
substitute for the roles once played by union nity considerations, but a continuation of the pri-
protections and government regulations. macy of profit for the company, such that, as
However, many authors have argued that CSR Reich points out, taking care of private interests
policies are largely insincere and are merely is, in some ill-defined way, the same as
intended to distract stakeholder attention from the addressing the public good.
true corporate goal of profit maximization. For Like Marens, Reich also interprets the
instance, empirical evidence demonstrates that 1950s–1970s as a time of relative sharing among
since the 1980s and regardless of the benefits of corporations and their stakeholders. However,
CSR, US corporations have systematically Banerjee reminds us that this 20-year period of
discounted the interests of stakeholders: US corpo- time was the exception. US corporations gained
rations are less likely to share their profits with the legal identity as persons in the early 1800s, and
employees and less likely to support the right to Banerjee writes that these “19th century under-
unionize than they were in the two previous decades. hand skullduggery strategies would bring a blush
They have also vigorously rejected government reg- even to the crooks that ran Enron” (2008: 56).
ulation. Subhabrata Bobby Banerjee notes that cor- Banerjee argues that despite allusions to
porations, initially recognized in the eighteenth morality and emancipation, current corporate
century as entities serving the public good, “have social responsibility, corporate citizenship, and
in the past 200 years systematically diminished the sustainable business practices are grounded in
power of state and federal governments in regulating narrow business interests and serve to curtail the
their activity” (2008: 67). Yet, corporations are one interests of external stakeholders. In fact,
of the largest beneficiaries of US government pro- Banerjee claims that discourses of CSR are used
tections; there are dozens of cases where the US by corporations much like nations employ the
government has restricted foreign access to their rhetoric of colonization: to legitimize and consol-
markets to protect US corporate interests. Banerjee idate power. He quotes William Duggar,
states that “caring for the corporation is bigger busi- “The corporation has evolved to serve the inter-
ness than the caring corporation” (2008: 69). ests of whoever controls it at the expense of
Indeed, Robert Reich writes that even those whomever does not” (Banerjee 2008: 51).
businesses that launch corporate responsibility Using Michel Foucault’s concept of subjecti-
initiatives do so only to the degree that such fication, that managers become subjects of the
policies result in shareholder value and increased corporation and develop their sense of meaning
profit: and reality through their identification with the
Critiques of Corporate Social Responsibility 641 C
interests of the firm, Banerjee argues that this ruling could mean that to the degree that
managers are not free to make socially responsi- corporate social responsibility threatens profit
ble decisions (2008: 58). Muhammad Yunus and therefore shareholder dividends, it is illegal.
agrees. Yunus states that because of the mandate One assumption of this conclusion is that there is
to maximize shareholder interests, to the degree a rigid distinction between shareholders and
that CSR policies have been instituted in profit- external stakeholders such that shareholders are
driven companies there is little dispute that social not affected by the social impact of the company C
responsibility is a distant second to profit accumu- in which they hold stock.
lation. Rejecting corporate social responsibility as Authors have also pointed out that corporate
a way to address social problems, Yunus writes: social responsibility is voluntary and therefore
non-enforceable, and also difficult to confirm.
CSR takes two basic forms. . . ‘weak’ CSR has the
credo: Do no harm to people or the planet (unless Joseph Stiglitz writes that “even the worst pol-
that means sacrificing profit). . .[and] ‘strong’ CSR luters and those with the worst labor records,
says: Do good for people and the planet (as long as have hired public relations firms to laud their
you can do so without sacrificing profit.) (Yunus
sense of corporate responsibility and the con-
2007: 15, emphasis in the original). . .Occasionally,
through a happy accident, the needs of society and cern for the environment and workers’ rights”
opportunities for high profits happen to coincide. (2007: 199). Therefore, even as companies
But what happens when profit and CSR do not go evade social responsibility they are adept at
together? What about when the demands of the misrepresenting their practices as beneficial to
marketplace and the long-term interests of society
conflict? What will companies do? Experience the public good.
shows that profit always wins out. (Yunus 2007:
17, emphasis in the original).
by the small union membership among workers Foucault, M. (1980). Power/knowledge: Selected
in the private sector and the 2011 gubernatorial interviews and other writings (pp. 1972–1977).
New York: Pantheon.
movement to rescind collective bargaining rights Foucault, M., et al. (1979). Governmentality. In G. Burchell
for public workers. The power of US government (Ed.), The foucault effect: Studies in governmentality
regulations to protect social and environmental (pp. 87–104). Chicago: University of Chicago Press.
interests is also declining while the might of Freeman, R. E. (1984). Strategic management:
A stakeholder approach. London: Pitman Publishing.
corporations increases, as evidenced by judicial Marens, R. (2009). It’s not just for communists anymore:
rulings such as Citizens United v. Federal Marxian political economy and organizational theory. In
Election Commission (2010), which invokes the P. S. Adler (Ed.), The oxford handbook of sociology and
First Amendment to give corporations unlimited organizational studies. London: Oxford University Press.
Margolis, J. D., & Walsh, J. P. (2003). Misery loves
ability to contribute to independent political companies: Rethinking social initiatives by business.
broadcasts and therefore allows unprecedented Administrative Quarterly, 48(3), 513–517.
corporate influence in US elections. Given both Reich, R. B. (2007). Supercapitalism. New York: Knopf.
inevitable conflicts between the goals of social Stiglitz, J. (2007). Making globalization work. New York:
W. W. Norton and Company.
responsibility and profit maximization and the Yunus, M. (2007). Creating a World without poverty.
role of managers to maximize shareholder inter- Social business and the future of capitalism.
ests, CSR is a highly problematic public servant. New York: Public Affairs.
Yet, for lack of alternatives, corporate social
responsibility policies remain a source of hope
and fertile ground for advancing social good and
Critiques of Industrial Responsibility
environmental sustainability.
▶ Critiques of Corporate Social Responsibility
Cross-References
▶ Business Ethics
Critiques of Socially Responsible
▶ Business in Society
Business
▶ Corporate Citizenship
▶ Government (Role in Regulation, etc.)
▶ Critiques of Corporate Social Responsibility
▶ Socially Responsible Management (SRM)
▶ Stakeholder Theory
▶ Stakeholders
▶ Strategic Corporate Social Responsibility
Critiques of Socially Responsible
Management
stakeholders from different cultures poses that are low in terms of Hofstede’s uncertainty
a complex challenge. Culture can be regarded as avoidance, masculinity and power distance indi-
the fundamental system of meanings and beliefs, ces, but high on the individualism dimension will
learned over time, that members of a particular tend to display a high degree of consumer
group or society share. Different cultures can activism, expecting more product information
hold different beliefs and emphasize different and putting more emphasis on service,
cultural values, and what is important in one people, and quality. Williams and Zinkin (2008)
culture may be less so in another. Such found empirical evidence for differences between
differences have been confirmed in comparative countries with regard to the likelihood that
empirical research on cultural and human values. consumers will punish companies’ unethical
Hofstede (1980), for example, on the basis of corporate practices. Based on a GlobeScan CSR
a large-scale cross-cultural survey of IBM Monitor survey including data from 30 countries,
employees, identified four dimensions or catego- they found that cultures with low scores
ries that distinguish different cultural traits and on Hofstede’s power distance and high-low
with respect to which cultures can be seen to uncertainty avoidance dimensions, but with high
differ: power distance (the degree to which scores on the individualism-collectivism and
unequal power distributions are accepted), indi- masculinity-femininity dimensions, are more
vidualism-collectivism (the degree to which indi- likely to punish irresponsible corporate practices.
vidual’s goals take precedence over group goals), Plausibly, differences in the likelihood to engage
high-low uncertainty avoidance (the degree to in punishing behavior in different cultures, such
which cultures have a tolerance for ambiguity as Williams and Zinkin’s study uncovered,
and uncertainty), and masculinity-femininity could be argued to be the result, at least in part,
(the degree to which a culture places higher of different underlying attitudes to CSR across
value on assertiveness, things and power than countries.
on nurturance, people, and quality of life). Carroll (1991) has suggested that businesses
Among other things, a culture’s specific belief need to fulfill four basic societal respon-
and value patterns can affect the role organiza- sibilities: economic, legal, ethical, and
tions and institutions take on in that particular philanthropic. Effectively, the different types of
society and what that society, and the social responsibility constitute domains in which
stakeholders in it, expects of organizations and managers and organizations operate to give shape
institutions (e.g., Katz et al. 2001). In other to CSR policy, determine CSR strategy, or adopt
words, as cultural beliefs and values can differ a CSR platform (e.g., environmental, ethical,
across cultures, so can stakeholders’ attitudes to philanthropic, etc., or a combination). Carroll
(the importance of) social responsibility, posits that whereas the “foremost responsibility
their expectations with regard to corporate of business is economic in nature” (p. 500), that
involvement in (resolving) CSR-related issues, is, the responsibility to make profit, the remaining
and their attitudes to specific CSR themes and three responsibilities are relatively less important
issues (e.g., climate change, community support, and can be ranked in terms of decreasing
labor rights, and human rights). As a result, significance, from legal to ethical to philan-
different cultures may take divergent stances thropic, the latter responsibility being the least
and respond differently to the idea of CSR and important, with the least priority in business.
to the CSR initiatives undertaken by companies. With respect to attitudes to the different social
By extension, the demands of stakeholders responsibilities that make up CSR, evidence from
with regard to CSR issues and how organizations a number of empirical studies has provided
approach these issues to meet stakeholder indications that CSR is regarded differently
expectations will partly depend on the cultural across cultures. Maignan’s (2001) survey of
setting in a particular country. Katz et al. consumer attitudes to CSR in the United States,
(2001), for instance, have suggested that cultures Germany, and France showed that French
Cross-Cultural Attitudes to CSR 645 C
and German consumers regarded the economic based on potentially different CSR motivations
responsibility as significantly less important than (i.e., value-driven, performance-driven, or stake-
American consumers, who positioned the holder-driven), involves potentially different
economic and legal responsibilities as the top CSR processes (e.g., environmental programs,
two responsibilities for businesses. More surpris- philanthropy, sponsorship, volunteerism,
ingly, in light of Carroll’s relative ranking of the ethics code, health and safety programs), and
four social responsibilities, the French and addresses potentially different stakeholder issues C
German consumers rated the legal, ethical, and (e.g., employee, community, customer, or
philanthropic responsibilities as significantly shareholder focussed), in order to enact responsi-
more important than the economic responsibility. bility to society. Another comparative study of
Maignan relates this finding to the fact that corporations’ CSR communication, across 16
German and French cultures are characterized different nations (Hartman et al. 2007), showed
by a communitarian ideology, whose members that US-based companies tended to justify CSR
are unlikely to perceive the pursuit of objectives policy in economic (i.e., bottom line terms)
aimed at self-interest as an appropriate goal terms, while European companies relied
for any social agent. Instead, consumers in relatively more on arguments relating to
communitarian cultures may feel that businesses citizenship, corporate accountability, and
use their economic resources to promote moral commitment to support their CSR policy,
well-being in society more generally and that reflecting cross-national differences in CSR
reaching economic objectives is not a primary orientation. Although additional research is
social responsibility. Maignan’s study also needed, it seems plausible that such
found that although consumers in all three cross-national differences can be linked to the
countries were willing to support responsible traditional role played by firms in the different
organizations (i.e., businesses that engage in societies (i.e., cultures) under study.
CSR) by buying from them, consumers in France
and Germany were significantly more likely to do
so than consumers in the United States. Together, CSR Orientations in Developing Versus
these results provide an indication that as Developed Countries
stakeholders’ attitudes to CSR vary across
cultures, so might their response to CSR Visser (2008) has drawn similar conclusions
initiatives and their subsequent behavior. about cross-cultural attitudes to CSR in
Crane and Matten (2007) explicitly addressed developing world regions (i.e., in Asia, Africa,
the suggestion that culture can influence how and Latin America), based on descriptive
CSR priorities are perceived across countries. accounts and case studies in, for example, Brazil,
Discussing CSR in the European context on the South Africa, India, and China. He suggests
basis of Carroll’s framework, they conclude that that in a developing country context, the
“all levels of CSR in Europe play a role” across relative importance assigned to Carroll’s four
the different countries, but “have different responsibilities is different than in developing
significance, and [. . .] are interlinked in economies and that Carroll’s original framework
a somewhat different manner” (p. 51). Indeed, is essentially biased toward CSR in the developed
this seems to be reflected in the CSR policy world. While economic responsibility is also
implemented by companies in different European regarded as most important in the developing
countries. Maignan and Ralston’s study of CSR countries (as in Carroll’s original model), it is
reporting – as an indicator of CSR policy and philanthropic responsibility (least important in
activities – by businesses in France, the Nether- the original framework) that seems to be regarded
lands, and the UK (and the USA) showed that in developing regions as second most important,
firms in the three European countries opt to ahead of legal and ethical responsibilities.
implement (partly) different CSR policy that is The relative emphasis on philanthropic
C 646 Cross-Cultural Attitudes to CSR
Cross-References
▶ Co-operation Between NPOs and Companies Corporate citizenship and Africa; Corporate
in Germany philanthropy; Corporate responsibility and Africa;
Corporate social investment in Africa; Corporate
social performance and Africa; Corporate social
responsiveness and Africa; Nongovernment
Organizations (NGOs); Sustainable development
Cross-Sector Interaction
a win-win outcome for themselves and their host is not merely a theoretical or an ideological dis-
nations. This is especially the case in certain sec- pute. This is because it is clear that whichever of
tors, such as the extractive industries, where there these motivations underpins a CSR initiative, it
are limited opportunities for competitive advan- determines which stakeholder gets included or
tage. For example, Jedrzej George Frynas (2005) excluded from the consequential CSR benefits
has pointed out that Chevron was able to acquire and which stakeholder’s interest is given priority
new oil blocks in Angola largely because of its in the design and implementation of CSR initia-
pretentious attention to community development tives. Hence, corporate motivation is bound to
under the umbrella of its CSR practices. The have significant ramifications for the success or
implication is that the pursuit of CSR by business failure of such initiatives. Nevertheless, the CSR
in Africa has instrumental value adding conse- initiatives of most business enterprises cover
quences in terms of tangible (e.g., increase in a wide range of issues such as labor rights,
market share) and intangible benefits (e.g., employee relations, human rights, environmental
a boost of employee morale) for the corporation performance, sustainable development, health
as well as developmental benefits for the society at issues, issues of corporate governance, and trans-
large. parency. Similarly, a number of different practi-
The third is the changing societal expectations cal strategies are employed to tackle these
argument. This position suggests that TNCs are different challenges. Although, different busi-
part of (and not separate from) the host society nesses tend to adopt different forms of CSR prac-
within which they operate. As a result, TNCs tices within their CSR strategy, these different
have an obligation to respond to changing socie- CSR practices can also be mutually reinforcing
tal expectations if they are to maintain their legit- (see Fig. 1).
imacy as well as benefit from societal goodwill. Figure 1 suggests that, while businesses might
The failure on the part of TNCs to meet societal opt to use only philanthropy and corporate social
expectations might result in a legitimacy crisis for investment as the avenue for addressing their CSR
them as well as the loss of the “social license to functions, they can also simultaneously employ
operate,” which will undermine their business stakeholder engagement and volunteerism. In
operations. While most TNCs in Africa initially other words, these different CSR practices are not
resisted these demands for them to be socially mutually exclusive and, in fact, most companies
responsible, most now publicly declare their com- tend to engage their CSR initiatives through more
mitment to CSR principles on their websites and than one form of CSR practice. In addition, Fig. 1
some include their CSR actions and activities in suggests that volunteerism can be either employee-
their African operations in their annual sustain- or corporate-driven and stakeholder engagement
ability reports. can be via partnership or stakeholder dialogue.
Nonetheless, these different arguments for Similarly, some businesses address their CSR obli-
CSR in the African context have meant that gation in terms of citizenship obligations via their
TNCs motivation for adopting CSR principles corporate citizenship practice. An example is
and practices within the region could either be Exxon Mobil. However, corporate philanthropy
born out of genuine concerns for their African and corporate social investments continue to
stakeholders or out of strong CSR instrumental remain the dominant form of CSR practice in
value. As such, there is some disagreement in the Africa. As a result, critics have argued that CSR
literature over corporate motivations for the practices in Africa are still largely rudimentary and
adoption of CSR principles in the continent. yet to fully mature. This is because most TNCs
This disagreement is partly due to the difficulty seem to conflate corporate philanthropy, that is,
of ascertaining corporate motivation directly and charity or public given, with CSR that is really
the different ideological frame of references that about integrating CSR concerns into core business
is often brought to bear on CSR analysis by operation and in its interactions with stakeholders.
different scholars. In any case, this disagreement For example, in his critique of CSR practices in
CSR and Africa 651 C
CSR and Africa,
Corporate social responsibility
Fig. 1 CSR practices in
Africa
Corporate C
Volunteerism Philanthropy and Engagement citizenship
Social investment
practice
developing countries, the economist Philip and therefore CSR practices will vary from
Swanson argued that CSR is not about making region to region and even within region, the
money the way you want and then give a small debate over whether or not cultural and socioeco-
portion of it back to the community. Rather it is nomic factors influence CSR policies and prac-
about how you run your business, how you make tices in Africa remain unresolved. For example,
your money, and how you interact with your stake- Judy Muthuri and Wayne Visser in their works on
holders. These different ways of conceptualizing CSR in Kenya and South Africa, respectively,
CSR is a reflection of the lack of a global consen- found evidence of cultural and socioeconomic
sual CSR definition and therefore businesses have influence on CSR practices in these countries. In
been able to appropriate the meaning of CSR, contrast, Adam Lindgreen et al. (2010) did not
especially in the African context with ramifications find any such influence in Botswana and Malawi.
for local population. Consequently, CSR in Africa However, the sociocultural and economic context
is a site of material and discursive contestation. of Africa does shape societal expectation of the
Materially, this is reflected in terms of shifting the social responsibility of business and therefore
cost associated with CSR from one stakeholder to what should ideally constitute CSR priorities of
another as in the case of Nigeria, where oil TNCs businesses operating in the region. For instance,
continually seek to transfer the cost of CSR as in some rural areas where there is limited avail-
much as possible to the Nigerian government. Dis- ability of social infrastructure and where poverty
cursively, this is manifested in how TNCs in the can be endemic, especially around extractive
region are often quick to point out the magnitude of sites, local communities understandably tend to
their philanthropic contribution. In contrast, NGOs expect TNCs to provide social infrastructure
point out that such philanthropic gestures are not and contribute to poverty reduction programs.
“real CSR,” as they are used to mask the fact that Unfortunately, the extent to which CSR
TNCs do not change how they conduct their busi- initiatives have met the expectation of local
ness operation even after publicly espousing sup- communities or have had positive impact on
port for CSR principles. their livelihood remains limited and at best
marginal. There are a number of reasons attribut-
able to this problem. These reasons range from
Key Issues failure to adequately take into consideration the
concerns and priorities of the local population in
While there is a tacit consensus in mainstream the design and implementation of CSR initiatives,
CSR literature that the meaning attached to CSR over-instrumentalization of CSR initiative to the
C 652 CSR and Africa
benefit of TNCs, but with limited benefit to local are increasingly playing different roles that range
population and inherent weaknesses in CSR prac- from enacting social responsibility laws,
tices. For example, corporate philanthropy, which establishing public-private partnership, signing
is the dominant form of CSR practice, has often up to global CSR initiatives, and facilitating
been criticized for failing to address the core CSR initiatives. For example, the Nigerian
social and environmental issues at the heart of government attempted to pass oil and gas bill in
business day-to-day operation. Besides, while 2004 that stipulate the social responsibility of oil
charitable donation are very useful for public TNCs operating in the country and established
relations purposes, philanthropy very rarely a commission that would oversee its implemen-
addresses the problem that it is supposedly tation as well as ensure that other CSR concerns
expected to solve as some of these problems are are being addressed. However, the extent to
not amenable to its quick fix nature. Similarly, which such governmental efforts have enabled
some have also argued that CSR practice in the CSR to deliver on its potentials remain an open
region has tended to inadvertently divert attention question. Nonetheless, a major factor that would
from the real structural, political, and economic determine if these governmental efforts would
problem facing the continent and fostered depen- yield the desired outcome is the role of civil
dence on corporate given as opposed to local society organizations. This is because civil
empowerment. In contrast, proponents of CSR in society organizations within and outside Africa
Africa often point to the difficult and sometimes have been core drivers of CSR in Africa by
hostile environment within which CSR initiatives demanding for governmental reforms, exposing
are being implemented. They also assert that no corporate misdemeanor, and demanding for
matter how meager, some members of the local governmental and corporate accountability.
population have nevertheless benefited from some Similarly, with the emergence and proliferation
CSR initiatives. Indeed, this disagreement over of the CSR industry (i.e., consultant, CSR orga-
the actual effectiveness and impact of CSR initia- nization, and experts), some nongovernmental
tives in Africa remains a major problem that con- organizations have also been known to imple-
tinues to undermine one’s ability to reach ment CSR initiatives on behalf of TNCs. What
a definitive conclusion about the usefulness of is still not clear is whether these CSR initiatives
CSR in Africa. that are implemented by NGOs on behalf of
Furthermore, in recent years, national TNCs are more beneficial to local population
governments in Africa have gradually begun to than CSR initiatives that are implemented
play a more prominent role in both CSR discourse directly by TNCs. In addition, the implications
and practice. At the level of discourse, in contrast of the willingness of some NGOs to emphasize
with the 1960s, African governments are often collaboration in their engagement strategy with
now quick to point to the potential benefits to be TNCs as opposed to the traditional confrontation
derived from collaboration and partnerships with and resistant strategies favored by others raise
TNC for Africa’s development. As a result, tensions within civil society as well as questions
African governments have increasingly played about its ability to continue to effectively demand
a key role in the discursive rebranding of TNCs for corporate accountability within Africa.
as not just part of the problem of underdevelop- Unfortunately, this issue is yet to be adequately
ment but also as a part of the solution to the addressed in the literature.
problem in the region. While some have been
critical of this perspective, the concept of CSR
has therefore been a useful framework within Future Directions
which business have been able to legitimize this
new role and declare their commitments to There is no doubt that CSR is now a common
solving developmental problems in Africa. At buzzword for businesses operating in Africa, and
the level of CSR practice, African governments many business enterprises are now often willing
CSR and Catholic Social Thought 653 C
to highlight or boast of their social responsibility ▶ Corporate Citizenship
contributions. In practice; however, we still lack ▶ Corporate Philanthropy
a clear understanding of the value adding per- ▶ Corporate Responsibility
spectives that the concept and practice of CSR ▶ Stakeholder Theory
have brought to bear on the different efforts to ▶ Sustainable Development
address the myriad of challenges confronting ▶ Triple Bottom Line
Africans. There is therefore a need to move C
beyond the present polemic debate over whether References and Readings
CSR is good or bad for Africa, as we lack suffi-
cient systematically accumulated empirical evi- Amaeshi, K. M., Adi, B. C., Ogbechie, C., & Amao, O. O.
(2006). Corporate social responsibility (CSR) in
dence to support either positions, to more nuance
Nigeria: Western mimicry or indigenous practices?
understanding and analysis of CSR contradic- Journal of Corporate Citizenship, 24, 83–99.
tions in Africa. A key first step would be the Frynas, J. G. (2005). The false development promise of
need to study and analyze CSR from the perspec- corporate social responsibility: evidence from multi-
national oil companies, International Affairs, 81(3),
tive of Africans whose voices are often either
581–598.
neglected or ignored in mainstream CSR dis- Gilbert, V., & Muthuri, J. N. (2011). An institutional
course. This might entail rich empirical studies analysis of corporate social responsibility in Kenya.
that are based on how sociocultural factors shape Journal of Business Ethics, 98, 467–483.
Lindgreen, A., Swean, V., & Campbell, T. T. (2010).
local population expectations and perceptions of
Corporate social responsibility practices in developing
CSR, and comparative analysis of CSR processes and transnational countries: Botswana and Malawi.
and outcomes within and between regions of Journal of Business Ethics, 90(3), 429–440.
Africa. Similarly, there is also the need for stud- Swanson, P. (2002). Corporate social responsibility and the
oil sector. CEPML Internet Journal, 11(1). Retrieved
ies that compare and contrast the CSR initiatives
online at http://www.dundee.ac.uk/cepmlp/journal/
of foreign firms with that of indigenous firms. In html/vol11/article11-1.html. Accessed 25 Sept 2004.
addition, future studies might also begin to Utting, P. (2005). Corporate responsibility and the move-
explore the factors and conditions under which ment of business. Development in Practice, 15(3 & 4),
375–388.
some CSR initiatives might achieve the desired
Visser, W. (2006). Revisiting Carroll’s CSR pyramid: An
outcomes while others fail. In other words, how African perspective. In E. R. Pedersen & M. Huniche
historical, contextual, and institutional factors (Eds.), Corporate citizenship in developing countries:
drive and constrain CSR. Crucially, here is also New partnership perspective (pp. 29–56). Copenhagen:
Copenhagen Business School Press.
the need to explore how CSR might be benefiting
from a weak institutional context and thus further
weaken local institutions in ways that privilege
the interest of business but to the detriment of the CSR and Catholic Social Thought
interest of local population. There is also the need
for closer examination of the impact of CSR Gloria Zúñigay Postigo1 and
initiatives on local population. This is particu- Kevin Schmiesing2
1
larly important because at present we still do not The University of Texas at Arlington, Arlington,
have a clear sense of how much difference CSR TX, USA
2
initiatives are making in Africa. Addressing these Acton Institute, Grand Rapids, MI, USA
kinds of issues is necessary if CSR is to be rele-
vant to the average African.
Synonyms
CST offers one answer among others provided by the corporate form of business, contends that there
ethical theories and positions. are “signs of grace” in the creativity, liberty, social
character, and other features of the modern corpo-
The Business Vocation and the Corporation ration. In contrast, law professor William Quigley
Similarly to labor and capital, the Church’s rela- has argued that the corporate form necessarily leads
tionship with commerce has developed in a positive to unethical practices and that therefore corporate
fashion. Although the Church has never officially personhood should be legally abolished. Taking
condemned business as such, early Church Fathers a middle ground are scholars such as Helen Alford,
(ca. 100–500 A.D.) generally emphasized the dan- O.P., and Michael Naughton, who propose “the
gers of the temptations brought about by wealth and common good” – distinct from both shareholder
saw merchants as a class of men known chiefly for and stakeholder models – as the primary end of the
their tendency to exploit the poor. In the medieval corporation. The common good in the Catholic
period, however, a long and inconclusive debate tradition is defined as the set of “conditions of
about the morality of usury emerged, which social life which allow social groups and their
reflected the Church’s confrontation with the grow- individual members relatively thorough and ready
ing importance of business enterprise and the role access to their own fulfillment” (Vatican II, Con-
of money and investment in the developing econo- stitution on the Church in the Modern World,
mies of Europe. n. 26). Thus, Alford and Naughton invoke the prin-
In question 77 of the Summa Theologiae, for ciple of the common good to distinguish a Catholic
example, Thomas Aquinas examines the matter approach from an excessively individualistic focus
of prices and selling for a profit independently of on the good of the self.
business concerns. In this examination he antici- Regardless of the spectrum in views
pates the concept of arbitrage, which is the taking concerning the moral status of the corporation
advantage of price differentials for the same in CST, it is important to note that the same is
product between two different markets. For the case in secular discussions such as the exam-
Thomas, what we now call arbitrage is justified inations of CSR. In Corporations and Morality,
when the seller is gaining from having added an for example, Thomas Donaldson points out that
improvement to the product, or on account of the the corporation emerges from a confusing past,
risk that the seller takes in transporting the prod- one in which not only the guild and the great early
uct from one market to another. In question 77 trading companies but also the Church, together,
Thomas also specifically examines the trades- contributed to the creation of what we now call
man, whose profession is to exchange things for the corporation.
profit. Thomas views profit as a form of payment But it is important to address here the activities
for the tradesman’s labor and, as such, he does of one particular kind of corporate enterprise that
not consider it immoral (sinful, in his words) or involves banking operations, money investments,
contrary to virtue but indeed a virtuous act if the or lending services. The reason for this is to
end is procuring a livelihood or the assistance of confront the oft-misunderstood position of usury
the needy. It is in this sense that Thomas views by the Church. It may sound surprising in fact that
the profession of business not only as a lawful the matter of usury has been the subject of an
profession but potentially virtuous in nature. By evolutionary development in CST since the
the time of the Protestant Reformation in the Church’s early position. Historically, usury was
sixteenth century, the profession of business condemned by the Council of Nicaea in the fourth
was widely if not universally recognized as century and the Second Lateran Council in the
a legitimate calling (vocation) from God. twelfth century. Popes Alexander III, Gregory
Catholic attitudes toward business in general IX, Urban III, Innocent III, and Clement
and the corporation in particular continue to vary V bestowed official authority to such condemna-
widely. American theologian Michael Novak, tions. Revelation indeed offered support for this
arguably the most prominent Catholic defender of official position. Consider for example Psalm
CSR and Catholic Social Thought 657 C
14:5: “He that had not put out his money to Letter establishing the Financial Information
usury.” Or Ezekiel 18:8: “If a man . . . hath not Authority as an agency whose role is to enforce
lent upon money, nor taken any increase . . . he is a new law protecting all monetary investments by
just.” But the Church did not arrive at this posi- the Holy See from being employed for money
tion solely on the basis of revelation. Rather, its laundering or the financing of terrorism.
position was also supported by a philosophical Although the jurisdiction of this law is limited
basis. According to Thomas in question 78 of the to Vatican institutions and those whose opera- C
Summa Theologiae, usury is unjust because it is tions are related to the financial affairs of the
the charging of something that does not exist. Holy See, such as the Vatican Bank, the motiva-
Following Aristotle, Thomas viewed money as tion for this Apostolic Letter is to take a position
a good that was consumed or sunk in exchange. against improper uses of money and money mar-
Clearly, this position preceded the discovery kets. This is evidence of the evolutionary trajec-
and full understanding of the notion of interest as tory of the Church’s position on usury and what
a payment for the future value of money lent in are justified gains from monetary investments.
the present, and for the element of risk in lending, On the one hand, this trajectory has followed
as well as for protection against the very practical the contributions of economics and the larger
problem of default. It is important to point out, conceptual framework for the phenomenon of
however, that while these matters seem obvious money, not only as a means for exchange but
to us based on our present-day knowledge of also as a commodity and its value-relevant
money markets and gains in interest from sav- machinery of present and future value calcula-
ings, the idea of growing money from lending and tions. On the other, the Church has continued its
investing was not part of the conceptual structure moral focus on the human person, and the moral
of the ancient and medieval periods and, conse- responsibilities that we owe one another. On both
quently, it had not been yet realized in institutions counts, the examinations of CSR and CST are on
such as banking and currency exchange markets. the same path of discovery.
Nonetheless, Thomas recognizes that a person
could suffer a loss from money lent and in light of Ownership and Fiduciary Duty
this it would be justified to request compensation The rise of the corporate form of business in early
by means of collateral as a condition for a loan modern Europe touched on another aspect of Cath-
provided that the lender makes no profit by olic thought: private ownership of material goods.
receiving the collateral in place of the repayment Although evidence from Scripture suggests that
of the loan. If we set aside for the moment the some early Christians practiced ownership in com-
conceptual basis of interest that Thomas had not mon (see Acts of the Apostles 4:24–35), a strong
reached, ceteris paribus, this position seems no defense of individual ownership developed within
different to what we would find today as Catholic theology. Nonetheless, the Church’s rec-
a judgment from a court regarding a claim. In a ognition of the benefits of private property in the
case of a home loan default, for example, proper ordering of society coexists with traditions
a bank must return to the mortgage holder in of monastic and consecrated religious life,
default the balance of any monies over the mort- whereby men and women voluntarily take vows
gage loan due that result from the sale of a home. of poverty and agree to communal ownership of
What both Thomas and a present-day court want property within the religious community. Let us
to preserve is justice in a loan repayment trans- examine how these two understandings of prop-
action, that is, one that is free from extortion, loan erty are compatible.
sharking, or any other abuses of power by orga- Beginning with the Mosaic commandment,
nized lending organizations. The latter are “Do not steal,” Thomas Aquinas built a case for
immoral practices and the Church has not the validity of private ownership of property as
changed its position on this matter. On December being the most effective way to distribute the
30, 2010, Pope Benedict XVI issued an Apostolic earth’s goods and ensure the material sustenance
C 658 CSR and Catholic Social Thought
of all. In question 66 of the Summa Theologiae, and inhumane fashion. Profits do not justify this
Thomas asserts that the possession of things as misuse of our power over other sentient beings
well as the dominion over all other creatures is who cannot defend themselves.
natural for man. It is a matter of efficiency for In the terminology of business entrepreneurship,
each person to procure what he needs for himself, stewardship can also be understood as fiduciary
than to attempt to meet the needs of the commu- duty. One way to understand this may be that
nity as a group. The reason that he offers is that entrepreneurs have a duty to act in the best interests
each person would shirk labor and leave for of the company or the community, and not just for
others what pertains to the community’s needs. the sake of maximizing profit for either purely self-
Moreover, he observed that individuals in interested pursuits or as a duty to shareholders. This
a community quarreled less if they did not share position comes with great opposition, such as the
property in community. This position on property argument advanced by Milton Friedman in which
has remained unchanged for we find, later, Leo he argues that the sole responsibility of business is
XIII’s Rerrum Novarum citing Thomas as to increase profits. However, the Catholic teaching
a defense of private property against the argu- of stewardship does not suggest that the goal of
ments of socialism. a business enterprise must be primarily social, or
Nonetheless, for Thomas, as for subsequent that social ends of the immediate community
Catholic social thought, the right to property is must supersede the ends of the business
not absolute. Owners have a responsibility to use enterprise. (See ▶ Community Relations entry in
their goods for the benefit of others once individ- this Encyclopedia.) Indeed, the efficiency of private
ual needs are addressed. The concept of good property that Thomas, following Aristotle, advo-
stewardship is crucial for understanding this bal- cates would be dissolved by such collectivist ends.
ance between private ownership, on the one hand, Some theologians and business theorists have
and community of use, on the other. Stewardship underscored the complementary relation between
refers to the responsibility to care for what one Natural Law theory and the understanding of
owns. In a modern-day application, the concept stewardship outlined above. Joseph F. Johnston,
of stewardship applies to our productive and for example, traces the history of fiduciary obli-
humane use of resources. Arguably, this means gation and concludes that it derives from the
that having dominion over things and creatures “fundamental moral principles of trust, which
on earth does not amount to doing whatever we are inherent in certain human relationships.” He
wish because we can but, instead, to care for such views the customary legal duties of business
things and creatures, to give back at the very least managers, such as good faith, loyalty, and care,
as much as we take. The alternative to steward- as consistent with the Aristotelian-Thomistic vir-
ship is, unfortunately, an ends-justify-the-means tue ethics tradition.
utilitarian mentality that inexorably leads to
regrettable outcomes despite high profits. Factory Catholic Understanding of Community
farming indeed exemplifies lack of stewardship While CSR draws from the framework of ethical
insofar as farm animals are confined and unable theories to assess the fitness of collective respon-
to move throughout their entire lives, thus leaving sibility on the part of the constituents of corpora-
them to stand or lie (if they are able to) on their tions toward the community that either houses it
own feces to brew diseases. Not even food is or in which it does business, CST draws from the
a comfort as they are fed not what they would principles of solidarity and subsidiarity. Solidar-
normally seek to eat by nature (grass for cattle, ity is the virtue of love (aka charity) in its social
for example) but grain feed because it will pro- dimension. Thus in Sollicitudo Rei Socialis, John
duce a faster rate of growth albeit to the detriment Paul II affirms that it is “a firm and persevering
of their health as their organ functions cannot determination to commit oneself to the common
catch up with their unnatural mass size. After all good; that is to say, to the good of all and of each
of this suffering, they are sacrificed in a careless individual, because we are all really responsible
CSR and Catholic Social Thought 659 C
for all” (no. 39). Let us now turn to subsidiarity, people who enjoy their environments at work
which is the principle that guides the means by are more productive. Unfortunately, the stereo-
which the goal of the common good is accom- typical image of a firm is that in which adminis-
plished. In Centesimus Annus, John Paul explains trators are feared or not respected, and the
subsidiarity as the principle according to which employees are either disgruntled or alienated, or
“a community of a higher order should not inter- are either slackers or backstabbing competitors.
fere in the internal life of a community of a lower This less felicitous dynamic is more akin to what C
order, depriving the latter of its functions, but Stein describes as an association, which is a union
rather should support it in case of need and help of people that only join together to seek their own
to co-ordinate its activity with the activities of the self-serving pursuits. A gym, for example, would
rest of society” (no. 48). According to subsidiar- be an association since one joins a gym only to
ity then, the firm or corporation has an important improve one’s own physical condition but not to
role to play. On the one hand, it should not allow invest in the physical condition of anyone else.
any undue interference from “communities of Although one may be pleased that there are others
a higher order” (such as the state) but, on the in the gym because their membership makes the
other, it cannot enjoy unencumbered freedom gym possible, it is of no personal consequence if
either because it may be necessary to regulate it the other members indeed achieve their goals.
in order to prevent actions that go against solidar- Now let us consider examples in a broader
ity instead of promoting its realization. Without context of community that may shed more light
subsidiarity, then, there can be no solidarity. on the mechanics of how the common good,
As indicated earlier, the end of solidarity is the although not a collectivist end, may be achieved
achievement of the common good, which is the only in the context of community. Any firm
good of the community. It shall be important to belongs to a community at least in principle. It
clarify this oft-used term “common good” cannot enjoy profits and continue to sustain them
because it is typically assumed that it refers to in the long run if it does not consider the needs of
some generic plan that each member of society its society of consumers, and the quality of its
shares in common with the rest. This understand- products or services. We have all witnessed how
ing would be clearly objectionable since only the growth of the computer industry has come
each individual knows what his or her plans are, hand in hand with our own gains in the form of
and there is no reason to suppose that they all fit increasingly sophisticated technology at ever
any particular pattern or category. Thus, the com- more affordable prices. The workers of computer
mon good is not a collectivist end, but it is firms, who also are part of this community, have
achieved only in the context of community. This also gained in the form of stable employment and
relation might not seem very clear at first, so let increasing wages. These gains, however, can
us take it apart and start with the notion of occur only when the actions of all members of
community. the society, not only those of the firm, are guided
The most elaborate examination of the nature by the principle of solidarity. We can think, for
and constitution of community can be found in example, of employees who take pride in their
the work of philosopher Edith Stein (see ▶ Com- work, and employers who pay fair wages in rec-
munity Relations entry in this Encyclopedia), aka ognition of good work, as well as the good quality
St. Teresa Benedicta of the Cross. A community, of the products offered by firms, and the good
Stein explains, is a union of individuals who are reputations borne out of the satisfactory response
committed to each other’s well-being. Ideally, on the part of consumers. Each individual mem-
a family is a community, but so could a firm if ber of the community gains in ways that serve
its members thought of themselves as part of an their unique plans, so there is no collectivist end.
organic unity that depends on the good will, hard But the optimal realization of these unique plans
work, and teamwork of its parts in order to func- is served by the coordinated contributions of all
tion well. It is thus not surprising to find that members of the community. It is in this context
C 660 CSR and Catholic Social Thought
that the Catholic notion of community can be promote corporate business,” he writes, “while
understood as the best medium for human beings dividing and limiting the risk of business, have
to flourish. Think of the metaphor of a busy free- given occasion to the most sordid license. For
way. If drivers only think of their own plans (to We observe that consciences are little affected by
get to work on time, to avoid traffic, to leave town this reduced obligation of accountability; that fur-
as soon as possible), then they might not be thermore, by hiding under the shelter of a joint
mindful of other drivers and not use blinkers name, the worst of injustices and frauds are pene-
when switching lanes, or at least not with suffi- trated; and that, too, directors of business compa-
cient time to allow other drivers to slow down in nies, forgetful of their trust, betray the rights of
advance instead of slamming on brakes in those whose savings they have undertaken to
response to a quick and unexpected move. The administer.” His concerns do not seem unfounded
solidarity approach will permit the development with the light cast by the actions of the decision
of community even among strangers on a busy makers of Enron, corporations that created the
freeway, and this will bring about the common banking and mortgage crisis, and the operations
good. But the more we depart from solidarity, we at the Gulf of Mexico by British Petroleum, to
shall encounter more accidents, heart-stopping name a few. Additionally, Pope Pius laments the
brake slamming, and stress. success of “those crafty men who, wholly uncon-
Arguably, the application by firms of the prin- cerned about any honest usefulness of their work,
ciples of solidarity and subsidiarity toward the do not scruple to stimulate the baser human desires
cultivation of community is not the same as and, when they are aroused, use them for their own
CSR. But it is quite compatible with those non- profit” (no. 132). In this way, he implies an obli-
collectivist but community-focused descriptions gation for businesspeople to refrain from seeking
of CSR (with a similar sense of “community” as profit by taking advantage of human vices.
outlined here). There are, however, some differ- In Populorum Progressio, Pope Paul VI
ences. In what follows, we shall address key focuses attention on globalization and the devel-
issues regarding such differences and these will oping world; thus his remarks on business con-
be examined in two sections. First, responses to cern multinational companies in particular. He
CSR in papal thought and, second, diverse posi- urges business leaders from the developed world
tions concerning CSR by Catholics. to treat their employees in developing nations
with dignity equal to that expected in their
home countries. “Their advantaged situation,”
Key Issues he writes of international corporations, should
“move them to become the initiators of social
Papal Thought on CSR progress and of human advancement in the area
Although papal thought since Leo XIII has not where their business calls them. Their very sense
often addressed corporate social responsibility by of organization should suggest to them the means
name (indeed, the term was not commonly used for making intelligent use of the labor of the
until the 1970s), the popes have on occasion indigenous population, of forming qualified
discussed the role and character of business enter- workers, of training engineers and staffs, of giv-
prises from the perspective of the Catholic moral ing scope to their initiative, of introducing them
tradition. progressively into higher positions, thus prepar-
In his encyclical, Quadragesimo Anno, Pope ing them to share, in the near future, in the
Pius XI recognizes the contribution of corpora- responsibilities of management” (no. 70).
tions to society’s well-being, but he also criticizes Again, the pope’s exhortations imply obligations
business executives who are not attentive to any for corporations that extend beyond increasing
obligations beyond profit, and states that legal profit and shareholder return.
regulation must protect society against the damage This basic approach characterizes subsequent
brought about by avarice. “The laws passed to papal thought as well. In Centesimus Annus, Pope
CSR and Catholic Social Thought 661 C
John Paul II affirms the validity of the modern of the business: the workers, the clients, the
corporation as an institution, and of profit as suppliers of various elements of production, the
a legitimate marker of the corporation’s success. community of reference” (no. 40).
“When a firm makes a profit, this means that pro-
ductive factors have been properly employed and Diverse Opinions and Approaches to CSR by
corresponding human needs have been duly satis- Catholics
fied” (no. 35). Yet, he continues, “profitability is not In local and national contexts, a diverse array of C
the only indicator of a firm’s condition.” John Paul Catholics have applied their understanding of the
argues that the firm’s purpose is not exhausted in Church’s teaching in a variety of ways. These
the pursuit of profit; instead, it must consider its role approaches range from bishops trying to provide
as “a community of persons who in various ways guidance, to business managers attempting to live
are endeavoring to satisfy their basic needs, and in accord with the faith they profess, to activists
who form a particular group at the service of the seeking to bring Catholic values to bear on cor-
whole of society.” Thus, “Profit is a regulator of the porate activity.
life of a business, but it is not the only one; other The United States Conference of Catholic
human and moral factors must also be considered Bishops (USCCB) released a pastoral letter on
which, in the long term, are at least equally impor- the economy in 1987 titled Economic Justice for
tant for the life of a business.” (See the British All, in which the conference expressed a position
Petroleum case in the ▶ Community Relations similar to that already noted in papal encyclicals.
entry in this Encyclopedia.) Writing of individuals in management positions,
Pope Benedict XVI continues in the same vein, the bishops stated, “Commitment to the public
recognizing the legitimacy of the corporation while good and not simply the private good of their
insisting that shareholder value should not be the firms is at the heart of what it means to call their
sole concern of managers. In Caritas in Veritate, work a vocation and not simply a career or a job”
he reiterates the need for business to recognize its (no. 117). The bishops went further in arguing
social responsibilities: “Without doubt, one of the that public policy should promote business activ-
greatest risks for businesses is that they are almost ity that extended beyond the goal of increasing
exclusively answerable to their investors, thereby shareholder value. “Governments must provide
limiting their social value” (no. 40). He expresses regulations and a system of taxation which
concern that rapid turnover among executives encourage firms to preserve the environment,
threatens to undermine this recognition, and he employ disadvantaged workers, and create jobs
worries that rampant “outsourcing of production” in depressed areas. Managers and stockholders
might “weaken the company’s sense of responsi- should not be torn between their responsibilities
bility towards the stakeholders – namely the to their organizations and their responsibilities
workers, the suppliers, the consumers, the natural toward society as a whole” (no. 118). Finally,
environment and broader society – in favour of the although not committing themselves to
shareholders. . .” (no. 40). a specific reform, the bishops insisted that the
While praising the concept of CSR, Pope Ben- dominant form of corporate organization in the
edict is careful not to endorse the CSR movement United States was inadequate: “Although share-
as a whole. “Even if the ethical considerations that holders can and should vote on the selection of
currently inform the debate on the social responsi- corporate directors and on investment questions
bility of the corporate world are not all acceptable and other policy matters, it appears that return on
from the perspective of the Church’s social doc- investment is the governing criterion in the rela-
trine,” Benedict writes, “there is nevertheless tion between them and management. We do not
a growing conviction that business management believe that this is an adequate rationale for
cannot concern itself only with the interests of the shareholder decisions. The question of how to
proprietors, but must also assume responsibility for relate the rights and responsibilities of share-
all the other stakeholders who contribute to the life holders to those of other people and communities
C 662 CSR and Catholic Social Thought
affected by corporate decisions is complex and identified with the political left. This identifica-
insufficiently understood. We therefore urge seri- tion has led to criticism from more conservative
ous, long-term research and experimentation in Catholics. This criticism has taken two forms.
this area. More effective ways of dealing with One group objects to the goals but not the
these questions are essential to enable firms to means used by most SRI activists. This group
serve the common good” (no. 306). shares an understanding of the social responsibil-
One important avenue through which American ity of corporations and views the use of tools such
Catholics have participated in the CSR movement as shareholder resolutions as legitimate, but pre-
is socially responsible investing (SRI). SRI is an fers that such energies be spent to stem practices
umbrella term that encompasses various methods such as abortion and pornography, rather than
of making investment decisions that use criteria environmental abuses or poor treatment of
other than maximizing earnings such as a ban on workers. The second group of critics more fun-
purchasing shares in morally objectionable busi- damentally targets the activists’ concept of CSR,
nesses despite their high return on investment. arguing that maintaining shareholder value as
Another method concerns investment-related activ- a primary aim is a surer guarantee of ethical
ities such as filing shareholder resolutions to business activity than a commitment to social
achieve ends unrelated to maximizing shareholder responsibility that is vague, difficult to track,
return. One example is to halt practices judged to be and subject to the vicissitudes of social and polit-
environmentally harmful. Religious concern with ical fads. Business ethicist Nicholas Capaldi, for
SRI was given impetus by the formation of the example, writes that the CSR field in general is
Interfaith Center on Corporate Responsibility characterized by “hostility to markets” that “is
(ICCR) in 1971. The use of shareholder resolutions fueled by a traditionally leftist understanding of
to oppose practices that activists deemed objection- the world and its problems.” Joseph Johnston
able grew steadily through the end of the twentieth (cited above) argues that viewing other stake-
century. In the 1980s, the idea of moral responsi- holder interests as equivalent to the interests of
bility in investing was given a major boost by the shareholders introduces confusion into the
movement to disinvest in South African companies decision-making process by managers and
and firms doing business in South Africa as a means thereby makes it less likely that they will behave
to pressure the government to end apartheid. Cath- in a way consistent with traditional norms of
olic congregations of consecrated religious (sisters, fiduciary responsibility. Although the characteri-
brothers, and priests) have been very active in the zation of the debate in Catholic circles
ICCR and in SRI more generally. These congrega- defies simple categories, all sides share one
tions control billions of dollars accumulated common ground, which is the belief that corpo-
through their members’ savings and also benefit rations have responsibilities besides profit
from media attention that follows public protests maximizing.
of corporate policies or actions. Mercy Investment
Services, for example, the agency that manages
funds for the Sisters of Mercy, possesses a “Social Future Directions
Responsibility Committee” whose tasks include
“engaging, retaining and replacing socially respon- In sum, it is safe to say that while the principle
sible investing vendors and research providers; behind the concept of corporate social responsibil-
establishing negative and positive investment ity is widely accepted among Catholics, significant
screens; engaging corporations by filing share- differences remain between CST and CSR. Per-
holder resolutions and participating in dialogue, haps the greatest difference concerns the content
and voting proxies.” of that responsibility and the appropriate method
In the American context, this SRI movement for discharging it. Catholic social thought as
by Catholic organizations in the direction of CSR expressed in the official documents of the Church
has become primarily though not exclusively insists that the moral obligations of corporate
CSR and Catholic Social Thought 663 C
managers are not reducible to maximizing profit or monetary and financial dealings. http://www.vatican.
shareholder return. However, this should not be va/holy_father/benedict_xvi/motu_proprio/documents/
hf_ben-xvi_motu-proprio_20101230_attivita-illegali_en.html
understood as an endorsement of collectivism Bruni, L., & Sugden, R. (2008). Fraternity: Why the
either, as we have clearly seen in the foregoing market need not be a morally free zone. Economics
examination of Encyclicals. The extent and and Philosophy, 24(1), 35–64.
nature of these additional obligations is a subject Capaldi, N. (Ed.). (2005). Business and religion:
A clash of civilizations? Salem, MA: M&M Scrivener
that continues to be debated among scholars of Press.
C
Catholic social thought, and hopefully this debate Capaldi, N. (2011). Review of Bryan Horrigan (2010). In
will be received as a contribution to the broader N. Capaldi (Ed.), Corporate social responsibility in the
CSR discussions, not as a religious point of view twenty-first century. Northampton, MA: Edward
Elgar Press. In Journal of Markets & Morality 14
but, rather, as a well-developed theoretical frame- (Spring 2011).
work that emerged from the tradition of Catholic DesJardins, J. (2006). Doing well by doing good:
social though and its rich philosophical Distinguishing the right from the good in theories of
foundations. corporate social responsibility. Paper presented at The
good company: Catholic social thought and corporate
social responsibility conference, sixth international
symposium on catholic social thought and manage-
ment education, Pontifical University St. Thomas,
Cross-References Rome.
Donaldson, T. (1982). Corporations and morality. Engle-
wood Cliffs, NJ: Prentice Hall.
▶ Community Relations Drucker, P. F. (1993). The concept of the corporation.
▶ Economic Sociology on CSR New York: John Day Company.
▶ Employee Participation Friedman, M. (1970). The social responsibility of business is
to increase profits. The New York Times Magazine.
▶ Human Resource Management http://www.colorado.edu/studentgroups/libertarians/issues/
▶ Social Accounting friedman-soc-resp-business.html
▶ Social Entrepreneurship Johnson, J. F., Jr. (2005). Natural law and the fiduciary duties
▶ Social Innovation of business managers. In N. Capaldi (Ed.), Business and
religion: A clash of civilizations? (pp. 279–300). Salem,
▶ Trust MA: M&M Scrivener.
Keen, R. (2006). An aquinas in the boardroom,
(unpublished). Presented at The good company con-
ference, Pontifical University of St. Thomas
References and Readings (Angelicum), Rome, 5–7 Oct 2006.
Kennedy, R. G. (2006). The good that business does.
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Aquinas, T. (1948). Summa theologiae. New York: Chris- Editrice Vaticana. http://www.vatican.va/holy_father/
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Bainbridge, S. M. (2003). Catholic social thought and the rerum-novarum_en.html
corporation. UCLA School of Law Research Paper No. Mahoney, T. (2006). Accounting for just wages: A proposal.
03-20. Paper presented at The good company: Catholic social
Becker, R. A. (2008). Capital theory. In S. N. Durlauf & thought and corporate social responsibility conference,
L. E. Blume (Eds.), The new Palgrave dictionary sixth international symposium on catholic social thought
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Palgrave Macmillan. The New Palgrave Dictionary St. Thomas, Rome.
of Economics Online, 22 Dec 2010. http://www. Menger, C. (1976). Principles of economics (trans:
dictionaryofeconomics.com/article?id¼pde2008_C000575. Dingwall, J. & Hoselitz, B. J.). New York University
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Benedict XVI. (2009). Caritas in Veritate, Encyclical, Noonan, J. T. (1957). The scholastic analysis of usury.
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holy_father/benedict_xvi/encyclicals/documents/hf_ben Novak, M. (1981). A theology of the corporation. In
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C 664 CSR and Cause-Related Marketing
the favor with a very expensive car, for instance, a burden, as it will cost them money and time.
then this is not a typical case of quanxi. The Quite often, the official’s work will result in
person receiving the car can be expected to expensive changes (think about the quality of
know that there is something else happening materials or the expected solidity of the building
than strengthening the relationship. once completed). Some contractors respond to
There is also the myth that holds that corrup- this by trying to influence the official. The people
tion is typical of what is regarded as “the capital- who later use the building may not know this. The
ist way of doing business.” The idea is that the corrupt deal was not victimless, because in many
kind of deal-making that happens within corrup- cases the building collapses, resulting in loss of
tion is identical with making deals in the capital- lives and property, and if it does not collapse, the
ist system. But the principal notion within the people using the building will be exposed to risk.
capitalist system is that all human beings have One example can be found in earthquakes, which
both needs to demand and value to offer, so that in more corrupt countries typically result in much
an exchange of those needs and value-items will more damage. What about corruption with police
occur, while a transparent comparison of goods and security officers? If a criminal bribes
and services for exchange leads to the best out- a security officer at an airport to let a particular
come. However, the capitalist exchange takes piece of luggage pass, this appears to not affect
place within a market setting, which requires others. The luggage may contain drugs or dia-
transparency and transparency will almost cer- monds, and why would other people at the airport
tainly exclude illicit behaviors. Also, the result care? But the luggage may also contain a bomb or
of the corrupt exchange is not the overall most a virus, which means that the safety of other
efficient pricing, but rather a price that suits one people is jeopardized. What is also jeopardized
or two people. is trust in security forces. The resulting low feel-
Another myth is that it would be a “victimless ing of safety has all sorts of damaging effects,
crime.” This is typically the case where corrup- ranging from crime to the discouraging of
tion is equated with bribery. The idea is that business.
money (or favors) being exchanged between
two people does not have to affect someone
else. However, such an exchange is not the Key Issues
essence of corruption; the “deviation from
entrusted duties” is. After all, the exchange of It is hard to determine the causes of corruption,
money (or favors) happens for the reason to due to its complex nature and the national and
make someone act different from what the proper organizational contexts in which it is found. On
execution of duties would entail. The reason that the website of Transparency International (www.
someone has to be persuaded to deviate from transparency.org), one can find several docu-
duties and to keep it confidential is that there are ments on the causes of corruption, specified to
good reasons why “the proper execution of particular industries, such as healthcare, justice
entrusted duties” needs to be in force. For systems, etc. There is not one single cause. One
instance, in most countries, building activities cause is poor governance, both in business
have to be approved by officials before the actual organizations as well as in not-for-profit and
building activities can commence. The reason for governmental organizations. Another cause is
this is mainly safety (sometimes other consider- demotivation, as lower motivation brings less of
ations also play a role, such as aesthetic prefer- a hesitation to engage in corrupt practices.
ences, labor conditions, or, increasingly, the Another factor is in conflicting laws and regula-
environmental impact of the building activities). tions; for example, if a restaurant holder has to
The official will typically judge the building place the fire-extinguisher on the floor at the
plans with official guidelines in mind. To con- instigation of the fire department and at shoul-
tractors, the work of the official could be der-height at the instigation of the labor
CSR and Corruption 667 C
inspection, then this entrepreneur may be countries experiencing a loss in academic/scien-
tempted to bribe one of the inspectors. tific progress. Again, most of the damage is
A distinction is often made between petty cor- caused by perceptions. If in a university one of
ruption and grand corruption: On the one hand the faculty members has been found guilty of
badly paid officials seeking to supplement their accepting bribes in order to give students a free
modest incomes and on the other hand wealthy pass in exams, then the perception becomes that
entrepreneurs, influencing decisions with a far- exams and diplomas at that university are in C
reaching impact. This distinction is relevant general untrustworthy. The students who did not
when it comes to understanding the causes of pass their exams fraudulently and the faculty
corruption. members who did not accept bribes will bear the
As is made clear in TI’s sector tables, certain consequences.
industries are worldwide more vulnerable to cor- Finally, what may arouse suspicions of cor-
ruption than others (http://www.transparency.org/ ruption in academia is the influence of companies
policy_research/surveys_indices/bpi/bpi_2008). on curricula. This does not mean that all funding
Apparently, one of the industries most men- from the business community is suspicious, but it
tioned is the construction industry, while another does mean that such funding must have transpar-
industry in this regard is the hospitality industry. ent accountability to protect the proper focus of
Suffice it to say that in preventing and fighting the university.
corruption those industries require special
attention.
One special issue concerns corruption in aca- Future Directions
demia. In both research and education, texts are
created, as research reporting and as part of edu- Fighting corruption is a bit like “fighting evil”; it
cational programs. When we look at students, the is called for, but it is hard to imagine that it will
“entrusted duties” are about following the educa- ever be completed. Still, there are good reasons to
tional program in which the student enrolled, take steps toward that goal and, fortunately, there
including the writing of texts, and for researchers are also some ways to make that feasible.
this is about truthful reporting. This means that One way to limit corruption is information on
those texts have to be the work of that particular the causes and consequences of corruption.
student or researcher. In recent years, plagiarism Discussing the myths is part of that. When we
is increasingly a concern within universities, gov- look at the type of corruption mentioned last,
ernments, and accreditation bodies worldwide. academic corruption, then much can be achieved
Several developments appear to be behind this through educating researchers and students (in
increase. The most obvious development would some cases, students are poorly informed about
be the spread of the use of Internet on all sorts of academic writing and are not aware of the proper
devices. ways to quote and to use references).
One contributing factor could also be culture It has to be understood that much of the dam-
or national tradition. In cultures in which exper- age of corruption already takes place when cor-
tise is highly valued, sometimes students may ruption is just rumored. Let us look into the
feel inclined to copy the words of an authority. example of the building inspector and the con-
It also happens that in some countries, education tractor. If they are rumored to be corrupt, also
is not much more than memorizing what the other inspectors and contractors may suffer from
teacher expresses, and students from those less trust.
countries may feel inclined to write texts in the Another way to limit corruption is about how
same vein. companies and government structures are orga-
The damage caused by academic corruption is nized, as insufficient governance and conflicting
considerable. It ranges from individual students rules play a role in causing corruption. In
not receiving the right education to whole preventing and fighting corruption it makes
C 668 CSR and Corruption
sense to have the proper bureaucracy. For and setting rules, but it is also, and even increas-
instance, if important decisions depend on the ingly, a matter of setting examples. It is important
approval of one particular individual, then it that leaders show integrity and are aware of their
may be tempting to certain people to try to influ- own behaviors. For instance, a leader who was
ence him or her. Then it might make sense to known for his integrity can have a damaging
change procedures and structures, making certain impact on the organization by appearing to have
other officials check the decisions of their col- lost his integrity through some unfortunate
league or making certain decisions the responsi- behavior. Should that be the case, others in the
bility of a team, not a single individual. organization may be less inclined to avoid
Also, demotivation has been mentioned as corrupt behaviors.
a factor contributing to corruption. Should there The lesson we can draw here is that preventing
be signs of increasing demotivation, then one and fighting corruption requires a systematical
would at least have to realize the increased risk approach. The signals given through governance
of corruption-induced damaging behaviors and and leadership and from HRM, the company cul-
act accordingly. ture and the Code of Conduct have to be consis-
Another concern is about hiring. Is there tent. In general, it can be said that unclarity
a reason to think that the applicant is trustworthy regarding what is expected of the members of
and will act with the interests of the organization an organization can give room to undesired,
in mind? Connected with that are the decisions even damaging, behaviors.
regarding promotions. Does the person who is One promising direction for future research
promoted to an authoritative position show the would be toward the responsibilities for business
right kind of behavior, acting from integrity? organizations in preventing and fighting corrup-
It may be best to look into the behaviors in the tion. The question could then become: “How
organizational culture. It is unlikely that corrupt does preventing and fighting corruption tie in
behaviors will be collectively considered accept- with honoring the responsibilities toward
able, but it is possible that one cultivates certain stakeholders?”
behaviors which may be more easily corrupted Another future direction for research would be
than others and then it is important that the social focused on possible opportunities for business
group which is the company is able to fight off the organizations in terms of strategy and marketing.
subversion of corrupt behavior. This direction should be seen in connection with
Connected to legislation and corporate culture honoring stakeholders.
is the use of codes of conduct within organiza-
tions and industries. The contents of the codes
typically reflect the issues that professionals in Cross-References
the respective organizations are facing. Corrupt
practices are among those issues. In many cases, ▶ Fraud Prevention, Detection, and Reporting
the codes limit bribery by clarifying what is ▶ Government
acceptable as a gift, often mentioning a maximal ▶ Responsible Leadership
value for gifts and proscribing reporting on the ▶ Transparency International
reception of gifts. Many codes also contain rules
about the involvement of relatives, limiting nep-
otism. The codes need to be implemented in the References and Readings
various HRM decisions and the behavior of
employees also needs to be inspected in terms Hampden-Turner, C., & Trompenaars, F. (2000). Building
of the codes. Increasingly organizations show cross cultural competence – How to create wealth
from conflicting values. New Haven/London: Yale
success in this use of codes. University Press.
Special attention should go to leadership. Hess, D., & Dunfee, T. W. (2000). Fighting corruption:
Governance is not only a matter of controlling A principled approach; The C2 principles (combating
CSR and Poverty 669 C
corruption). Cornell International Law Journal, 33, poverty reduction. Similarly, there are also
593–626. differences about the extent to which businesses
Hutching, K., & Weis, D. (2005). Quanxi and Wasta:
A comparison. International Business Review, 48(1), through CSR are able to address the multicausal
141–156. 12 December 2005 (online). factors of poverty and its multidimensional
McKoy, D. V. (2009). Defining corruption. In nature, and whether businesses should be held
A. Stachowicz-Stamusch (Ed.), Organizational immu- accountable for their poverty alleviation efforts.
nity to corruption – Building theoretical and research
foundations. Katowice: Information Age publishing. In addition, while in principle, business involve- C
Steidlmeier, P. (1999). Gift giving, bribery and corrup- ment in poverty reduction via CSR is often said to
tion: Ethical management of business. Journal of offer enormous opportunity; in practice, such
Business Ethics, 20(2), 121–132. involvement can often be marred in contradic-
www.transparency.org, Accessed 15 April 2011.
tions, and the outcomes fragmented. As such,
the strongest criticism of the CSR-poverty
nexus lies in the suggestion that there continue
to remain a significant gap between corporate
CSR and Poverty rhetoric on poverty reduction and their actual
efforts on the ground.
Uwafiokun Idemudia
Department of Social Sciences, 307 Founders
College, York University, Toronto, ON, Canada Introduction
As such, the confrontational nature of the politics glorified wealth as an absolute value,
of development in the 1960s and 1970s had to apotheosized business, and inevitably disavowed
give way to a new approach to development that the social obligation previously assumed by
emphasizes collaboration and partnership and business. In addition, the free enterprise
avoids/limits spaces for confrontation and economic system did not only legitimize self-
contestation. This new approach to societal gov- interest but also provided no means or rationale
ernances has been referred to as the emerging to internalize the social cost that accrues from
embedded relational governance era by Professor production. This task was left to governmental
Alte Midttun. It is against this background that regulations that were often inefficient. The fore-
business has in the last few years turned to the going situations in combination with market inef-
concept of corporate social responsibility (CSR) ficiency and irresponsible corporate behavior
as a framework to get involved in poverty allevi- eventually incited public dissatisfaction with
ation and legitimize their new role. However, laissez-faire as an economic order and its
critical voices continue to question such business supporting institutions. The consequence was
involvement given its profit-oriented nature and the reinvigoration of the demand for more gov-
the fact that the implications of such involvement ernment regulation of corporate activities and,
for business, society, and the poor is yet to be thus, the second phase of corporate social respon-
fully understood. Nevertheless, the combination sibility in which businesses began to adopt CSR
of a shift in emphasis toward embedded relational policies as a way to ward off government regula-
societal governance and the idea of business case tion and social criticisms. While poverty was
logic has not only shaped how business has often not the direct target of the CSR initiatives
responded to the issue of poverty, but also how adopted at this time, efforts to address issues of
business understands poverty and sees its role in workers’ health and safety and the recognition of
the poverty alleviation project. workers’ rights indirectly contributed to poverty
The focus on the relationship between CSR alleviation.
and poverty is a relatively nascent phenomenon. The realization that CSR has become an
The earliest indirect manifestation of the CSR- indispensable part of doing business in today’s
poverty nexus was driven in part by both volun- competitive environment, coupled with efforts by
tarism and individualist philanthropic initiatives. CSR proponents to debunk the criticism that CSR
For example, Sir Titus Salt founded Saltaire town is a costly initiative that reduces corporate profit
outside of Bradford in the UK with a view to without reasonable returns, instigated the move
enhance the quality of the life of his workforce toward the third phase of business social respon-
and meet his social responsibility to society. sibility. This phase in contemporary parlance
These kind of efforts via which business might be referred to as the era of the “business
attempted to address questions of poverty case” or the win-win era. The win-win era has its
indirectly was partly due to the fact that the roots in the writing of Professor Peter Druker who
notion of “social responsibility” was at that time argued in 1984 that “in the next decade it will
still largely interpreted in terms of the social become increasingly important to stress that busi-
responsibility of the businessman and not the ness can discharge its ‘social responsibilities,’
social responsibility of business per se. Hence, only if it converts them into ‘self-interest,’ that
criticism of such gestures that they amounted to is into business opportunities.” The third phase of
voluntary reduction of profit and were unneces- business social responsibility is thus underpinned
sarily competing with other corporate expendi- by the idea that by being socially responsible, the
ture and stockholder dividend essentially ensured corporation is securing its interest and that of
that ambivalent attitude toward such social society. This particular conception of the social
responsibility practice ensued. According to responsibility of business essentially settled the
Dr Nicholas Eberstadt, the advent of the indus- unspoken tension that divided CSR proponents,
trial revolution contributed to a new ethic that as this interpretation of CSR was largely
CSR and Poverty 671 C
consistent with Andrew Carnegie’s conception of argue that businesses via their CSR initiatives are
CSR but at odd with that proposed by Julius able to contribute to poverty reduction through
Rosenwald. In contrast to Julius Rosenwald, contribution to community development, provi-
who argued for the social responsibility of busi- sion of social infrastructure, support for micro-
ness by stating that “You have to do good to do credit schemes, delivery of HIV/AIDS medicine,
well,” Andrew Carnegie suggested instead that creation of employment, and support for capacity
“GOD wants us to do well so we can do Good.” It building initiatives. For these CSR proponents, C
is within this third phase that the issue of poverty the issue is no longer whether CSR can or cannot
has emerged as an item on mainstream CSR make a difference in poverty reduction; rather,
agenda, and therefore, this phase provides the the core challenge is how to systematically har-
underpinning logic that informs how most ness the capacities of businesses and their CSR
businesses conceptualize their relationship with efforts in a systematic and sustainable manner
poverty, and the kind of solutions for poverty that can then potentially make a significant
often proposed from a business perspective. difference in the race to reduce poverty. On the
The relationship between CSR and poverty is other hand, critics argue that the idea that CSR
complex, uneven, multidimensional, and highly initiatives contribute to poverty reduction is
contested. This partly explains why poverty has a façade, and at best, CSR initiatives are only
only just recently emerged as a major issue of able to make piecemeal contribution to poverty
concern within mainstream CSR agenda. Indeed, alleviation. This is attributed to the nature of CSR
while most businesses now claim they contribute that has essentially allowed business to use
to poverty reduction either directly or indirectly claims of social responsibility to ward off
via a diversity of their CSR initiatives, only regulatory treat, accommodate some oppositional
a minority of businesses explicitly set concerns, neutralize call for structural reform
poverty reduction as a CSR objective. The com- necessary for poverty reduction, and appropriate
plexity of the relationship between CSR and pov- the meaning of poverty and how to reduce it.
erty reduction can be attributed to the lack of For these critics, then, the core challenge is the
a consensual definition for both CSR and poverty, need to move beyond just a focus on CSR contri-
and the fact that poverty manifests in a diversity bution to poverty reduction, as we need to begin
of forms (e.g., lack of income, lack of capacity, to examine the different contradictory relation-
exclusion, and voicelessness). Similarly, the ships and tensions that might exist between busi-
unevenness and the contested nature of the ness and poverty reduction. The debate between
relationship between CSR and poverty are also the proponents of CSR is good for poverty reduc-
due to the multicausal nature of the factors tion and CSR is bad for poverty reduction has
responsible for poverty and the lack of been particularly insightful and useful for
well-established methodology to adequately highlighting the complexity of the relationship.
capture or assess systematically the impact of However, the failure to sufficiently historicize
business on poverty reduction. The combination and contextualize the multidimensionality of the
of these factors has meant that different busi- linkage between business and poverty, make
nesses are not only able to define CSR and pov- explicit the unstated assumptions that underpin
erty differently (i.e., how business sees fit), but each perspective and consider the voices and
also legitimately claim they contribute to poverty lived experiences of the poor who are supposedly
reduction (as most businesses tend to use differ- the beneficiary of CSR, means that we still do not
ent yardsticks to measure their contributions to adequately know how (i.e., the process), when
poverty reduction). Consequently, the debate (i.e., under what conditions), and where (i.e.,
over the relationship between CSR and poverty what forms of poverty) CSR initiatives
is fraught with claims and counterclaims that contribute to poverty reduction. Similarly, the
often do not proceed from similar grounds or impact of CSR initiatives on the poor and the
assumptions. On one hand, proponents of CSR implications of poverty reduction strategies
C 672 CSR and Poverty
based on a CSR framework for society at large business as victim of poverty is both problematic
are still poorly understood. and disingenuous. The idea that business is a victim
The issues of how businesses understand of poverty is problematic as what he conceptualizes
poverty and see its role in poverty reduction were in terms of “victimhood” is what others have also
recently addressed by Dr Michael Blowfield, who referred to as the fortune at the Bottom of the
stated that understanding the specific relationship Pyramid (BOP). Besides, neither the market nor
between business and poverty is necessary if we are its size is a naturally occurring state of affairs within
to better understand business behaviors as develop- all human societies. Furthermore, it is misleading to
mental actors. He argued that to see business simply see business as “victims of poverty” because it
as either the cause or the solution of poverty is presupposes that the involvement of business in
inadequate as it does not capture the variety of any context can be neutral. Unfortunately, such
ways that business affects, or is affected by, pov- a situation is often never the case. Similarly, given
erty. Hence, he suggested that the relationship the significant power disparity that often exists
between business and poverty is best conceptual- between business and the poor and the fact that
ized along three dimensions (i.e., business as business can choose to freely invest and disinvest
a cause of poverty, its victim, and a solution). The whenever and wherever it chooses means
conception of business as a cause of poverty, he suggesting that businesses are victim of poverty is
attributes largely to power asymmetries that favor a classical case of what Dr Kenneth Amaeshi has
business and thus allow it to externalize the cost of called intellectual gymnastic that offers nothing
production in ways that might often engender pov- more than intellectual simulation. The point here
erty. In other instances, business is also known to is not that businesses are not sometimes affected
cause poverty by ignoring the gendered nature of negatively by incidence of poverty; rather, it is that
production and the process dimension of poverty poverty is often a function of governance failure to
such as empowerment. Similarly, he argued that which business might have directly or indirectly
business can also be a victim of poverty because contributed to. Hence, while business might be
poverty can negatively affect the business sector. victim of governance failure, it is almost never the
According to him, one only needs to look at the victim of the poor.
facets of poverty as set out in the Millennium Nonetheless, the ways in which business
Development Goals (MDGs) which are indicators especially Transnational Corporations (TNCs)
of human development to see how business can be have caused poverty is well documented in the
victim of poverty. Dr Blowfield goes on to state that various variant of the modernization versus
“the fact that half the world lives on less than two dependency theories debate of the 1960s and
dollars a day shows how much greater the market 1970s within development studies. A more recent
for goods and services could be if only people had debate has shown how the competition among
more income,” In other words, the incidence of developing countries to secure Foreign Direct
poverty potentially reduces the size of available Investment (FDI) (that is supposedly meant to
market for business and, thus, makes business stimulate economic growth that can reduce
a victim of poverty. In addition, he suggested that poverty) tends to engineer the race to the bottom,
the idea of business as a solution to poverty goes a process that creates an enabling environment
beyond its traditional role in the capitalist economy for poverty to fester. Specifically with regard to
of creating jobs, providing goods and services, and CSR, TNCs are often able to pass on cost associ-
generating wealth. Rather it is the belief that busi- ated with the adoption to CSR principles to
ness can consciously invest in ways that are simul- smaller suppliers in their supply chains. These
taneously profitable and beneficial to the poor. The small suppliers are often likely to compensate
idea that business is both a cause and a solution of for such additional CSR cost by cutting labor
poverty is not novel and in fact well established in cost and paying low wages that generate precar-
the literature, and it is often the subject of polemic ious working condition and push some workers
debates. However, Dr Blowfield’s conception of into poverty. A good example will be the
CSR and Poverty 673 C
so-called Wal-Mart effect. In contrast to the idea Key Issues
of business as the cause of poverty, Dr Boyle and
co have identified three ways via which business The first key issue is the disagreement over
can act as solution to the problem of poverty. The whether business indirect and semi-direct
first is the economic approach that sees the poor approaches to poverty reduction can be an effec-
as either consumers or producers. As consumers, tive means for reducing poverty or if such efforts
the poor becomes a potential market to be by business are simply another form of a band-aid C
targeted and grown through new products and solution to the problem of poverty. For example,
services innovations developed by businesses. critics argue that given business emphasis on
The poor as producers implies turning the poor either indirect or semi-direct approach to poverty
into producers so as to build their assets wealth, reduction, business is only able to address symp-
generate economic wealth, and thus get out of toms of poverty in a piecemeal fashion as the root
poverty. The second is the CSR approach, causes of poverty are frequently ignored. In other
which according to them differs from the eco- words, the inability to actively pursue a direct
nomic approach in the sense that profit is not approach to poverty reduction often means that
necessarily the primary goal, when companies the structural factors that keep people poor are
take on issues of poverty alleviation. However, often left unchallenged or unchanged by CSR
the concern for profit-making is never completely initiatives. Another core concern is the material
ignored altogether. The third is the activist/advo- and discursive consequences for both the poor
cate approach that requires businesses to engage and the field of development in terms of basing
in the policy process rather than try to solve the poverty reduction effort on a CSR framework.
problem of poverty themselves. It is therefore For instance, Dr Boyle and co have argued that
clear that business can play a number of roles as basing poverty reduction efforts on a CSR frame-
a solution to poverty. These roles range from its work is problematic as the core theory that
traditional indirect role (i.e., by focusing on gen- informs CSR (i.e., stakeholder theory) ignores
erating economic value for its owners), semi- poverty. Hence, the poor are often not recognized
directly (i.e., by using CSR to meet both profit- as stakeholders and they are always likely to lack
ability and poverty alleviation goal), or directly sufficient power to be able to influence manage-
(i.e., by actively lobbying for pro-poor social, rial decision making in a manner that protects
economic, and political policies). However, their interest. The material implication thus for
since, in practice, businesses are less likely to the poor is that they are less likely to directly
advocate for any kind of policy that might con- benefit from corporate intervention since
strain capital accumulation even though such such interventions are not necessarily geared
a policy will facilitate poverty reduction, most toward meeting their real needs. Similarly, critics
businesses largely engage with poverty issues also argue that if business efforts to address
either indirectly or semi-directly. Hence, poverty poverty are predicated solely on the business
tends to enter business decision making either in case logic, what happens when issues of poverty
terms of risk to its operation or in the form of cannot be converted into business opportunities.
negative CSR. Dr Rhy Jenkins describes negative Put differently, the emphasis on the business case
CSR as tendency to emphasize what a company logic means that certain aspects of poverty are
should not do such as employing child labor or likely to go unaddressed, and therefore, the scope
violating human rights as opposed to setting pos- for business engagement with poverty is always
itive development outcomes as CSR target such going to be narrow and its efforts fragmented.
as helping to reduce poverty. This manner in In addition, some scholars like Dr Dinah Rajak
which poverty enters managerial decision mak- have also argued that besides its material implica-
ing has significantly shaped the nature of busi- tions for the poor, a more disconcerting issue is the
ness-poverty relationship and raises a number of discursive capacity of CSR to reshape develop-
key issues for poverty alleviation efforts. ment agendas according to corporate values and
C 674 CSR and Poverty
interest. The problem here is that business is not empirically analyze how different aspects of
just able to pick the winners and losers in its CSR CSR might affect different dimensions of poverty.
initiative, but it is also beginning to be able to This would offer us a more nuanced insight into
appropriate the meaning of poverty, legitimize the relationship between business and poverty
certain forms of solution for poverty reduction, beyond the more narrow focus on whether CSR
and marginalize other solutions to poverty that has contributed or failed to contribute to poverty
are inconsistent with corporate values and interest. reduction. The works of Boyle and co and
However, Dr Blowfield points out that some Dr Peter Utting though largely theoretical are
elements of business response to poverty such as good examples of efforts that have tried to
adaptation of conventional management tools and address this issue. Theoretically, analysis of the
concepts for development purposes, depoliticiza- CSR-poverty linkages also need to begin to
tion of economic opportunities, and the reduction explore how CSR processes matter for poverty
of development visions to just targets and devel- alleviation and under what circumstances has
opment process to techniques are strategies that CSR contributed to poverty alleviation. It is also
are characteristics of contemporary development important to disaggregate business and to
itself. Hence, it is much more difficult to suggest consider how different businesses might affect
that business might co-opt development than to poverty differently. Finally, concerted effort
make the case that business is just coping should also be made toward capturing or measur-
established norms of the predominate develop- ing the impact of CSR initiatives on the poor.
ment discourse. Finally, the question of the impact Such an effort should seek to privilege the voices
of CSR initiatives on poverty remains an and experiences of the poor that are supposed to
unresolved issue. As such, proponents and critics be the beneficiary of CSR initiatives. A major
of CSR are able to make assertions about the part of this process requires studying the useful-
impact of CSR on poverty reductions without sys- ness and relevance of CSR for poverty reduction
tematically accumulated empirical evidence to from the perspective of vulnerable groups,
substantially support their positions. For instance, especially women, children, and indigenous
proponents of CSR is good for poverty reduction communities.
and its critics are able to use anecdotal evidence,
point to shift in corporate policy or adoption of
international codes of conducts like the United Cross-References
Nations Global Compact as evidence that CSR is
either contributing or failing to contribute to ▶ Bottom of the Pyramid
poverty reduction. Thus, we are still not able to ▶ Business and Society
ascertain in clear terms whether business has been ▶ Corporate Citizenship
good or bad for poverty reduction. This problem is ▶ Corporate Codes of Conduct
further complicated by the tendency to marginal- ▶ Corporate Philanthropy
ize the voices of the poor in theoretical and ▶ Corporate Responsibility
practical debates about CSR and poverty. ▶ Stakeholder Theory
▶ Sustainable Development
▶ Triple Bottom Line
Future Directions
development means addressing material and company is deeply embedded in its local and
capital investment measures such as technical regional environment and that there is a strong
infrastructure. link of interdependencies and interrelations
2. In the field “software,” regional development between the company, its business activities,
means dealing with the various immaterial and its external environment. In many cases, the
social and economic processes and company’s location matches the place of resi-
nonphysical aspects that determine a region’s dence of its employees, the location of its sub-
attractiveness for people and businesses. contractors, and its business market.
Among others, this includes developing social Consequently, those business activities and deci-
practices, nonmonetary support for individ- sions directly affect the economic, ecological,
uals and businesses as well as increasing and social development of the surrounding area.
cultural activities and education or leisure Hence, it is hardly possible to focus on companies
options. without taking the surrounding areas and its soci-
3. In the field “orgware,” the region is referred to etal, institutional, and regulative actors into
as a political and administrative unit. In this consideration.
context, regional development addresses Most types of CSR-related commitment take
changes in organizational and institutional place at the company’s location or rather its
structures and political programs. This also community and often have a long tradition. How-
includes measures to empower and activate ever, most of them lack a long-term basis,
residents, to enhance participation, and to a certain degree of continuity, and pro-activeness,
establish self-help or bottom-up networks or a strategy in general. Moreover, philanthropic
between public and private actors. activities such as sponsorship and donations are
In the process of steering regional develop- predominant. In local and regional commitment,
ment, a region’s current strengths and weak- especially small- and medium-sized enterprises
nesses are identified and prospective play an important role. On the one hand, their
opportunities and threats are addressed in order engagement might be personally or ethically
to create, maintain, or improve a region’s future motivated, but on the other hand, it might repre-
development. Based on this analysis, programs sent a specific type of economically or politically
and projects are designed and instruments devel- oriented CSR understanding. According to this
oped that can be either formal, for example, a new rationale, CSR is not just a singular piece of
law, or informal, for example, a regional master a broader business model, but a strategic element
plan or a regional development concept. Against of doing business and of connecting the
the background of changing political regulations company’s resources with those of other actors
– as can be seen in the turn from a welfare to an in the region in order to further invest into and
enabling or activating state – regional develop- develop the company’s location respectively its
ment is increasingly characterized by multi- business environment.
stakeholder approaches that include public vs. Against this background, it is reasonable to
private actors and institutionalized vs. individu- conduct further research on businesses, their
ally organized groups. social commitment, and their contribution to
regional development. However, this focus has
hardly been addressed in regional sciences so far.
Introduction Whereas much of the CSR literature has explored
both the social and the business case of social
As studies have shown, the majority of business- activities, there is little empirical knowledge
people understand their company as part of about local and regional CSR networks as well
a local and regional network between public and as about the effect of cooperations between com-
private actors from the economic, the public, panies and nonprofit organizations on regional
and the civil sector. They know that their development.
CSR and Regional Development 677 C
Key Issues a great part of it – on the availability of
intraregional resources and the actors’ ability to
In the following, a number of key issues that activate, share, and make use of them. It is
intend to point out some conceptual and theoret- referred to positive impulses resulting from var-
ical approaches to build the bridge between CSR ious regional factors, such as financial power,
and regional development are identified. It work forces, infrastructure, market, or institu-
remains to be stated that these approaches derive tions. Endogenous resources also include imma- C
from a mid-European, welfare state perspective terial ones such as human capital and social
and are based on CSR activities in industrialized capital deriving from trust and cooperative
countries. relations between regional actors from different
spheres.
Growing Importance of Regions From the beginning of the 1980s on, sociocul-
Against the background of globalization, world- tural aspects or a company’s “social
wide interconnections in politics and economics embeddedness” have become important loca-
but also in personal life are intensifying and are tional factors. In addition to spatial proximity
growing in number, while traditional, local rela- between companies and their partners, this also
tions are often fading. However, at the same time, implies the degree of institutional and organiza-
there is an opposite pole to this: Under the tional closeness between business representatives
umbrella term “regionalization,” a number of and local or regional institutions. These public-
economic, socioeconomic, and political develop- private networks foster mutual learning
ments stressing the regional level can be identi- processes, exchange of knowledge, and fruitful
fied. By forming business clusters and by cooperation, which gives way to innovation and
strengthening regional networks, businesses can enhance a region’s problem-solving capaci-
intend to unite their own specialized knowledge ties. Hence, social capital generated in these
and resources with their neighboring partners in networks can develop a positive impact both on
order to increase their visibility and competitive- the groups’ members and the social and regional
ness on a global market. In a similar way, munic- context they are embedded in.
ipal administrations and politics form regional After all, businesses engaged in these multi-
alliances to share resources and cut, on the one sectoral networks have the opportunity to directly
hand, and to promote certain issues such as tour- and indirectly invest into their surrounding
ism or economy in order to attract more residents, location and its endogenous potentials.
customers, or investors, on the other hand. From an economic perspective, endogenous
All things considered, new models of potentials represent locational factors that deter-
“coopetition” – meaning of cooperation and com- mine a region’s attractiveness to investors as well
petition at the same time – are considered a key to as residents. These locational factors can have
heighten collective and regional strengths. In the either direct or indirect positive influence
course of local or regional CSR activities, on businesses: A local administration’s open-
business can contribute to foster these kinds of mindedness or its pro-business politics might
networks and efforts with the aim of promoting open up new ways of doing business; good living
the region. conditions, broad choices in education, culture,
and leisure activities might attract more inhabi-
Regional Development Through Endogenous tants, thereby generating a higher number of
Potentials well-educated employees.
Theory in regional sciences and economic geog- As a result, improving living and working
raphy stresses the importance of endogenous conditions or supporting education matters
potentials for a region’s development. According through regional CSR activities might
to that, regional development does not only eventually turn out as a profitable investment
depend on exogenous growth impulses but – to for businesses.
C 678 CSR and Regional Development
New Forms of Government and the Provision well as intensive cooperation between the public
of Public Goods and private sector in order to enhance problem-
Under the paradigm of an activating and enabling solving capacities and to foster future develop-
state, the public sector still guarantees the provi- ment. In this context, Corporate Social
sion of general public services even though it Responsibility can offer a conceptual and orga-
does not provide all of them itself. Instead, nizational framework for action in order to
a number of services are being outsourced or establish new forms of cooperative and
taken care of by private actors; responsibilities communicate structures that allow businesses
are being delegated. In this context, the govern- to take on responsibility for regional develop-
ment or the respective administration needs to ment matters.
come up with new organizational practices and A great number of companies already commit
forms of government as it is expressed with the themselves to issues and projects in their external
term “governance.” This means that societal mat- environment. However, these efforts can be
ters are governed and regulated collectively; improved in continuity, pro-activeness, and
informal and bottom-up strategies are being strategy. Examples from practice show that CSR
focused. Just like politics in general, regional activities in network structures with members
development strategies are characterized by from the public, private, and civil sector work
a more participatory and multi-stakeholder well. In a network, each member’s resources
approach, too. There is an either subject-centered can be shared and combined, which allows
or a territory-centered approach to regional gov- the participants to collectively address
ernance. The former implies a network that gen- certain regional issues or problems of the same
erates itself based on a specific issue or problem interest.
that each member has in common; the latter It can be assumed that local and regional activ-
implies a network that includes all members in ities will become more professional in the future
a specific region or area. since awareness for multi-stakeholder
A great number of CSR projects are launched approaches to fight collective problems is rising.
in originally state-governed areas such as educa- In its renewed EU strategy 2011–14 for
tion, childcare, or environmental protection. Corporate Social Responsibility, the European
By engaging in these fields, businesses create Commission stresses the importance of CSR
privately organized services, thereby strategies on a national and subnational level.
supplementing general public services and creat- It requests local and regional authorities to fur-
ing public goods. ther support businesses – especially small- and
Against this background, CSR programs medium-sized enterprises – in their CSR activi-
might open up new ways and opportunities for ties. According to the European Commission,
governments to delegate responsibilities and for it needs cooperation and partnerships between
companies to address and support regional needs. public and private actors to fight poverty and
problems of social inclusion.
It remains to be stated that there is still little
Future Directions empirical knowledge about local and regional
CSR networks as well as about cooperation
Against the background of globalization and an between companies and nonprofit organizations
overall structural change, regions today face and their actual effects on regional develop-
a strong competition pressure as well as a great ment. It is necessary to conduct further research
number of social, economic, and ecological on businesses, their social commitment, and
challenges. Current trends in regional develop- their contribution to regional development,
ment indicate an institutional and organizational which is also a question of how to measure
change that calls for innovative solutions in CSR activities and their outcome as well as
government, participation of private actors as their impact.
CSR and Spirituality 679 C
Cross-References
CSR and Spirituality
▶ Corporate Citizenship
▶ Lobbying Cécile Rozuel
▶ Networks Institute for Socio-Management, Stirling
▶ New Governance and CSR Management School, University of Stirling,
▶ Partnership Stirling, UK C
and a better knowledge of the good. These traits into its employees’ creativity to sustain
transform the person’s character according to the a competitive advantage. Further studies, both
uniqueness of each. A spiritual person is not conceptual and empirical, have followed,
necessarily a moral exemplar, but it is expected although many researchers in that field are
that possession of spiritual virtues strongly con- based in Asia, especially India. Indeed, while
tributes to an ethically mature attitude. Asian countries seem more open to an integrated
The past 15 years have nonetheless witnessed model of spiritual management (even though the
an increased interest in the benefits spirituality Eastern interpretation of spiritual management
could bring to organizations. The phenomenon may differ significantly from that of the West),
has been labeled workplace spirituality, organi- secular Western economies still bristle at the
zational spirituality, or spirit at work. These mention of self-development and spiritual
developments can be viewed as instances of well-being in the workplace. Yet, in continental
“applied spirituality.” In contrast to “pure spiri- Europe or Australasia, research is timid but
tuality” – which defines the personal, lived growing. In North America, the field received
experience of spiritual connection bringing significant support when the Academy of Man-
inner peace, harmony, or a feeling of complete- agement endorsed a research group focused on
ness – “applied spirituality” refers to how an management, spirituality, and religion.
individual joins this personal experience with Generally speaking, spirituality in the
his or her external environment (Ashar and workplace involves a notion of meaningful or
Lane-Maher 2004). In other words, applied purposeful work, the ability to express oneself
spirituality captures how greater spiritual aware- fully in one’s work, and a connection with the
ness affects our behavior. Most commonly, it is community in and through one’s occupation.
believed that applied spirituality enhances moral A spiritual workplace enables its employees to
reflection and moral sensitivity, so that spiritually participate in serving a greater good. The aspira-
aware individuals are more caring, more tion to a greater good involves high moral values
respectful, and more emotionally open toward embodied and practiced at all levels of the
others. Applied spirituality also invites reflection organization. These often include love, respect,
in one’s relationship to one’s work. As the honesty, authenticity, trust, and a sense of bal-
individual gets to know his or her inner self, he ance. A spiritual workplace further acknowledges
or she may move away from a self-serving, that employees are human beings, complex and
instrumental view of work as a career, and aspire spiritual, rather than mere resources or human
to work with a sense of vocation (Ashar and capital. It understands that workers seek meaning
Lane-Maher 2004). in what they do, both in and outside the work-
Only a few large-scale empirical studies have place, and that there is a need to integrate,
explored spirituality in work organizations, but whenever possible, this quest for meaning in
this is rapidly changing in both Western and their activities both inside and outside the work-
Eastern economies. In 1999, Ian Mitroff and place. People grow in organizations, thus the
Elizabeth Denton published the results of their workplace must accommodate individual
seminal study in the book A Spiritual Audit of changes, diverse expectations, and different spir-
Corporate America: A Hard Look at Spirituality, itual expressions.
Religion and Values in the Workplace (Mitroff
and Denton 1999). They argued that organiza- Spirituality and Leadership
tional members yearn for self-expression at Although a spiritual workplace influences all
work while the prevalent organizational culture employees, most research studies to this date
requires that they leave parts of themselves at have focused on spirituality in relation to leader-
home. This, they believe, is detrimental to both ship and to its effect on workplace morale and
the employees – who cannot develop as much as efficiency. Leaders indeed play a significant role
they could – and the organization that fails to tap in setting the tone for the organizational and
CSR and Spirituality 683 C
ethical climate. Spirituality arguably enhances natural, not superficial but essential to the authen-
leaders’ ability to inspire and learn from experi- ticity of the person.
ence, their reactivity to change and needs, and However, the rationale for integrating spiritual-
their commitment to a long-term vision. In this ity into management should not be merely instru-
purview, research suggests that spiritual leaders mental, else it risks becoming another management
possess traits such as wisdom, honesty, commit- fad. Surprisingly, some of the harshest critics of the
ment to the greater good, as well as humility. burgeoning literature on spirituality in the work- C
Louis W. Fry (2005) has developed over the place are found among supporters of the phenome-
years a model of spiritual leadership which he non – wary of possible managerial hijacking – but
argues is necessary to sustain CSR. Fry’s model skeptics have also raised concerns. Issues can be
of spiritual leadership relies on the leader’s classified under three headings: the content of work-
vision, hope/faith, and altruistic love which in place spirituality, the added value of a spiritual
turn inspire a sense of calling and membership organization, and the legitimacy of a spirituality
among the followers, resulting in organizational tailored for the workplace.
commitment, effectiveness, as well as ethical and Given that spirituality is such a personal mat-
spiritual well-being for all organizational mem- ter, it seems a priori challenging to integrate
bers (Fry 2005). Fry insists that efforts must be spirituality in the workplace in a way that suits
made to foster congruence among organizational everybody. Not everyone feels the same needs for
and individual values, so that spiritual leadership spiritual development and expression; similarly,
can prove effective in instilling workplace spiri- not everyone will express his or her spirituality in
tuality and effective CSR. A lone spiritual indi- the same manner, especially when spirituality is
vidual can feel at loss if the values of the team or closely linked with religious practices. Another
of the organization fail to resonate with his or her objection follows: It is not the role of work orga-
own. Fry (2005) thus argues that the organization nizations to be responsible for their members’
as a whole must undergo a transformational pro- self-development. Developing structures to
cess which will be initiated or driven by the encourage spiritual expressions could be per-
spiritual leader. Through that process, employees ceived as the organization invading a very private
are empowered and the leader is free to concen- sphere of life, which poses serious moral prob-
trate on aligning organizational values with those lems. Inasmuch as organizations are social enti-
of key stakeholders with a view to achieving an ties, it is however natural to expect that they
even greater congruence between internal and contribute to society’s well-being. Allowing
external environment. employees to self-develop and achieve greater
levels of consciousness, happiness and goodness
Rationale for Spirituality at Work in all aspects of their lives, including their work-
Workplace spirituality follows radically different place, thus becomes part of an organization’s
assumptions from traditional management theo- social duty. By all means, organizations should
ries. The most oft-quoted benefits of a spiritual foster but not impose spirituality, which calls for
outlook at work include heightened intuition and a necessarily collaborative process between the
creativity, honesty and trust, personal fulfillment, many organizational actors.
and greater organizational commitment and per- Another issue concerns the value spirituality
formance. It is argued that efficient workers are adds to an organization. Studies that examine
integrated people: their body, mind, and spirit are how organizations benefit from more spiritually
interconnected, aligned in the pursuit of aware managers or employees often conclude
a fulfilling life task (Guillory 2001). In other that spirituality increases workers’ overall perfor-
words, when heart and mind are on the same mance, creativity, and productivity and sustains
track, they support the physical endeavor the organization’s bottom line. This line of argu-
required to achieve what the person is set to ment is controversial because it reduces spiritu-
achieve. The commitment is not forced but ality to a mere instrument toward financial
C 684 CSR and Spirituality
success. In that view, spirituality is valuable shortcomings of the predominant economic par-
because – and as long as – it generates substantial adigm. In their view, CSR aims “to mitigate the
and measurable benefits for the organization. If it negative consequences of economic theories of
ceases to be profitable, or if “being spiritual” no organizations” predominant in a neoliberal
longer provides a clear competitive advantage, framework; however, it is not sufficient to chal-
then the idea is abandoned. Spirituality risks shar- lenge the underlying assumptions derived from
ing the fate of CSR or sustainability – concepts self-interest and shareholder value maximization,
that some corporations embrace only to the extent which have led to serious economic, social, and
they serve the bottom line. Many contributors to environmental dysfunctions (Lips-Wiersma and
the field of workplace spirituality have unwit- Nilakant 2008). In other words, CSR remains
tingly supported this trend by consistently linking prisoner of a narrow view of enlightened self-
spirituality with organizational performance, interest in which ethics depends upon its eco-
productivity, and long-term profitability nomic returns. Spirituality, in contrast, seems to
(e.g., Giacalone and Jurkiewicz 2003). Fry offer a viable alternative to the neoliberal ideol-
(2005) himself stresses how spiritual leadership ogy. The authors propose a model of practical
improves not only organizational and personal compassion, which encapsulates the spiritual pur-
well-being but also productivity. Yet, advantages pose of self-development through transcending
attached to a greater spiritual awareness cancel ego-centeredness, with the ability to practice
themselves out if spirituality is not promoted for spiritual values in daily organizational life.
its own sake. Some corporate leaders’ fancy for They also replace CSR with holistic responsibil-
shared spiritual practices within their organiza- ity and explain that:
tion feel forced onto the employees or hide self-
Whilst commitment to goals that benefit humanity
serving maneuvers to increase productivity in the will lie at the foundation of organizations develop-
short-to-medium term. A spiritual organization ing on a spiritual basis, an organization that focuses
seems to offer many positive outcomes, such as on leaving a legacy without ensuring the mental,
emotional, and spiritual welfare of its own
employees’ well-being and commitment, or
employees does not live up to its spiritual purpose.
stakeholders’ trust and benevolence. Some of Similarly, an organization that only focuses on
these outcomes might have a positive effect on reflective spiritual practices, such as mindfulness,
organizational profitability, but this cannot be the but does not pay attention to the needs of the world,
does not fully live up to its spiritual purpose either.
only or primary motivation for endorsing spiri-
(Lips-Wiersma and Nilakant 2008)
tual values in the workplace.
Furthermore, critics have argued that it is Ten years earlier, William C. Frederick had
simply not possible to translate the benefits of attempted to bridge social responsibility with the
spirituality into business terms because the spir- newly emerging literature on spirituality through
itual purpose is then lost. Rather, they state that the integrative approach of CSR4. Building upon
spirituality calls for a change of paradigm, which his previous work on CSR – CSR1 as Corporate
means that we should not expect to assess success Social Responsibility, CSR2 as Corporate Social
in economic terms; instead, a successful com- Responsiveness, and CSR3 as Corporate Social
pany would holistically care for its stakeholders Rectitude – Frederick (1998) introduced a new
in a large sense and would exist for a higher framework where business is not the center but
purpose than making profits. This is probably just one part of the whole. CSR4 stands for “cos-
the greatest hurdle of the spirituality-at-work mos, science, and religion” and purports to shift
movement: can spirituality exist in a neoliberal, the traditionally business-centered worldview
materialistic, short-term oriented economy? toward a more realistic, holistic approach.
According to Frederick, the CSR research field
Spirituality and CSR cannot progress further if it remains attached to
Lips-Wiersma and Nilakant (2008) argue that the view that everything revolves around the cor-
workplace spirituality transcends the poration. Rather, practitioners and researchers
CSR and Spirituality 685 C
must see that the world encompasses many more awareness of the individual’s needs and abilities.
things and that corporations are just entities in In practical terms, spiritual awareness likely
a larger cosmos. Besides, knowledge grows improves the competencies of organizational
through interdisciplinary exchanges, and the actors; this is so not because spirituality is
business-society relationships are shaped not a miraculous cure but because a spiritual quest
only by management gurus but also by scientific enables the individual to connect with his or her
progress (for a better understanding of human inner self, thereby engaging with other people in C
society and the natural environment) and spiritual a more challenging and more enriching manner
schools of thoughts (for an increased well-being (Lozano and Ribera in Zsolnai 2004). What mat-
of individuals both inside and outside work). ters is what spirituality allows people to become,
Frederick (1998) argues that whether we like it and if developed in an open and honest way
or not, irrelevant of what each person believes, (which is what true spirituality is about), there is
the workplace is already pervaded by spiritual little risk that the whole society does not benefit
beliefs – including the belief in money or profit- from it.
ability as an end in itself. It seems therefore Figure 1 summarizes the links between spiri-
important to lift the veil and discuss more openly tuality and CSR. Individual consciousness of self
the scope and influence of spiritual beliefs inside contributes (and benefits from) spirituality at
and outside the workplace. work, which in turn informs (and evolves with)
Few other papers to date have directly a holistic approach to CSR. The traits of spiritual
addressed the links between spirituality and practice are influenced by the external environ-
CSR. Most research studies assume that applied ment and the characteristics of the organization
spirituality significantly improves the moral cli- itself. Spiritual awareness at work can either be
mate and moral behavior of organizational mem- welcomed and supported, or instrumentalized
bers and sometimes offer conclusions on how this and restricted. Besides, organizations holding
sustains social responsibility. Yet, the link high spiritual values and acting upon them can
between the two is not always valid. It is possible change the prevailing values in the economy and
that the pragmatic aspect of CSR conflicts with society. The model is dynamic, as is spiritual
the inspirational dimension of spirituality. Both practice.
concepts at times also pursue very different pur-
poses. Spirituality consists in an inner, personal
process of self-enquiry and development; CSR Key Issues
involves managing an organization in accordance
with the needs and rights of all stakeholders, Spirituality transcends the quarrels of religious
taking into account the long-term implications doctrines to offer a more open perspective to seek
of organizational activity on the social and natu- meaning in oneself, one’s life, and one’s work.
ral environment. Thus, spirituality is primarily Embracing a spiritual view requires a profound
inward looking and personal, while CSR is change in our understanding of the social and
outward-looking and organizational or economic world, a reformulation of the ontolog-
communitarian. ical and epistemological assumptions on which
It nonetheless appears possible to combine the we have based our worldview and built the insti-
inner benefits of spiritual development with the tutions that shape society. As such, spirituality
social goal of CSR captured as holistic responsi- redefines moral expectations by highlighting the
bility. As a key constituent of moral decision- interrelatedness of all living forms. A spiritual
making – hence of CSR – moral imagination organization faces many challenges, ranging
helps transcend the perceived reality shaped by from fostering a supportive organizational cul-
mental models to envision new solutions to ture and providing meaningful work, to adopting
dilemmas. In many ways, spirituality expands a holistic perspective on its responsibilities
moral imagination through the growing within the cosmological order. Most importantly,
C 686 CSR and Spirituality
Individual
Spirituality
Self-consciousness
organizations within the “spirituality paradigm” the values and assumptions of a spirituality-
demonstrate great humility, while spiritual based paradigm. Management practitioners are
leaders embrace their personal and organizational primarily concerned with the direct implications
responsibility with the utmost integrity. spirituality has on the raison d’eˆtre of their
The central concern when examining spiritu- organizations. They ask for clear answers on the
ality is usually the following: Does spirituality in viability and sustainability of a socioeconomic
the workplace really make a difference? We framework where profit and competition are
should not expect to answer this question in replaced by love and compassion. So far,
a demonstrative and quantitative manner because a handful of corporations or public organizations
it is neither possible nor sensible to measure have integrated spiritual concerns into the work-
spirituality and compare it with organizational place, and these need to be looked at more
efficiency. To truly add value, spirituality should closely.
not be restricted to being a new tool to improve Models mixing Eastern traditions with West-
workers’ productivity in the existing economic ern ways of life may emerge, but as the paradigm
system. Else, such corrupted spirituality only per- shifts the tensions may evolve as well. The field
petuates classical models of exploitation and of workplace spirituality is not alien to research
alienation. Rather, true spirituality enhances on religion, ethics, and business; future studies
moral imagination and human potential. It invites may draw upon these while establishing spiritu-
a quest for well-being, a sense of calling, virtu- ality as a concept clearly distinct from religion.
ousness, and exemplarity. A spiritual life is an More importantly, researchers and practitioners
integral life and a life of integrity. Yet, will have to drive and support the necessary
a paradigm shift is needed before such motto change of paradigm if they want authentic spiri-
can fully apply to organizations. tual workplaces that are holistically responsible.
This alone is a major challenge.
Calls for future research range from developing ▶ Buddhist Ethics and CSR
comprehensive models of spiritual management ▶ Christianity and CSR
or spiritual leadership, to providing accounts of ▶ Islamic Ethics and CSR
successful spiritual organizations, to redefining ▶ Virtue Ethics and CSR
CSR Butterfly Effect 687 C
References and Readings initial conditions in chaos theory; namely, that
small differences in the initial condition of
Ashar, H., & Lane-Maher, M. (2004). Success and spiri- a dynamical system may produce large variations
tuality in the new business paradigm. Journal of Man-
in the long-term behavior of the system. It is
agement Inquiry, 13(3), 249–260.
Dawes, J., Dolley, J., & Isaksen, I. (2005). The quest: a term that commonly interpreted to mean that
Exploring a sense of soul. Ropley: O-Books. small disturbances in the atmosphere may
Forman, R. (2004). Grassroots spirituality: What it is, why become amplified to give rise to large (or even C
it is there, where it is going. Exeter: Imprint Academic.
catastrophic) effects, as might be suggested by
Frederick, W. C. (1998). Moving to CSR4: What to pack
for the trip. Business & Society, 37(1), 40–59. chaos theory. The phrase “butterfly effect” was
Fry, L. W. (2005). Toward a theory of ethical and spiritual coined by Edward Lorenz, an American mathe-
well-being, and corporate social responsibility matician and meteorologist and a pioneer of
through spiritual leadership. In R. A. Giacalone,
chaos theory in 1972 in his paper, “Predictability:
C. L. Jurkiewicz, & C. Dunn (Eds.), Positive psychol-
ogy in business ethics and corporate responsibility Does the Flap of a Butterfly’s Wings in Brazil Set
(pp. 47–83). Greenwich: IAP. off a Tornado in Texas?”
Giacalone, R. A., & Jurkiewicz, C. L. (Eds.). (2003). In the field of corporate social responsibility
Handbook of workplace spirituality and organiza-
(CSR), the butterfly effect has become
tional performance. Armonk: M.E. Sharpe.
Guillory, W. A. (2001). The living organization: Spiritu- a metaphor for the seemingly insignificant events
ality in the workplace (2nd ed.). Salt Lake City: that can have large, widespread social and envi-
Innovations International. ronmental consequences. Growing
Lips-Wiersma, M., & Nilakant, V. (2008). Practical compas-
interdependence and interconnectedness have
sion: Toward a critical spiritual foundation for corporate
responsibility. In J. Biberman & L. Tischler (Eds.), Spir- amplified risks and opportunities for consumers,
ituality in business: Theory, practice, and future direc- employees, businesses, and governments, partic-
tions (pp. 51–72). New York: Palgrave Macmillan. ularly civil society organizations. As a result,
Mitroff, I. I., & Denton, E. A. (1999). A spiritual audit of
issues that were once peripheral or local now
corporate America: A hard look at spirituality, reli-
gion and values in the workplace. San Francisco: have global impact. CSR butterfly effect
Jossey-Bass. describes how a slight change in initial social
Zsolnai, L. (Ed.). (2004). Spirituality and ethics in man- and environmental conditions can lead to drasti-
agement. Dordrecht: Kluwer.
cally different outcomes in the worldwide. For
example, the flap of a butterfly’s wings in the
scandal of sweatshops in Nike in the middle of
1990s was responsible for the boycott and bad
CSR Butterfly Effect reputation all over the world.
The butterfly effect occurs under two condi-
Liangrong Zu tions: the system is nonlinear and each state of the
Enterprise, Microfinance and Local Development system is determined by the previous state. In
Program, International Training Centre of the other words, the output at each moment is repeat-
ILO, Turin, Italy edly entered back into the system for another
cycle through the mathematical functions that
determine the system.
Synonyms
popularized by Pierre Duhem’s 1906 book. The Lorenz in his book “The Essence of Chaos”
idea that one butterfly could have a far-reaching describes chaos as behavior that is deterministic,
ripple effect on subsequent events seems first to or is nearly so if it occurs in a tangible system that
have appeared in a 1952 short story by Ray Brad- possesses a slight amount of randomness, but does
bury about time travel, although Lorenz made not look deterministic. This means that the present
popular the term. In 1961, Lorenz was using state completely or almost completely determines
a numerical computer model to rerun a weather the future but does not appear to do so.
prediction, when, as a shortcut on a number in the How can deterministic behavior look random?
sequence, he entered the decimal. 506 instead of If truly identical states do occur on two or more
entering the full. 506127 the computer would occasions, it is unlikely that the identical states that
hold. The result was a completely different will necessarily follow will be perceived as being
weather scenario. Lorenz published his findings appreciably different. What can readily happen
in a 1963 paper for the New York Academy of instead is that almost, but not quite, identical states
Sciences noting that “One meteorologist occurring on two occasions will appear to be just
remarked that if the theory were correct, one alike, while the states that follow, which need not
flap of a seagull’s wings could change the course be even nearly alike, will be observably different.
of weather forever.” Later speeches and papers In fact, in some dynamical systems, it is normal for
by Lorenz used the more poetic butterfly. two almost identical states to be followed, after
According to Lorenz, upon failing to provide a sufficient time lapse, by two states bearing no
a title for a talk he was to present at the 139th more resemblance than two states chosen at ran-
meeting of the American Association for the dom from a long sequence. Systems in which this
Advancement of Science in 1972, Philip Merilees is the case are said to be sensitively dependent on
concocted “Does the flap of a butterfly’s wings in initial conditions. With a few more qualifications,
Brazil set off a tornado in Texas” as a title. to be considered presently, sensitive dependence
Chaos theory is the study of nonlinear dynam- can serve as an acceptable definition of chaos, and
ics, where seemingly random events are actually it is the one that we shall choose. “Initial condi-
predictable from simple deterministic equations. tions” need not be the ones that existed when
In a scientific context, the word chaos has a system was created. Often they are the conditions
a slightly different meaning than it does in its at the beginning of an experiment or
general usage as a state of confusion, lacking a computation, but they may also be the ones at
any order. Chaos, with reference to chaos theory, the beginning of any stretch of time that interests
refers to an apparent lack of order in a system that an investigator so that one person’s initial condi-
nevertheless obeys particular laws or rules; this tions may be another’s midstream or final condi-
understanding of chaos is synonymous with tions. Sensitive dependence implies more than
dynamical instability, a condition discovered by a mere increase in the difference between two
the physicist Henri Poincare in the early twenti- states as each evolves with time. For example,
eth century that refers to an inherent lack of there are deterministic systems in which an initial
predictability in some physical systems. The difference of one unit between two states will
two main components of chaos theory are the eventually increase to a 100 units, while an initial
ideas that systems – no matter how complex difference of a hundredth of a unit, or even
they may be – rely upon an underlying order a millionth of a unit, will eventually increase to
and that very simple or small systems and events a 100 units also, even though the latter increase
can cause very complex behaviors or events. This will inevitably consume more time. There are
latter idea is known as sensitive dependence on other deterministic systems in which an
initial conditions, a circumstance discovered by initial difference of one unit will increase to
Edward Lorenz (who is generally credited as the a 100 units, but an initial difference of
first experimenter in the area of chaos) in the a hundredth of a unit will increase only to one
early 1960s. unit. Systems of the former sort are regarded as
CSR Butterfly Effect 689 C
chaotic, while those of the latter sort are not con- market, the butterfly effect was certainly evident
sidered to constitute chaos, even though they share throughout the financial world during the autumn
some of its properties. Because chaos is determin- of 2007 and beyond, as the meltdown of
istic, or nearly so, games of chance should not be a relatively minor part of the US mortgage market
expected to provide us with simple examples, but brought global money and capital markets to their
games that appear to involve chance ought to be knees, while the demise of Lehman Brothers on
able to take their place. Among the devices that September 15, 2008, pushed the entire system to C
can produce chaos, the one that is nearest of kin to the edge of collapse; in biology, a small change in
the coin or the deck of cards may well be the a virus in monkeys in Africa creates
pinball machine. It should be an old-fashioned a “thunderstorm” of an effect on the human pop-
one, with no flippers or flashing lights, and with ulation around the world with the appearance of
nothing but simple pins to disturb the free roll of the AIDs virus, local livestock contaminations
the ball until it scores or becomes dead. (e.g., mad cow disease, avian flu) that threaten
Chaos surrounds us. Seemingly random stability of global health and global food supply
events – the flapping of a flag, a storm-driven chains; in evolution, small changes in the chem-
wave striking the shore, a pinball’s path – often istry of the early Earth gives rise to life; and in
appear to have no order, no rational pattern. psychology, thought patterns and consciousness
Explicating the theory of chaos and the conse- altered by small changes in brain chemistry or
quences of its principal findings that actual, pre- small changes in physical environmental stimuli.
cise rules may govern such apparently random The butterfly effect is also a common trope in
behavior has been a major part of the work of fiction when presenting scenarios involving time
Edward N. Lorenz. In The Essence of Chaos, travel and with “what if” scenarios where one
Lorenz presents to the general reader the features storyline diverges at the moment of a seemingly
of this “new science,” with its far-reaching impli- minor event resulting in two significantly differ-
cations for much of modern life, from weather ent outcomes.
prediction to philosophy, and he describes its In social and environmental science, the late
considerable impact on emerging scientific twentieth century has shown that any human and
fields. business activity can have very many consequences
The butterfly effect stated that a butterfly on society and natural environment – foreseen and
could flap its wings and set air molecules in unforeseen, intended and unintended, beneficial
motion that in turn would move other air mole- and catastrophic. The CSR butterfly effect has
cules – which would then move additional air been amplified by the increasing globalization,
molecules – eventually becoming able to influ- new technologies, and a rising tide of expectations
ence weather patterns on the other side of the among stakeholders about the social and environ-
planet. For years, this theory remained an inter- mental role of business over the past years. The
esting myth. In the mid-1990s, however, the but- evermore powerful stakeholders, particularly, civil
terfly effect was proved to be accurate, viable and society organizations, wield wide influence. For
worked every time. example, since 1990, more than 100,000 new citi-
zens’ groups have been established around the
The Butterfly Effect in Corporate Social world. The balance of power has shifted in favor
Responsibility of individuals and small single-issue groups
Lorenz’s early insights marked the beginning of increasingly armed with tools and tactics that can
a new field of study that impacted not just the easily be deployed through the Internet. Trust in
field of mathematics but virtually every branch of nongovernmental organizations (NGOs), citizens’
science – biological, physical, and social. For groups, and online information sources has risen as
example, in environment, CO2 emission of each inexorably as faith in business – Enron, WorldCom
car and greenhouse gas emission of each factory – has declined. In 1996, Nike found itself at the
lead to global climate change; in the financial center of a fury after a New York Times column
C 690 CSR Butterfly Effect
accused the company of profiting from “sweat- stakeholders’ perspectives on social issues
shops” of “wretched origin” to create its athletic becomes a competitive necessity, managing
apparel. Soon Nike was at the center of an interna- social risks will need to become more fully
tional controversy. International labor groups were embedded in corporate strategy.
united, and over 40 demonstrations occurred at Globalization entails a paradox: the more
Nike towns and universities across the United interdependent we become, the more we seem to
States. require order and yet foment change.
The companies as they go global have increas- Interdependence (through complexity) brings
ingly encountered social and environmental risk. greater efficiency and effectiveness – but with it
Globalization offers many opportunities to com- comes greater vulnerability. Corporations operat-
panies but also poses novel sources of uncertainty ing in the global economy are key players in
and risks. Multiple business indicators show that a dynamic system. The higher the number of inter-
the level of uncertainty for corporate leaders has actions, both implicit and explicit, that entities have
increased due in large part to with one another the more factors are introduced
– Large extended enterprises made up of inde- that influence the overall relationship. The dynamic
pendent organizations but with tremendous system effectively has more levers and pressure
pressures to grow and perform as a unit points than existed in the past, many of them crit-
– Rapid rates of change in technology, connec- ical to smooth operations and playing a role in the
tions, and information flows as a result of optimization of the whole. Those pressure points
globalization on business, most notably those pressures by civil
– Problems in managing scale using methods society and stakeholders more broadly, constitute
rooted in controlling all decisions across the social and environmental risk. From a company’s
entire extended enterprise perspective, social risk occurs when an empowered
The result of the greater interdependencies and stakeholder takes up a social issue area and applies
hidden vulnerabilities that businesses now face is pressure on a corporation (exploiting
an increased number of uncertainties in corporate a vulnerability in the earning drivers – e.g., reputa-
decision making. Current network-based operat- tion, corporate image) so that the company will
ing models highlight the growing importance of change policies or approaches in the marketplace.
the extended enterprise by establishing greater From a civil society perspective, a company
connectivity among and between stakeholders may well deserve criticism for its social practices.
across the globe. This connectivity has also cre- Think of Shell in Nigeria, Nike in Indonesia, oil
ated entirely new stakeholders and requires inno- spills such as the Exxon Valdez, upscale apparel
vative forms of risk management. retailers purchasing from sweatshop suppliers,
These changes in the operating model have led unsustainable forestry practices by the timber
to a significant shift in market power – not just to industry, or big pharmaceutical companies
customers and traditional investors but also, and going into South African courts to keep imported
more importantly, toward stakeholders: commu- generic AIDS treatment drugs out of that country,
nities, employees, regulators, politicians, sup- suffering one of the world’s highest HIV preva-
pliers, NGOs, and even the media. As a result of lence rates. Even where companies break no local
this shift in market power, “social risk” is a rising laws, they may stand in violation of their own
area of concern for global corporations. From self-proclaimed standards or be accused of
a company perspective, social risk, like any breaching international community norms.
other risk, arises when its own behavior or the
action of others in its operating environment cre-
ates vulnerabilities. In the case of social risk, Key Issues
stakeholders may identify those vulnerabilities
and apply pressure on the corporation for behav- Companies that operate in the new global envi-
ioral changes. As the ability to listen to corporate ronment need to devise systematic means for
CSR Butterfly Effect 691 C
dealing with the challenges it poses. One of these may raise concerns about outsourcing of jobs over-
challenges as “social risk” could be brought about seas. Suppliers may request coverage in
by the butterfly effect. Civil society organiza- a company’s health-care plan. While many of
tions, in particular, can campaign for changes in these feedback channels may be familiar to most
corporate behavior through protests, boycotts, large public companies, it is emergence of civil
trying to change purchasing patterns or increas- society scrutiny, and its resulting social risks, with
ingly partnering with companies to achieve joint which many companies are the least familiar and C
aims. The push and pull of these sectors consti- least equipped to manage.
tutes a butterfly effect, posing both new risks but Global companies face a new reality that has
also opportunities. changed the nature of risk and risk management:
A social risk may initially be “picked up” by networked operations and global value chains,
the CSR antennae; there is no guarantee that is empowered stakeholders, and the dynamic ten-
where it will remain. A host of “social risks” have sion among sectors. The emergence of the new
begun as issues that were primarily understood forms of social risk cannot be mitigated through
and addressed by CSR departments. However, as traditional means. The new environment requires
those social risks continued to gain attention with innovation by companies in both sensing and
civil society, public policy, and media outlets understanding these risks, and in adapting risk
over time, senior managers were also forced to management systems to include new tools and
pay attention, as core business operation became network-based models of information sharing.
impacted. The challenge faced by Nike as a result Corporate social responsibility programs are
of conditions in its global supply chain is an an effective means to provide strategic intelli-
example. The case of Nike illustrates more spe- gence for managing social risks. Risk manage-
cific dangers of not linking CSR and stakeholder ment by global companies should be adapted to
intelligence to core business processes, but also include corporate social responsibility programs.
how one company fixed this disconnect to create CSR provides the framework and principles for
a win-win outcome. stakeholder engagement, supplies a wealth of
Therefore, companies should link intelligence on emerging and current social
a comprehensive CSR program (stakeholder issues/groups to support the corporate risk
engagement) with core business processes (risk agenda, and ultimately serves as a countermea-
management) as part of its overall approach to sure for social risk. Granted, effectively integrat-
business performance. As Nike’s experience ing CSR into core business functions can be
shows, not linking CSR and related stakeholder difficult, as the experience of Nike illustrates.
intelligence to core business processes can leave
a company vulnerable, with no appropriate con-
trols or countermeasures. Cross-References
having hidden motives and hence of The findings resulting from Bhattacharya and his
practicing “greenwashing,” “blue-washing,” or colleagues’ research on how CSR communication
“windowdressing” by trying to stand out more is perceived by stakeholders are noteworthy. Some
glossy than they actually are (Morsing et al. of their findings seem to indicate that, in order to
2008). The reason for this skepticism evoked create favorable stakeholder attitudes, corporations
by consumers and other publics who are exposed must make efforts to meet different sets of conduct
to CSR messages is that corporations who may including (a) establishing a fit between the com-
earn legitimacy through disclosing their CSR pany and their CSR activities and (b) communicat-
policies and activities are expected to have ing stakeholder benefits rather than own benefits.
a long and clean CSR record. Since it is rather Supporting social causes that have nothing to do
exceptional that businesses can go through his- with the company’s own business (e.g., Johnson &
tory without having to some degree offended Johnson saving endangered species by sponsoring
some of their stakeholders or even being the World Wildlife Fund versus donating 10% on
engaged in a corporate scandal at some point in every purchase of baby shampoo to the World
time, one of the most important challenges is to Wildlife Fund) generate suspicion among con-
balance the transmission of good deeds with less sumers concerning the CSR motives of the com-
successful deeds. For companies who are not pany. In framing the communication about CSR
able to establish this balance, CSR communica- initiatives, focusing on the impact for the stake-
tion may result in lost credibility and reduced holders rather than on the deeds of the company is
legitimacy. As pointed out by the French CSR likely to enhance its CSR credibility. Turning the
researcher, Maud Tixier (2003), effective CSR perspective around by communicating explicitly
communication is about how to balance the what the specific functional, psychological benefits,
walking and the talking. Saying too much and more fundamental values of a CSR initiative
about CSR may indicate that organizations are to specific stakeholder groups may contribute to
promise more than they can live up to, while improve the understanding and perception of CSR
saying too little may indicate that they have communication. Making explicit the returns of an
something to hide. The question, however, is oral health initiative to stakeholders Bhattacharya
not only how organizations manage to create et al. (2008) established the following table
this balance. It is also crucial for them to find (Table 1).
out whether and who among their stakeholders The point of this content strategy is that a more
are interested in CSR communication and if so, articulated CSR communication that takes into
how this communication should be approached. account stakeholders’ interests and stakes in spe-
cific social issues that are closely linked to
CSR Communication Strategies a company’s business strategy and mission is
Communicating with stakeholders about CSR likely to result in increased CSR credibility and
represent challenges at different levels including, reputation for the company. Bhattacharya and his
which issues to communicate, with whom and colleagues take this a step further having data
how? Strategies concerning content, channels of demonstrating that explicit messaging of intrinsic
communication, and media have therefore to be (altruistic) motives of a company prove to be
established. problematic and cause skepticism unless it is
paired with extrinsic (business related) motives,
Content Strategies which again supports the balanced approach to
The stakeholder approach to CSR communication CSR communication. Moreover, CSR studies
has important implications for what issues corpora- and practices confirm that it has generally
tions should target to which stakeholders. Follow- become more acceptable in recent years to com-
ing Bhattacharya et al. (2008) and Du et al. (2010), municate CSR as a business case (e.g., Porter and
stakeholder awareness is a key prerequisite for Kramer 2006). The stakeholder approach to CSR
reaping CSR’s strategic benefits (Du et al. 9). communication is also a relevant framework of
CSR Communication 695 C
CSR Communication, Table 1 Returns to stakeholders resulting from an oral health initiative (Bhattacharya et al.
2008, 262)
Returns to Beneficiaries Consumers Investors Employees
stakeholders
Functional benefits Healthy teeth – Stock returns, lower Use professional skills to aid personal
risk causes
Psychosocial Social Altruism Financial success Work-life integration
benefits acceptance
C
Values Self-esteem Well-being Accomplishment Harmony
communication from a more explicit learning per- a Danish study. Journal of Marketing Communica-
spective. Based on processes of mutual understand- tions, 14(2), 97–111.
Nielsen, A. E., & Thomsen, C. (2007). What they say and
ing, a learning approach is unthinkable without how they say it. Corporate Communications: An Inter-
dialogue and two-way symmetrical communica- national Journal, 12(1), 25–40.
tion, which is best instantiated through social inter- Paine, L. S. (2003). Value shift. Why companies must
action through networking and dialoguing with merge social and financial imperatives to achieve
superior performance. New York: McGraw-Hill.
stakeholders. Social media may be a step forward Podnar, K. (2008). Communicating corporate social
toward enhancing this. However, organizations are responsibility. Journal of Marketing Communication,
still leaved in a limbo concerning how to use social 14(2), 75–81.
media to interact with their stakeholders and must Porter, M. E., & Kramer, M. R. (2006). Strategy and
society: The link between competitive advantage and
first learn how to manage these media and scruti- corporate social responsibility. Harvard Business
nize their potential before they can use this poten- Review, 84(12), 78–92.
tial as a way to enhance the value of CSR Schlegelmilch, B. B., & Pollach, I. (2005). The Perils and
communication. opportunities of communicating corporate ethics.
Journal of Marketing Management, 21, 267–290.
Tixier, M. (2003). Soft vs. hard approach in communicat-
ing on corporate social responsibility. Thunderbird
Cross-References International Business Review, 45(1), 71–91.
van Riel, C. B. M. (1995). Principles of corporate com-
munication. London: Prentice Hall.
▶ Communicating with Stakeholders Waddock, S. (2009). Making a difference: Corporate
▶ License to Operate responsibility as a social movement. Journal of Cor-
porate Citizenship, 33, 35–46.
[European Toolbox for a Competitive and Board of Directors: The Board of Directors,
Responsible Europe: http://www.csreurope.org/ elected every 2 years, determines the network’s
toolbox]. CSR Europe launched the European strategic direction and appoints an Executive
Toolbox for a Competitive and Responsible Director for the secretariat.
Europe based on the first results of the CSR President: The President provides advice
Laboratories [CSR Laboratories: http://www. in relation to the overall strategy of the
csreurope.org/pages/en/laboratories_quickguide. organization and its high-level representation.
html], cross-sectoral business-stakeholder The current president, Viscount Étienne
cooperation projects under the umbrella of Davignon [Viscount Etienne Davignon: http://
the European Alliance for CSR [European www.csreurope.org/pages/en/davignon.html],
Alliance for CSR: http://www.csreurope.org/alli- has been involved with CSR Europe since its
ance]. Together with its national partner organi- inception.
zations, CSR Europe organized a “Roadshow” of Secretariat: Based in Brussels, the secretariat
events to present the CSR tools to companies and is responsible for the day-to-day management
stakeholders across Europe. and implementation of the organization’s
2010: Enterprise 2020. In October 2010, CSR strategy.
Europe launched Enterprise 2020, a new strategic
initiative aimed at supporting companies in build-
ing sustainable competitiveness by providing Activities/Major Accomplishments/
a platform for exchange and innovation, fostering Contributions
close cooperation between companies and their
stakeholders by exploring new ways of working Expertise and information services: CSR
together toward a sustainable future, and strength- Europe offers tailored support and information
ening Europe’s global leadership on CSR by engag- services to provide members with practical tools
ing with EU institutions and other stakeholders. and updates on the latest European and interna-
tional CSR developments. CSR Europe’s website
also offers a wide range of publicly available
Mission/Objectives/Focus Areas resources, e.g., publications and a database of
CSR case examples.
CSR Europe is a platform for connecting Best practice exchange: CSR Europe’s
companies to share and further develop best secretariat connects member companies and
practice on CSR; innovating new projects national partners for the sharing and
between business and stakeholders; and shaping further development of CSR best practices
the business and political agenda on sustainability through events, working groups, and other
and competitiveness. activities.
Collaborative projects with stakeholders:
CSR Europe and its national partner organiza-
Structure of Governance tions connect member companies with
relevant stakeholders to seek innovative solutions
CSR Europe is a business-driven membership to socioeconomic challenges through joint
network with two types of members: corporate projects.
members representing a diverse array of indus- European stakeholder dialogue: CSR
tries, and national partner organizations aiming to Europe has since its inception played an
promote and facilitate CSR in different European important role in providing input to the
countries. European CSR policy debate and acting as
General Assembly: Every corporate member a platform for dialogue between companies,
and national partner organization has a represen- policy makers, and other stakeholders at the
tative in the General Assembly of the network. European level.
CSR Frameworks 701 C
Cross-References Carroll’s (1991) Pyramid of Responsibility
has often been used as a framework to understand
▶ Canadian Business for Corporate Social and apply CSR. It categorizes responsibility
Responsibility along four dimensions: economic, legal, ethical,
▶ Club of Rome and philanthropic. When this was first presented,
▶ Corporate Social Responsibility it was read as a progression from lower levels of
▶ Corporate Social Responsibility Strategy the pyramid to higher levels. Now it is seen as C
▶ EABIS (European Academy of Business in more holistic with each category interrelated.
Society) Other frameworks that are useful are the view
▶ WBCSD of CSR along a continuum from economic to
strategic (Thorne et al. 2011) where the former
could be regarded as minimal economic and legal
considerations focusing on contractual stake-
CSR Frameworks holders with the latter more strategic in that it
broadly integrates economic, legal, ethical, and
Suzanne Young philanthropic considerations focusing on all
La Trobe Business School, La Trobe University, stakeholders. Thorne et al. 2011, p. 14) state
Melbourne, VIC, Australia that firms that focus only on the expectations
required by laws and contracts demonstrate min-
imal responsibility or a compliance orientation
Synonyms and see these activities as a cost of doing busi-
ness. Whereas those taking a more strategic
Corporate social responsibility framework; Cor- approach integrate a range of expectations,
porate social responsibility model; Corporate desires, and constituencies into its strategic direc-
social responsibility structures; Social responsi- tion and planning processes.
bility framework; Social responsibility model; Other useful ways of viewing CSR is according
Social responsibility structures to three categories: social obligation, social
responsiveness, and social responsibility. The
first category is social obligation, which is meet-
Definition ing the requirements established by law. This
includes taxation, product safety, employee’
Corporate social responsibility frameworks refer working conditions, antipollution legislation, and
to models and conceptual structures that frame antidiscrimination legislation. The second is social
the corporate responsibility philosophy and responsiveness or the willingness of a firm to adapt
application in a business setting. to changing societal expectations such as the pro-
vision of childcare facilities, payment of extensive
maternity/paternity leave provisions, recycled
Introduction packaging, and environmentally sensitive produc-
tion processes. The emphasis is on meeting com-
This entry will not deal with definitions of cor- munity expectations, incorporating an awareness
porate social responsibility as these will be of changing societal conditions in business activ-
looked at elsewhere. What it attempts to do is ities, and reflecting demands for ethical qualities in
discuss different types of frameworks or concep- product attribute, e.g., “dolphin-friendly” tinned
tual structures that over the years have been use- fish products. The third is social responsibility,
ful in framing the philosophy of corporate social which refers to the pursuit of long-term goals
responsibility and its application in the business that are good for society and implies an ethical
environment. These may also be discussed else- basis for business decisions, i.e., judgments about
where in this encyclopedia. what is good and bad for society.
C 702 CSR Frameworks
Another useful model is Galbreath’s (2006) that may not reflect global or home country stan-
Strategic CSR framework where he categorizes dards. In linking morals and strategy, corpora-
CSR along four dimensions: tions may choose to invest in what Carroll
• Shareholder strategy – where the objective is (2004, p. 118) called philanthropy, which is
to maximize shareholder returns “more often than not strategic in nature,” based
• Altruistic strategy – which relates to philan- on the view that businesses are expected to play
thropic activities paid from firm surpluses. an active role in global corporate citizenship.
This refers to acts of goodwill with no expec- In this vein, Thorne et al. (2011) present
tation of receiving anything in return. another framework that is useful in thinking
• Reciprocal strategy – which can be called about managing CSR in home and host markets.
“enlightened self interest.” These are actions They present Gardberg and Fombum’s
to benefit society while producing economic (2006) matrix that categorizes citizenship expec-
benefit to the firm. tations in home and host markets:
• Citizenship strategy – integrates more fully • Minimalists are companies that adopt citizen-
the stakeholder perspective. It recognizes the ship profiles that are minimum at home and
firm’s responsibilities to external and internal abroad.
constituents and operates from a long-term • Expansionists that adopt citizenship profiles
focus. that are greater in their host market then their
Another oft-used framework is viewing CSR home market.
as a reactionary activity to a crisis or external • Activists adopt citizenship profiles that are
events as opposed to it being strategic or active both at home and abroad.
a business-level product differentiation strategy. • Reductionists adopt citizenship profiles that
As such, additional social attributes or features are lower in their host market than their
are added to a product which is valued by some home market.
consumers or other stakeholders. Other compa- As more research is conducted and articles
nies use socially responsible production pro- written, other frameworks come to the fore. All
cesses such as the use of organic raw materials are useful as a way of framing the discussion
or the prohibition of the use of child labor in around CSR philosophies and practices.
developing economies. In this case, CSR is seen
as a form of strategic investment (McWilliams
et al. 2006). Key Issues
As opposed to the business case, others argue
for CSR from a moral case of particular relevance There is a strong but axiomatic argument and
for multinational corporations operating in significant assumption that an organization’s
a global community whereby they are expected CSR strategy should balance meeting its stake-
to contribute financial and human resources and holder needs with a strong business case for
to “give back” so that quality of life is enhanced achieving them. There seems to be currently
and sustained (Carroll 2004). Stewardship theory a variety of CSR approaches to meet standards
(Davis et al. 1997) argues for the moral perspec- in reporting, disclosure, and measurement, with
tive of behavior based on “doing the right thing” companies at liberty to tailor their CSR strategy
no matter how it effects financial performance. to meet their unique stakeholder needs. And the
Idealized citizenship emphasizes voluntary self- lack of CSR at the governance/strategic level in
restraint and altruism concerning realization of many companies may mean that CSR is simply
universal human rights. Moreover, Carroll (2004, “greenwashing” and viewed as a marketing
p. 117) pointed to the link between ethical tool only. Adopting CSR as a business
responsibilities and cultural norms and discussed approach, rather than as a moral imperative, still
the problematic nature of moral relativism for entails integration from the executive level and
global companies as they adapt to local norms across business units, which is not always
CSR in Africa 703 C
evident. Adopting a CSR framework may be responsibility: Strategic implications. Journal of Man-
a useful way to make it clear to all within the agement Studies, 43(1), 1–18.
Thorne, D., Ferrell, O. C., & Ferrell, L. (2011). Business &
company and stakeholders what type of CSR is society: A strategic approach to social responsibility
being adopted. & ethics (4th ed.). Australia: Southwestern Cengage
Learning.
Future Directions C
recently, tended to award social responsibility have grown in prominence, helping the industrial
little or no consideration within their operations. sector rise to 41.5% of Africa’s GDP in 2006,
Today, CSR policies within national and global compared with 36.5% between 2000 and 2005.
firms are better focused in terms of investment The increase can be explained by rising global
and engagement, infrastructural development, prices and new discoveries of reserves. Hence,
job creation, environmental protection, and African countries have reported rapid rates in
knowledge and skills transfer. International stan- economic growth. Yet as Binns et al. (2012)
dards and aims are incorporated within corporate explain, in some countries such as Equatorial
performance frameworks. One prominent Guinea, the sudden rise does not extend to other
example is the United Nations Millennium Pro- sectors of the economy. Improvements in living
ject which provides the goals around which many standards have largely been restricted to political
CSR policies are seen to coalesce. Across and elites and those directly connected to the energy
within sectors and regions, there is considerable sector. In other locations, diamond mining is
variation in investment, commitment, and fundamental to national economies and is often
intentions. dominated by indigenous firms. Binns et al. refer
The most prominent corporate social respon- to Botswana’s high per capita GDP which they
sibility approaches in Africa are associated with largely attribute to the mining and export of high
the most prominent industries, namely, oil, gas, quality diamonds, with the South African com-
gold, diamond, and copper. With extraction often pany De Beers prominent. Unlike the highly
occurring in locations with limited national social mechanized Botswana mines, in Sierra Leone
welfare policies for health, education, infrastruc- diamond locations are dispersed which when
ture, and poverty, TNCs operating in Africa are allied to political turmoil and weak government
increasingly expected in step into the breach. controls, has meant that it is much more difficult
Hence in many parts of sub-Saharan Africa, to regulate. Consequently, looting and smuggling
there are high expectations and demands that has been prevalent with groups willing to use
TNCs will provide learning opportunities, health violence to secure and protect the minerals
facilities, housing, employment, business pro- which have been known as “blood” or “conflict”
grams, financial assistance, and sanitation. Con- diamonds. In order to reduce the interconnections
versely, TNCs are also associated with human between political instability, diamonds and vio-
right infringements whether committed by lence, certification schemes have been introduced
national governments, within corporate sites or to prevent trade. Lacking universal international
surrounding neighborhoods, environmental rigor the impact is varied and greater onus has
disasters, vast inequalities, corruption, and abject been placed upon companies to prohibit the
living conditions. By comparison, in societies export of “blood diamonds” within socially
with a state welfare framework, such as Libya responsible programs that extend beyond certifi-
under the control of Colonel Gaddafi, there are cation agreements.
often limited expectations, or indeed opportuni- The surge in energy related revenues, perva-
ties, for foreign driven CSR. It is therefore some- sive international boundaries, allied to electronic
what ironic that following the popular uprising empowerment and extensive NGO networks
and demand for political and social representa- have contributed to national mining companies
tion, there is a greater likelihood that TNCs will and oil and gas TNC actions and consequences
be expected to undertake a more extensive role being placed under closer scrutiny. Royal Dutch
within the turmoil and damaged social networks Shell involvement in Nigeria has probably
of post-Gaddafi Libya. attained most notoriety, notably over environ-
Across large swathes of Africa, industry con- mental devastation and implicit collusion over
tinues to be dominated by the extractive the arrest and execution of Ken Saro-Wiwa and
subsector and in particular, mining of minerals eight other Ogoni leaders. Such involvement is
and oil and natural gas production. Oil and gas a prime example of the long-lasting damage of
CSR in Africa 705 C
social and environmental impacts to corporate Niger, and Rwanda, the figures of the working
brands. In the case of Shell, this has meant that population who are engaged in agriculture can
the company’s close relationship with the Nige- exceed 80% (Binns et al. 2012). By comparison,
rian government led to political and commercial in neighboring Nigeria, the figure is under 5%. In
boundaries being blurred. The diminution of dis- part this is because of developed industrial and
tinctions contributed to perceptions of responsi- service sectors. However, the figure is also indic-
bilities and consequences being shared and ative of Nigeria’s descent into rentier state status C
violent attacks have been committed against and the overreliance on the capital intensive
Shell partly because the acts are considered to energy industry.
also be attacks against the government. More- Small family farms still proliferate, especially
over, the proximity of Shell to local communities in sub-Saharan Africa with many literally at the
in oil producing regions where government frontline of the debate over the impact of global
controls are weak and national welfare provision warming and the pervasive spread of arid land.
is absent, has resulted in the TNC being held Increasingly larger operations are growing in
accountable for problems and demands. Con- prominence with greater emphasis on productiv-
versely as Frynas (2009) observes, and while ity and imported techniques, technology, and
acknowledging his own criticism, Shell (and chemicals. Larger farms tend to employ paid
BP) is widely recognized as being global leaders workers, and not family members, and encounter
in corporate citizenship. For Shell, numerous different worker related issues. Moreover unlike
self-inflicted PR disasters during the 1990s, smaller farms which tend to concentrate on
including the death of Saro-Wiwa, led to exten- meeting familial and local community needs,
sive reforms and a more engaged and participa- larger farms are growing crops for national con-
tory CSR approach. The spectrum of opinion is sumption and international market. The rising
probably indicative of the differing impacts of involvement of Northern hemisphere supermar-
CSR policies in Africa more generally. In short kets and retailers in the region is indicative of
some people benefit, many people do not. changing patterns of food and drink production
International civil inspection also crosses over and distribution. Northern companies have
into trade and legalities. Numerous campaigns introduced codes of social accountability, most
have been instigated which aim to “encourage” notably over labor practices within their global
northern hemisphere pharmaceuticals TNCs to be production networks and to some extent across
more accommodating when dealing with coun- supply chain management. Yet impacts for
tries and peoples facing tremendous challenges workers have been limited and conditions have
and limited financial resources. Against not improved for the largely casual, migrant
a backdrop of high levels of HIV/AIDS and workforce. The extent to which reform is
malaria in Africa, drug companies have been required was emphasized in 2001 when interna-
strongly encouraged to become more socially tional chocolate manufacturers were reported as
responsible by allowing the manufacturing and being unable to guarantee that child slaves had
importation of affordable versions of their pat- not been involved in the production of the TNCs
ented drugs. cocoa (McEwen 2009). Nevertheless there were
Although arguably of lower international signs of progress through the introduction of
profile, agriculture is another important sector multi-stakeholder initiatives that are directed at
within Africa. Significance varies, with contribu- addressing issues of labor abuse among super-
tions varying between northern Africa and market suppliers. Parallel to these shifts have
sub-Saharan Africa. For instance, agriculture been the emergence of fair trade agreements
contributes to between 2% and 13% GDP in which aim to ensure that smaller farmers in
Libya and Egypt and over 50% in places like parts of the world like Africa receive a fair price
Central African Republic, Liberia, and Somalia. for crops and merchandise, principally by cutting
In countries such as Angola, Burundi, Ethiopia, out exploitative sectors within the supply chain.
C 706 CSR in Africa
Typically, such products are more expensive than subjected to agreements and pressure groups
equivalent items and there are concerns outlined which demand greater consideration on eco-
by Harford (2006) that much of the additional nomic, environmental, and social impacts and
cost is not paid to the producer but becomes profit how these can be addressed through sustainable
to retailers. Consequently, what may well be development and local empowerment.
socially responsible behavior, as suppliers Wider afield, the emergence of the BRIC
receive a fairer share, is also an opportunity for (Brazil, Russia, India, and China) countries is
new forms of income generation for northern notable with all four countries seeking to gain
hemisphere retailers. Ultimately, the onus is African raw materials and markets. Although
placed onto the consumer to balance ethics and lacking the strong (post) colonial ties of Northern
cost; the extent to which they would be willing to hemisphere countries such as UK, France, and
pay more if they knew of the extent to which Portugal, China has been able to build upon
TNCs were benefitting is debatable. long-standing diplomatic links, a history of
Shifts in globalization, production, and con- anticolonial support, and the provision of aid,
sumption patterns are also reproduced within technical support, and infrastructural develop-
Africa. The postapartheid emergence of South ment. The Tanzania-Zambia railway is probably
Africa to become arguably the dominant nation the best example of earlier Chinese support
in the continent is reflected by high levels of (Williams et al. 2009). Today, unlike interna-
service sector employment and industrial produc- tional institutions such as United Nations and
tion. South Africa’s large reserves of gold, plati- World Bank, Chinese loans and infrastructural
num, and palladium account for approximately projects are not tied to demands for changes to
one third of total activity in sub-Saharan Africa. national politics nor economic liberalization.
In addition, the country has established a network Sen’s (1999) criticism of the IMF’s emphasis on
of trade missions across Africa and has consider- market relations rather than improving social
ably increased trade across the Southern African opportunities for millions of people is indicative
Development Community (SADC). Binns et al. of a wider body of literature regarding interna-
(2012) report that trade with countries in SADC tional institutions. By comparison, China has
now constitutes 16% of South Africa’s total. been willing to invest in countries such as
Within the range of companies, Binns et al. Sudan, whose human rights violations deterred
(2012) draw upon three very different examples Western commitment. Although Chinese corpo-
which are indicative of the scope of the country’s rations rarely have a fully fledged CSR approach,
expansion: mining operations; beer and soft drink there are components that would be claimed as
production; and hotels. As such, considerable such by Northern TNCs. For instance, profes-
attention is being placed upon South African sional training is provided, malaria prevention
companies at a business level by those eager to programs introduced, trade and economic coop-
apply similar approaches within neighboring eration zones are set up and travel and communi-
nation-states and at a social level as corporate cation networks have been improved in places
impacts are analyzed. For example, the 72% such as Angola, Democratic Republic of the
decline between 1987 and 2006 in gold mining Congo, Ghana, and Nigeria. A cynic could
employment severely affected the gold producing argue that this is to the benefit of Chinese com-
regions. Partnerships between public and private panies operating, or wanting to do so, in the
sectors, ostensibly led by local authorities, regions. Nevertheless communities also benefit.
resulted in numerous initiatives that successfully Inevitably this is at a cost to the host countries.
attracted new investors, industries, and activities Although the economic and political costs of
to the affected regions (Binns et al. 2012). Within loans may be lower than international institu-
other African nation-states, national companies’ tions, the money must often be used for contracts
actions, most notably within the mining sector, with Chinese companies who overwhelmingly
are also being increasingly scrutinized and employ Chinese workers. Moreover, the new
CSR in Africa 707 C
arrangements provide import avenues in sectors 51 (or 96% of) African countries were either
such as textiles which can decimate local industry incorporated within the remaining 27% of the
and manufacturing. literature or ignored altogether. Since 2005,
Against the rise of new forms of competition there is evidence that the range of studies is
for African markets and supplies are many TNCs expanding as more minerals are discovered in
and South African companies with roots in colo- African countries, the profile of CSR and percep-
nialism and apartheid. Understandably, compa- tions of the roles of national and TNCs shifts. C
nies do not highlight these links. Yet there are In light of the growing amount of interest and
concerns that TNCs inadvertently, or otherwise, investment in CSR in Africa, the extent of sub-
repeat approaches which are associated with stantive evaluation is at first glance surprising
colonialism and apartheid. With historical mem- sparse. However, this observation needs to be
ories still embodied within social relationships, located within the general evaluative issue across
TNC actions are frequently viewed through the CSR, namely, measuring the success or otherwise
lens of history, often resulting in a critical posi- of policies is typically difficult. Local companies
tioning of CSR policies along a trajectory from and TNCs refer to measures such as amount
colonialism. Consequently, policies of resource invested, number of new buildings, health facili-
allocation to some communities along the oil ties, schooling opportunities, business startup
production and distribution networks can exacer- programs, and environmental controls. In other
bate local tensions and become locations of words, TNCs tend to report upon easily measured
anger, resentment and even conflict. To this outputs. That the measures are frequently accom-
extent, parallels can be drawn with the colonial panied by photo opportunities does little to over-
divide and conquer approach (Vertigans 2012). come the widely held perception that many CSR
Problems of perception are compounded with the approaches tend to be a public relations exercise.
restricted incorporation of southern hemisphere Such an impression is compounded by the lack of
perspectives and influences. In this regard, CSR broader and longer term social impacts and veri-
approaches can be located within wider develop- fiable quantification. Of course, this is not unique
ment philosophy. There was a noticeable to Africa. What is different is that the (lack of)
post-1945 shift from the notion of trusteeship of consequences may be more severe than ill-
“childlike peoples” who required supervision and considered approaches within the Northern hemi-
guidance to welfare and advancement to “part- sphere where TNCs continue to operate around
nership.” Yet subsequent “partnership” strategies the fringes of societies, although there are signs
continue to be the responsibility of northern this is changing as northern hemisphere national
trustees and it is the north where the solutions governments social welfare programs continue to
are to be found for southern problems. Similar contract.
imbalanced relationships and diagnosis permeate Alongside promoted “success,” if often
through CSR thinking. For instance, as Frynas unsubstantiated, stories, numerous problems are
(2009) notes, there continues to be a tendency also associated with CSR approaches. One of the
within Northern CSR approaches to impose main reported problems across the extraction
notions upon African societies which neglect industries is the lack of engagement with affected
localized norms and values. communities or targeting of particular leaders
Despite the rising profile of African and compliant individuals by indigenous and
economies, research into CSR, national and inter- international companies. Moreover existing com-
national companies’ related activities remains munity support mechanisms are frequently
limited. Visser’s (2006) study of CSR literature ignored, with little or no attempt made to incor-
discovered that only 12 out of the continent’s 53 porate established processes or to learn from
countries had any research published in core CSR them. In this regard, TNC CSR approaches are
journals. Moreover 57% of articles featured on now intertwined, often unintentionally, with
South Africa and 16% focused on Nigeria. Hence international development and poverty reduction.
C 708 CSR in Africa
Hence, and building upon the preceding section, diagnosis. Nevertheless, even allowing for these
it can be argued that CSR approaches are often reservations, corruption remains embedded
typical to mainstream development thinking within many mineral, oil, and gas producing
which McEwen (2009) and Williams et al. regions. Unless addressed, potential benefits
(2009) argue is based upon negative thinking from revenues received through extractive indus-
about local communities and reluctance to tries will not be realized. Instead political and
acknowledge the value of local cultures and sys- economic elites will continue to prosper in the
tems which are frequently viewed as barriers to short term (McFerson 2009). That corruption
corporate initiatives. The “top-down” approach is continues despite widespread condemnation is
therefore doomed to failure unless communities indicative of how symptomatic the problem is
are engaged. Conversely “bottom-up” strategies of wider systemic problems that often stem from
are usually short lived with limited impact. This the bureaucratic boundaries and opposing loyal-
is usually because NGOs are dominated by north- ties which were constructed during colonialism
ern hemisphere discourse. And even allowing for and reinforced post independence. For instance,
greater southern hemisphere influence, outcomes the practice has largely continued because it is
are severely constrained as many of the issues part of a suite of mutually supporting policies
facing communities stem from both local and which includes considerable constraints on polit-
national social, political, and economic ical and civil participation and economic activi-
processes. Hence building a school for ties, particularly in spheres dominated by elites.
a community will only be successful if resources Moreover, as McFerson (2009) points out when
are available over the long term for staff and using the example of Nigeria where active plu-
teaching materials and education leads to ralism is accompanied by restrictions, freedom of
employment. Instead TNC commitment tends expression and civic participation are not suffi-
to be short term, with responsibility shifted to cient in themselves to produce proportionate
“empowered communities” thereby raising seri- political representativeness and protection of
ous questions about sustainability. Moreover the individual rights. This dilemma raises awkward
prospect of numerous, long-term jobs is beyond questions about the likelihood that CSR
the scope of the community and to some extent approaches can be successful in locations lacking
TNCs. Employment prospects in these locations civil participation. Conversely, and a more diffi-
are like elsewhere, influenced by global and cult question, relates to whether TNCs should be
national structures of markets and power. working with unrepresentative governments to
implement CSR policies. At one level the
intended socially beneficial outcomes for some,
Key Issues if not many, is desirable. However, in a point
which echoes some of the debates over the allo-
In the twenty-first century, there is still cation of international aid, to what extent are
widespread poverty, high levels of childhood those outcomes acceptable if they contribute to
mortality and low life expectancy across large prolonging repressive, unjust regimes.
parts of Africa. Hence there is considerable Across the northern hemisphere there are
scope for CSR policies to make fundamental growing concerns about the rise of BRIC coun-
improvements to many peoples. However, there tries and in particular the influence of China in
are a number of key issues which currently Africa. Such perceptions fail to acknowledge that
restrict the extent of improvements. considerable concerns remain about northern
One of the most notorious problems which hemisphere TNC engagement and attempts to
CSR in Africa has become associated with is apply moral boundaries are seriously undermined
corruption. To some extent, some of the commen- by the history of Western involvement in Africa.
tary draws upon racial stereotypes and lazy Moreover, the prominence of BRIC countries and
CSR in Africa 709 C
threat to Northern interests has created competi- national companies, international commerce,
tion for resources and markets and the profile of indigenous civilian life, and concomitant conse-
CSR, or versions thereof, within competitive quences. Despite this power continues to be held
packages is growing in prominence. To some disproportionately by the TNCs. The emergence
extent this could be an opportunity for greater of BRIC nations and growing reliance on scarce
distribution of resources, provisions, and services resources which are found in Africa such as
within Africa. minerals, oil, and gas should change this C
Such opportunities, however, should be dynamic. Competition over African resources
viewed with considerable caution. Following on and markets enhances the bargaining power of
from the preceding sections, there are multiple indigenous peoples. Hence, African governments
socially responsible issues in Africa which indig- will be provided with numerous opportunities to
enous companies and TNCs have to consider. gain the extended commitment of TNCs in part-
Alongside this emphasis has to be placed upon nerships within a CSR framework. The extent to
the reality that these TNCs are commercial which politicians will be willing to utilize the
organizations that are not necessarily best placed increasingly favorable conditions to negotiate
to formulate and implement solutions. Consider- on behalf of their populations, and not subsets
ation of the scale of the issues such as illiteracy, therein, will be heavily dependent upon societal
epidemics, abject poverty, famine, corruption, levels of political participation, transparency, and
political turmoil, massive inequalities, and civilian representation which were discussed in
repressive regimes highlights the magnitude, the key issues section.
multiplicity, and interwoven complexity of the Alongside pessimistic projections, sight
problems. In other words, even if companies should not be lost of national firms and TNCs
wanted to address these issues, the stark reality current considerable investments in Africa
is that they are not capable of doing so. Moreover, which, when added to taxation contributions,
for companies to become involved to this extent suggests that there should be an array of favorable
would fundamentally threaten the sovereignty of outcomes. Certainly, there have been successful
the particular nation-state, its credibility and ulti- community projects and income has been
mately its legitimacy. Hence, these issues will invested productively by national governments.
only be overcome with CSR involvement if In sum though, there is an overwhelming argu-
indigenous firms and TNCs are part of sustain- ment that local firms and TNCs CSR approaches
able, representative, multiagency, and disciplin- need to be more strategic, considered and consul-
ary partnerships (Vertigans 2012). tative in order to gain better outcomes from their
expenditure. Much can be learnt from the mis-
takes of international approaches to develop-
Future Directions ment. The “top-down” and “bottom-up”
approaches need to be integrated. Instead of
Shifts in patterns of global trade, communica- implementing initiatives from above, or working
tions, deregulation, privatization, and transporta- in isolation with communities, the so-called third
tion have provided industrial, manufacturing, generation approach works in partnership with
agricultural, and service sector opportunities. government, indigenous nongovernment, and
Across Africa, economies are being transformed community-based organizations while using
to utilize these possibilities. That new forms of international connections in order to advocate
income generation are not being fairly shared is and engage with national and global policy
indicative of the power imbalance between debates (Williams et al. 2009).
TNCs, African governments, and local commu- And by engaging with stakeholders, CSR can be
nities. Arguably CSR is being introduced in part adapted to local needs and demands. In short, it has
to blur the stark boundaries between powerful to be context specific. Amaeshi et al. (2006, p. 9)
C 710 CSR in Italy
There are a number of initiatives in Italy that responsibility, research, training, dissemina-
recognize CSR, including the Sodalitas Social tion, and comparison with particular attention
Award and the Great Place to Work award. to the needs of its economy mainly consisting
Financial ethics is experiencing particular devel- of small and medium enterprises.
opment, with the Italian Bankers Association – University Bocconi Research Unit, that
(ABI) preparing reports on CSR issues relating is, organized in several groups: CSR and
to the banking sector, and rating companies with Sustainability; Environmental Management
reference to CSR and socially responsible and Climate Change; Social Enterprise and
investing. Philanthropy Management; Business Ethics;
Nowadays, there is a research group that Business and Asset Protection.
works on this theme, and there is also a forum at – ALTIS, Alta Scuola Impresa e Società,
the website www.bilanciosociale.it in which the Università Cattolica del Sacro Cuore, whose
Social Balance is defined as follows: “it is a great activity is not only dedicated to CSR, but
tool, that represents the certification off an ethical oriented to a general Social Responsibility.
point of view, the element that legitimizes the There are different divisions: Corporate Social
role of a subject, not only moral but also in Responsibility; Corporate governance; Inter-
structural terms, in the eyes of the community nationalization of businesses, with particular
of reference, a moment to emphasize their link attention to the contribution development
with the territory, an opportunity to affirm the of the poorest countries; Dissemination of
concept of enterprise as a good citizen, a subject international experience of industrial districts;
that is pursuing its own economic interests to help Private Partnership/Nonprofit/Public; Man-
improve the quality of life of members of the agement of Nonprofit Enterprise.
society in which it is inserted. The company’s – CreaRes, Centro di Ricerche su Etica negli
mission and its sharing are important elements Affari e Responsabilità Sociale (Università
to obtain the consent of customers, staff, public dell’Insubria, Facoltà di Economia in Varese),
opinion.” whose main aim is to create the conditions for
The Italian Public Administration got the construction of networks and research pro-
involved in these issues in conjunction with grams for the intensification of training activ-
some circumstances, as for instance the need to ities, and development of application projects,
contain the public debt, some major scandals in international and national perspectives.
involving the public sector, causing the lack of – EconomEtica, Centro interuniversitario per
credibility of these institutions, as well as the l’Etica Economica e la Responsabilità Sociale
introduction of partnership between public and d’Impresa, whose main aims are developing
private sectors (Romolini 2007; Hinna 2004). academic research on Economic Ethics and
The delayed interest of Italian Public Admin- CSR; promoting the contribution of Italian
istration toward the social responsibility theme universities to be active in the international
may have two main causes: the lack of norms on scientific community on these issues;
this subject, the Italian Public Administration, in creating a forum to promote public dialogue
fact, faces the culture of “obligation”; therefore, between universities, companies, and their
only what is provided for by law is going to be stakeholders, the set of associations and
performed; the reticence for new elements and professions concerned, and the public
the lack of a consolidated managerial culture. institutions to encourage reflection and
It is interesting to see what research centers discussion on principles and organizational
were set up in Italy to the study of Corporate models of CSR.
Social Responsibility (Bottani G., ICSR): – Politeia, Centro per la Ricerca e la
– ICSR, the Italian Centre for Social Responsi- Formazione in Politica ed Etica, that makes
bility is a foundation whose mission is to research on SR issues, organizes seminars, and
increase the attention in promoting social masters programs.
CSR in Italy 713 C
Within the Italian public administration, the sustainability in different areas. One of these is
importance of the relationship between economy the provision of tools to support sustainable
and environment, two of the three areas of development, such as updating the National
sustainable development, becomes increasingly Plan for Sustainable Development in Implemen-
evident and with it the need to analyze and mea- tation of Agenda 21. An important step for Italy
sure their size. The awareness of this fact has, toward the introduction of Environmental
among other things, led to the development of Accounting as a tool for sustainable development C
several new instruments of governance. Among in 1998 is the presentation of the draft framework
these, the environmental budget is certainly one law on the Environmental accounting of the
of the newer forms of experience in public State, Regional, and Local Authorities.
administration (ISPRA 2009). The need for legal regulation governing envi-
Environment carries out certain functions ronmental accounting is closely linked to objec-
essential for the economy and in general for the tives that have prompted some MPs to take an
sustenance of man as it supplies the natural active interest in environmental issues. One of the
resources, and receives and transforms the waste above objectives, such as the attempt to bring out
of human activity ensuring the survival of man- those costs referred as “hidden” which are gener-
kind. Awareness that natural resources are not ated by the unconditional use of renewable and
infinite led to a kind of turnaround that has led un-renewable natural resources, and undisputed
to some rules that are necessary to ensure not only cause of damage to the environment and health.
present life forms but also future ones: “Preserv- This then binds to the need to allow administra-
ing environment meets the needs of the present tors to have full cognizance of the performances
without compromising the ability of future gen- staged in line with government policies in
erations to meet their own needs” (according to the area.
the WCED). Other important institutions are as follows:
Historically a first definition of sustainable – ISTAT (the national institute for official sta-
development appeared during the Conference of tistics), as the center of scientific and technical
the United Nations held in Stockholm in 1972. coordination and preparation of environmen-
From that date, a series of meetings gave light to tal accounts
the theme of “environment.” Internationally the – APAT (now called ISPRA, the national
first impulse to a “green accounting” came out of institute for environmental protection and
the conference held in Rio in 1992 in which research), as the institute in charge of prepa-
was defined the Agenda 21 (work summarizing ration, organization, and validation of envi-
strategies and actions to promote sustainable ronmental information produced and
development). Until the 1980s, Italy has only acquired by ARPA
resorted to the application of European Direc- – ENEA (the national agency for the new tech-
tives, and only in recent years, it is possible to nologies, the energy, and the sustainable
speak about an Italian Environmental Policy. development), as the institute responsible
Italy started the implementation of Agenda 21, for the validation of instruments for
and approved the National Plan for sustainable measurements
development with the decision of the CIPE In the annex to the law, there are listed the
(Interministerial Committee for Economic statistical tools suitable for processing the
Planning) of 28 December 1993. Moreover, accounting requirements:
with the environmental protection program – NAMEA (National Accounting Matrix
excerpt (PSTA) we have a first significant appli- Including Environmental Accounts), an
cation of new environmental policies to address array of integrated economic accounts
sustainability. with environmental indicators to describe
PSTA provides funding for six projects the interaction between economy and
designed to achieve the Strategic Objective of environment
C 714 CSR in Italy
– SERIEE (Système Européen pour le the ways for improving the future
Rassemblement des Informations management.
Economiques sur l’Environnement), a system – Federcasse model: It was designed by the
of satellite accounts identifying expenditure Federation of Cooperative Credit Banks
on the protection of the environment, govern- (Federazione delle Banche Cooperative di
ment, businesses, and families Credito, Ferdercasse) that set its own standard
– A system of sectoral indicators of an environ- in 2002 following Abi’s standard. A different
mental pressure system that measures the ratio reporting document was proposed: the mission
between natural and social systems in order to balance that emphasizes on the mutualistic
define the impact of economic activities on character of these particular banks.
environmental resources – Csr-Sc of Italian Ministry of Welfare: It was
proposed by Italian Ministry of Welfare for
the elaboration of a standard coherent with
Key Issues the EU’s position on CSR. The conceived
document presents a set of indicators about
If we take a look at the practical level of CSR in the social performances.
Italy, it is interesting to see how institutions made – Gbs model: It was elaborated by the Social
several and various reporting models. As well Balance Study Group (Gruppo di studio sul
analyzed by Hinna (2005), it is possible to high- Bilancio Sociale). This model presents three
light different models of approaching to CSR: main parts of the social balance: Identity,
those that focus the attention on the entire pro- which highlights the mission, the ethic values,
cess; and the others that suggest a particular and the strategic plan of the entity; Added
attention only on the final part of the process, value, which represents the production and
that is, the document. distribution of the added value to the different
Concerning the latter group, it focuses on prin- stakeholders; Social report, which analyzes
ciples definition and on the phases necessary for the relationship between the entity and its
drawing up the final report. Thus, following these stakeholders.
models the social responsibility consists only on – Sers-Sustainability Evaluation and Reporting
how good the final reports are. Hinna (2005) then System model: It was elaborated by the
shows five different models that belong to this European Centre Space of Bocconi University
approach: in Milan. Its aim is to make an efficient
– Abi/Ibis model: It was conceived by the Italian and integrated system for the performance
Association of Banks (Associazione Bancaria measurement. Its three main parts are Sustain-
Italiana, Abi) in 2001, in order to meet the ability balance; Integrated information sys-
need of its member banks toward a social tem; and Key performance indicators.
reporting. The basic idea was that a homoge- Concerning, instead, the models that focus on
neous social balance could improve transpar- the process, they look at the reporting as the final
ency and reliability of the provided data and part of a broader process. Always Hinna (2005),
therefore, the banks’ credibility. The first ABI among European ones, illustrates four Italian
model was based upon the following parts: models of this kind:
Introduction, a description of the characteris- – Seam model: In 2001, a process called
tics of the bank; Report, a process highlighting Progress was developed, by the consortium
the value-added composition and distribution; Sean. It defined a way for encouraging change
Social relation, an analysis of the relationship inside and outside the entity through an
between the bank and its context; Accounting improving process toward a responsible and
system, a way for monitoring the different social management.
stakeholders’ expectations; Suggestions for – SocialMetrica model: It was dedicated mainly
improvement, a concluding part that states on the development of metrics for measuring
CSR in the Banking Industry 715 C
social impact in the nonprofit sector and in the References and Readings
public administrations.
– Comunità&Impresa model: It is based on an Commission of the European Communities. (2001).
Green Paper - Promoting a European framework for
innovative social balance that is articulated in
Corporate Social Responsibility, Brussels, 18.7.2001
five sections: the first one highlights the base Crane, A., et al. (2009). The Oxford handbook of corporate
values and describes the socioeconomic con- social responsibility. Oxford: Oxford University Press.
text; the second one calculates the distribution Crowther, D., & Caliyurt, K. T. (2008). Globalization C
and social responsibility. Newcastle upon Tyne:
of added value; the third identifies the main
Cambridge Scholars Publishing.
stakeholders; the fourth concerns the social Freeman, R. E. (1984). Strategic Management: A stake-
budget; and the last one shows a comparison holder Approach. Boston, MA: Pitman.
with the other organizations about the social Hinna, L. (2004). Il bilancio sociale. Scenari, settori
e valenze. Modelli di rendicontazione sociale. Gestione
quality.
responsabile e sviluppo sostenibile. Esperienze europee
– Cantieri Pa model: It is based on a double e casi italiani. Milano: Il Sole 24 Ore.
perspective of empirical analysis and a Hinna, L. (2005). Come gestire la responsabilità sociale
theoretical and methodological comparison. dell’impresa. Manuale pratico-operativo. Processi,
strumenti e modelli. La redazione del bilancio sociale.
A handbook was elaborated to serve as a
Milano: Il Sole 24 Ore.
guideline. ISPRA (Istituto Superiore per la protezione e la ricerca
ambientale). (2009). Il Bilancio Ambientale negli Enti
Locali. Linee guida, Versione per la sperimentazione.
Palumbo, P. (1934). Ragioneria Commerciale, Palermo:
Future Directions Ciuni.
Panciera, E. (1939). Riflessi corporativi nell’economia
Italian CSR now faces a twofold challenge. On aziendale, Palermo: Palumbo.
the one hand, it has to second a broader definition Rappa, G. (2005). Fasi storiche della teoria italiana sul
bilancio sociale, in SISR (Ed.), Riferimenti storici e
of CSR through the retrieval of the positive tra-
processi evolutivi nell’informativa di bilancio tra
dition of generalism anchored to the concept of dottrina e prassi, Roma: Rirea, vol. n. 2.
azienda that goes beyond the concept of corpo- Ricci, P. (Ed.). (2004). La responsabilità sociale
rate; in this way, it can state a General Social dell’impresa: il ruolo e il valore della comunicazione,
in Atti del Convegno 29 gennaio 2004. Milano: Franco
Responsibility independent of the species of
Angeli.
entity. On the other hand, it needs to positively Ricci, P. (2010). L’articolo 41 della Costituzione Italiana
open to the international debate for an increasing e la responsabilità sociale d’impresa – Scritto in onore
interconnection with the other cultures on this del Professor Vittorio Coda, in RIREA, Roma, n. 3 e 4,
marzo e aprile.
theme. Finally, another trend is toward a creeping
Romolini, A. (2007). Accountability e bilancio sociale
“coding” standard that makes not everyone agree negli enti locali. Milano: Franco Angeli.
but that seems somehow an inevitable Rusconi, G., & Dorigatti, M. (2004). La responsabilità
perspective. sociale. Milano: Franco Angeli.
Torrecchia, P., & Gulluscio, C. (2011). Social responsi-
bility. The Italian case within public administration.
Paper presented at the ‘3rd International Conference
on Governance, Fraud, Ethics & Social Responsibil-
Cross-References €
ity’, Trakya Universitesi €
– Nevsehir Universitesi, 7–11
June 2011.
Zamagni, S. (2003). La responsabilità sociale
▶ Core Principles of CSR Approaches dell’impresa: presupposti etici e ragioni economiche,
▶ Corporate Social Innovation Il Ponte, Anno LIX n. 10–11.
▶ CSR and Regional Development
▶ CSR Communication
▶ CSR Europe
▶ CSR Frameworks CSR in the Banking Industry
▶ CSR Measurement
▶ Cultures, Businesses, and Global CSR ▶ Banks and CSR
C 716 CSR in the Banking Sector
Introduction
CSR in the Banking Sector
Corporate Social Responsibility (CSR) has come
▶ Banks and CSR into the mainstream academic literature predom-
inantly in the 1950s, coinciding with the rise of
large global corporations (Bowen 1953). Efforts
to measure it and explore the issues in doing that
CSR in the Media are relatively new, dating back to the early 1990s
(Wolfe and Auperle 1991). The different ways to
▶ Media Reporting of CSR measure CSR have been complicated due to the
fact that the very definition of the concept is
unclear and contradictory. Most definitions
agree that CSR entails thoughts and work beyond
CSR Index immediate business and profit but disagree on
almost all other issues like drivers (of CSR) as
▶ FTSE4Good Index well as its scope, business logic and beneficiaries.
▶ Sustainability Assessment Models This has created problems in developing valid
and reliable tools to measure CSR.
performance of companies that follow the princi- initiatives to bring in sustainability and its mea-
ples of sustainable development and looks at surement into mainstream business.
economic, social, and environmental criteria.
The economic criteria look at codes of conduct, Indicator-Based Measurement
corporate governance, risk, and crisis manage- A second approach in measuring CSR is based on
ment. Environmental criteria are derived from deciding on single or multiple indicators and
the report published by the company. Social measuring a corporation’s performance on those
criteria cover philanthropy, labor practice, indicators. Indicators are similar to the dimen-
human capital development, company reports, sions discussed above with more quantifiable
and talent acquisition. Factors specific to results (e.g., adherence to pollution standards is
a particular industry are considered as applicable a common indicator of environmental perfor-
under all criteria. Subsequently, information on mance). Corporate crime as recorded by the gov-
the different indicators is collected from ernment is another indicator. Many researchers
questionnaires, company and other published use more than one indicator to bring a holistic
documents, as well as personal contacts. Compa- touch to their measurement system. One common
nies are first ranked based on their sustainability critique to indicator-based measurement is their
practices, and the leaders are analyzed for ability to create a universal standard (e.g., adher-
the financial performance. However, the ence to pollution norms in a developing country
linkage between sustainable practices of may be considered a poor performance when
a company and its financial performance has compared to that of a developed economy having
been debated for long, and no conclusive proof stricter norms). Developing successful indicators
of one affecting the other has emerged after requires an approach that is beyond business and
decades of research. immediate profit, a general applicability, inclu-
The FTSE4GOOD index (http://www.ftse.com/ sion of a large number of companies, and avail-
Indices/FTSE4Good_Index_Series/index.jsp), like ability of reliable data.
DJSI, measures the performance of socially There are broadly two types of indicators used
responsible companies and helps investors looking in CSR measurement. Process indicators show
to invest in socially responsible companies. the process of achieving a stated output/outcome.
A similar methodology like DJSI is followed. How a company lists or ranks its suppliers may be
The CSID covers community, diversity, rela- a process indicator for a company that claims to have
tionship with employees, environmental perfor- a green supply chain. Substantive indicators on the
mance, international operations, product and other hand deal with single, quantifiable numbers or
business practices, and corporate governance. events, which may be an input, output, or outcome of
An organization’s strengths and weaknesses the process. In the example stated above, the number
along these dimensions are measured and of complaints received on the usage of child labor by
the average taken to be an indicator of the firm’s suppliers is a substantive indicator. GRI has devel-
CSR practices (Mahoney and Thorne 2005). oped certain process and substantive indicators and
requires companies to report their CSR-related activ-
Measurement Based on Compliance to Codes ities based on these indicators.
Various codes exist, providing guidance on the
CSR activities and performance of industries. Content Analysis
Some of the codes like Social Accountability Publicly available documents like annual reports
8000 (SA 8000: www.cepaa.org) have been pop- and corporate websites are analyzed to under-
ular among industries. Industry practice specific stand the CSR performance of organizations.
codes and guidelines are also in vogue; Fair Wear Termed content analysis, this method is gaining
Foundation (apparel), Kimberley Process (dia- acceptance mainly due to the increased level of
mond), Ethical Trading Initiative (apparel), Fair corporate disclosure, often as a result of new
Trade, Fairfood are some of the well-known regulations. Many organizations today publish
CSR Measurement 719 C
their CSR or sustainability reports which provide a product or service. Secondly, there is much
information on their activities. This gives an debate on the rise of rating bureaus as well as
opportunity to select indicators and rate compa- conflicts arising from contradictory scores given.
nies. The use of third-party audited reports and Organizations like Enron (USA) and Satyam
following globally accepted reporting norms like (India) that committed corporate frauds were ear-
Global Reporting Initiative (GRI) guidelines act lier recipients of CSR awards, exposing the
as a quality check for the published documents. weaker side of such ratings and rankings. Also, C
However, companies often disclose what they a customer is at a loss to select one rating or
choose to disclose, and it may not give the full certification from many. There are also technical
picture of their CSR activities. issues with the methods and tools.
All measurements need to be reliable, valid,
Perception Scales and comparable. Reliability ensures that the same
A fourth method of measuring CSR is to create test will give same result every time it is repeated.
a scale and note the perception of individuals Validity ensures that the indicators or values that
along the scale on various factors. The individ- are measured are really important, e.g., counting
uals can be selected from different stakeholder the number of accidents may not be a valid mea-
groups like employees, suppliers, customers, sure to understand the safety orientation of
community members, NGOs, etc. One limitation a software company; preparedness drills or fire
of using scales is that it forces respondents to fighting arrangements can be a more valid indica-
answer only on pre-chosen dimensions. Different tor. Comparability refers to standardized social
scales have been developed for these respondent and environmental performance indicators that
groups. The Perceived Role of Ethics and Social tend to vary across countries and industries.
Responsibility (PRESOR) is one example of such Many issues like “fair practice” or “equal oppor-
scales (Singhapakdi et al. 1996). However, some tunity” employment are more felt than seen and
researchers feel that there are not enough scales hence difficult to capture in a survey. Low
to measures CSR at the organizational level and response rates to surveys make things worse. We
rarely any that cover all stakeholder groups. must remember that standardization has its limits,
A related problem is poor response rates in sur- and while standardization of parameters tends to
veys used to measure such perceptions. help, identifying best values for them may be
impossible. What is acceptable pollution in
Critiques of the Measurement Process China may be far above the norm in California.
There is almost universal agreement that CSR Arguing along these lines, some researchers have
performance needs to be measured to bring in argued that nation-based CSR indices may be bet-
sustainable development-related indicators ter than a global standard (Gjolberg 2009).
while judging performance on the social respon- The source of data for measuring CSR perfor-
sibility front. This also relates to the concept of mance has also been questioned (Henriques 2010).
the “triple bottom line,” which argues that orga- Most organizations use Internet, academic papers,
nizational performance should be measured surveys, and company case studies as their source.
along three dimensions: economic, social, and Apart from academic writings, the remaining
environmental. Critics, however, point out that sources are likely to be biased, not reflecting the
intention to measure goes against the spirit of true state of affairs. To understand the measure of
CSR and biases the measurement process. Sup- CSR that a company has requires long study and
porters of CSR measurement are also not sure listening to many stakeholders. Tools like narra-
whether the right techniques are used today. Mea- tive analysis or content analysis are more advan-
surement is a costly endeavor, both in terms of tageous though listening to the right stakeholders
time and resources, and hence, a poorly done still remains an issue.
measurement can be worse than no measurement, Most CSR measurement metrices do not look
as all costs are finally passed on to the end user of at the performance of suppliers of corporations,
C 720 CSR Measurement
allowing managers to report better figures toward The practice of using metrices to measure
compliance. Manufacturing organizations face nonfinancial performance is catching on with dif-
this charge most as they shift their operations to ferent organizations, though the accuracy of their
developing economies having lower labor costs research approach, methodology, and tools
and compliance pressures. Many of them counter remains doubtful. There is little standardization
by saying that they cannot be held responsible for in the way CSR measurement is done, making
independent suppliers. the field opaque and costly to navigate. This
The cultural aspects of resources also make CSR leads to multiple measurement/s (organization/s),
measurement more difficult. Social value given to raising the compliance cost for companies. Incor-
land in India or Indonesia is higher than that in the porating a few steps can improve the CSR mea-
USA, making the impact of displacement difficult surement process: increased transparency,
to measure for mining or oil companies. standardizing data/parameters, better data quality
A related issue that emerges from the discus- (Chatterji and Levine 2006). As different indus-
sion above is the different externalities that bias tries work in different areas and contexts, finding
such measurements as well as the relative impor- one universal measure will remain a challenge.
tance (weightings) that different organizations Measurement needs to be with reference to the
give to one specific factor. One can assume that change an organization wants to see, and results
relative importance of, say, human rights over can vary over time. Thus, differentiation is neces-
environmental pollution is not just a matter of sary between short-term tangible results and long-
putting a number but one of philosophy and out- term (indirect) impacts of CSR programs. There
look. Using relative performance in CSR mea- will be a preference for the former for the sake of
surement can lead to Enron or WorldCom markets and shareholders, and one needs to be
winning a CSR award, showing that relative per- careful in judging these results. Some work (e.g.,
formances should be used with caution. Using being ethical and transparent in contracts and sup-
absolute performances, on the other hand, will plier selection) may defy measurement. Measur-
never allow a chemical plant to win over ing CSR in multiple areas (e.g., education, health,
a software company in terms of its CSR perfor- culture) and then integrating them to a single num-
mance as chemical companies pollute much ber may prove challenging.
more. Methodologies used by most rating/rank- Clearer understanding of CSR performance
ing organizations are not clear and difficult to and its measurement will help as many emerging
understand (Chatterji and Levine 2006). economies like India have started rolling out vol-
In the end, CSR measurement is only the last part untary guidelines on CSR for its corporations. On
of a company’s sustainability journey. It has to start the whole, a robust measurement of CSR can be
with the felt need to be sustainable and followed up a win-win-win strategy for corporations, con-
by a formal policy, an identified group of executives sumers, and other stakeholders, encouraging
(from all levels) who will be responsible and adoption of best practices and contributing to
accountable, as well as the development of key sustainable development. Measurement should
performance indicators, implementation, and lead to review and revision of existing policies
reporting. As noted earlier, starting from the point and practices to ensure sustainable CSR manage-
of measurement may distort the whole spirit of CSR. ment. Finally, no single number can yet catch the
complex nuances of CSR activities and their
impacts on communities and countries.
Future Directions
Synonyms
CSR Models
Ancestry; Culture; Ethnicity; Heritage; Hofstede;
▶ Sustainability Assessment Models Kinship; Rituals; Tradition
Definition
interpretations from various viewpoints and Tangible cues or surface pointers make ethnic
developed a comprehensive definition of culture: affiliation recognizable at a distance or in a fleet-
“Culture consists of patterns, explicit and ing instance. As such, these surface pointers act
implicit, of and for behavior, acquired and trans- as barriers to intimate contact in much the same
mitted by symbols, constituting the distinctive way as the core trinity of ethnicity. Frequent
achievement of human groups, including their surface pointers include dress, language, and
embodiments in artifacts; the essential core of culturally denoted physical features. This sec-
culture consists of traditional (i.e., historically ondary trinity stands for and implies differences
derived and selected) ideas and especially in blood, substance, and cult. Surface pointers
their attached values; culture systems may, on consist of an assortment of symbols, including
the one hand, be considered as products language, ritual calendars, specific taboos in
of actions, on the other as conditioning elements joint social participation, and special medical
of further action” (p. 181). Tradition is a culture’s practices, among others.
past, which carries the power of authority; Individuals associate themselves with groups
the very fact of survival and continuity gives that provide them with a sense of positive distinc-
an aura of authority, legitimacy, and rightness to tiveness. Social group membership is important
cultural beliefs and practices. Common to individuals because they are motivated to “see
phrases in most cultures—“timed honored,” themselves and their groups as different from
“in the eyes of the ancestors,” “our fathers before other groups and as better besides” (Fiske and
us,” and “the way it was always done”—indicate Taylor 1991, p. 165). People typically develop
the reverence and authority of traditions systems to categorize and classify themselves and
(Nash 1996). others. These systems allow individuals to attach
significant meanings to the classification group-
ings. Ethnicity, along with other elements, such
Introduction as gender and occupation, help define one’s
social identity. Individuals are favorably biased
Culture is one of the most important human char- toward members of their own group; they also
acteristics and is superior to other social associa- tend to exaggerate intergroup differences and
tions, such as nationality, political affiliation, enhance intragroup similarities (Fiske and Taylor
age, and education. Culture affects how people 1991).
behave and provides distinctions between differ-
ent groups. Culture provides markers of ethnic National Culture
differences and boundaries that distinguish mem- In his seminal work, Geert Hofstede (2001)
bers and nonmembers among social (ethnic) developed a framework for understanding the
associations. The most common ethnic boundary culture of nations. Hofstede suggested that cul-
markers are kinship, the presumed biological and tural differences cannot be understood without
descent unity of the group; commensality, the studying history; the origins of cultural differ-
propriety for eating together indicating equality, ences presume a comparative study of history.
peership, and intimacy (i.e., eating together is Hofstede argued that changes in cultural patterns
only one step removed from the intimacy of bed- come from ecological factors, which in turn influ-
ding together); and common cult, indicating ence societal norms (see Fig. 1).
a value system, sacred symbols, and attachments. Based on data collected by the IBM Corpora-
This trinity of boundary markers separates ethnic tion between 1967 and 1973, Hofstede identified
groupings from other kinds of social aggregates, four dimensions of national culture: power dis-
groups, and entities. If kinship, commensality, tance, uncertainty avoidance, individualism/col-
and cult are breached with regularity, the group lectivism, and masculinity/femininity. Power
as a differentiated social association would cease distance relates to how countries address inequal-
to exist (Nash 1996). ity. Inequality can occur in the distribution of
Cultural Differences in Values/Ethics and Decision-Making 723 C
ORIGINS SOCIETAL NORMS CONSEQUENCES
such resources as prestige and wealth, with dif- relationships and market position). Fifty coun-
ferent countries weighting elements differently. tries were evaluated based on Hofstede’s national
In organizations, inequality is formalized by culture framework (see Table 1).
boss-subordinate relationships. Uncertainty
avoidance deals with the future and how humans Organizations and Culture
cope with changes in technology, law, and reli- The critical dimensions of culture for organiza-
gion. In organizations, uncertainty avoidance tions are power distance (i.e., who decides what)
takes the forms of technology, rules, and rituals. and uncertainty avoidance (i.e., how one can
Individualism and collectivism, which speaks to assure that what should be done will be done).
the relationship between the individual and the High power-distance organizations lack trust,
collectivity of a given society, is reflected in the support political rather than strategic thinking,
way people live together (e.g., nuclear families, and support personal planning and control rather
extended families, or tribes). Masculinity and than impersonal systems. High uncertainty-
femininity is a matter of the emotional and socials avoidance organizations are less likely to practice
roles of genders (e.g., universally, women attach strategic planning, leave planning to specialists,
more importance to social goals, such as relation- support a need for more detail in planning and
ships and helping others). After conducting addi- short-term feedback, and have a more limited
tional research, Hofstede added a fifth dimension view of relevant information (Hofstede 2001).
of national culture, long-term versus short-term Based on power distance and uncertainty
orientation, which considers attitudes toward avoidance, organizations can be categorized into
such things as marriage and organization philos- four organizational types: personnel bureaucracy,
ophy (e.g., marriage should last forever even if full bureaucracy, work-flow bureaucracy, and
the love has disappeared versus if love has implicitly structured (see Table 2). In personnel
disappeared from the marriage, it is best to bureaucracy organizations, relationships among
make a new start; bottom-line versus building people are strictly determined by hierarchal
C 724 Cultural Differences in Values/Ethics and Decision-Making
Cultural Differences in Values/Ethics and Decision-Making, Table 1 Index scores and ranks of select countries
and regions
Long-term/
Uncertainty Individualism/ Masculinity/ short-term
Power distance avoidance collectivism femininity orientation
Country Index Rank Index Rank Index Rank Index Rank Index Rank
Argentina 49 35–36 86 10–15 46 22–23 56 20–21 n.a.a n.a.a
Australia 36 41 51 37 90 2 61 16 31 22–24
Austria 11 53 70 24–25 55 18 79 2 31 22–24
Belgium 65 20 94 5–6 75 8 54 22 38 18
Brazil 69 14 76 21–22 38 26–27 49 27 65 6
Canada 39 39 48 41–42 80 4–5 52 24 23 30
Chile 63 24–25 86 10–15 23 38 28 46 n.a.a n.a.a
a
Columbia 67 17 80 20 13 49 64 11–12 n.a. n.a.a
Costa Rica 35 42–44 86 10–15 15 46 21 48–49 n.a.a n.a.a
Denmark 18 51 23 51 74 9 16 50 46 10
Ecuador 78 8–9 67 28 8 52 63 13–14 n.a.a n.a.a
Finland 33 46 59 31–32 63 17 26 47 41 14
France 68 15–16 86 10–15 71 10–11 43 35–36 39 17
Germany 35 42–44 65 29 67 15 66 9–10 31 22–24
Great Britain 35 42–44 35 47–48 89 3 66 9–10 25 28–25
Greece 60 27–28 112 1 35 30 57 18–19 n.a.a n.a.a
a
Guatemala 95 2–3 101 3 6 53 37 43 n.a. n.a.a
Hong Kong 68 15–16 29 49–50 25 37 57 18–19 96 2
Indonesia 78 8–9 48 41–42 14 47–48 46 30–31 n.a.a n.a.a
India 77 10–11 40 45 48 21 56 20–21 61 7
Iran 58 29–30 59 31–32 41 24 43 35–36 n.a.a n.a.a
Ireland 28 49 35 47–48 70 12 68 7–8 43 13
Israel 13 52 81 19 54 19 47 29 n.a.a n.a.a
Italy 50 34 75 23 76 7 70 4–5 34 19
Jamaica 45 37 13 52 39 25 68 7–8 n.a.a n.a.a
Japan 54 33 92 7 46 22–23 95 1 80 4
Korea (South) 60 27–28 85 16–17 18 43 39 41 75 5
Malaysia 104 1 36 46 26 36 50 25–26 n.a.a n.a.a
a
Mexico 81 5–6 82 18 30 32 69 6 n.a. n.a.a
Netherlands 38 40 53 35 80 4–5 14 51 44 11–12
Norway 31 47–48 50 38 69 13 8 52 44 11–12
New Zealand 22 50 49 39–40 79 6 58 17 30 25–26
Pakistan 55 32 70 24–25 14 47–48 50 25–26 0 34
Panama 95 2–3 86 10–15 11 51 44 34 n.a.a n.a.a
a
Peru 64 21–23 87 9 16 45 42 37–38 n.a. n.a.a
Philippines 94 4 44 44 32 31 64 11–12 19 31–32
Portugal 63 24–25 104 2 27 33–35 31 45 30 25–26
South Africa 49 35–36 49 39–40 65 16 63 13–14 n.a.a n.a.a
a
Salvador 66 18–19 94 5–6 19 42 40 40 n.a. n.a.a
Singapore 74 13 8 53 20 39–41 48 28 48 9
Spain 57 31 86 10–15 51 20 42 37–38 19 31–32
Sweden 31 47–48 29 49–50 71 10–11 5 53 33 20
Switzerland 34 45 58 33 68 14 70 4–5 40 15–16
Taiwan 58 29–30 69 26 17 44 45 32–33 87 3
(continued)
Cultural Differences in Values/Ethics and Decision-Making 725 C
Cultural Differences in Values/Ethics and Decision-Making, Table 1 (continued)
Long-term/
Uncertainty Individualism/ Masculinity/ short-term
Power distance avoidance collectivism femininity orientation
Country Index Rank Index Rank Index Rank Index Rank Index Rank
Thailand 64 21–23 64 30 20 39–41 34 44 56 8
Turkey 66 18–19 85 16–17 37 28 45 32–33 n.a.a n.a.a C
a
Uruguay 61 26 100 4 36 29 38 42 n.a. n.a.a
United States 40 38 46 43 91 1 62 15 29 27
Venezuela 81 5–6 76 21–22 12 50 73 3 n.a.a n.a.a
a
Yugoslavia 76 12 88 8 27 33–35 21 48–49 n.a. n.a.a
Region
Arab countries 80 7 68 27 38 26–27 53 23 n.a.a n.a.a
East Africa 64 21–23 52 36 27 33–35 41 39 25 28–29
West Africa 72 10–11 54 34 20 39–41 46 30–31 16 33
a
Data not available
Source: Hofstede (2001).
non-Western countries, where the long-term ori- improves as one ages; behavior is governed by
entation predominates. The following axioms are external factors in earlier stages and internal fac-
not transportable from Western to non-Western tors in later stages (Kohlberg 1971). Levels of
countries (Hofstede 2001). moral judgment (i.e., moral intensity) vary with
• The solutions to pressing global problems do the issue under consideration and across cultures.
not presuppose worldwide democracy. The For example, business people in the United States
rest of the world is going Western. scored higher on moral judgment than Latvian
• Free market capitalism cannot be universal. business people (Smith et al. 2009). The influence
This assumes an individualist mindset that is of moral development on moral judgment sug-
not universal. gests that the promotion of moral development in
• Concepts of human rights cannot be universal. all areas of society will increase the quality of
The Universal Declaration of Human Rights ethical business judgment and overall ethical
adopted in 1948 was based on individualist behavior (Smith et al. 2009).
Western values, which are not consistent
with collectivism. Vanishing Business Values
Values are culturally learned depositions and the
Business Negotiations across Cultures foundation of human personality (i.e., value sys-
Cross-cultural negotiations may involve different tems). Value systems are determinants of behav-
rules of conduct. The nature of the control and ior, attitudes, and decision-making. Recent
decision-making structure, the number of people financial disasters bring into question the quality
involved, and the distribution of decision-making of business values in today’s markets. The
power may vary among players. Tolerance for collapse of Enron, a US corporation, had perva-
ambiguity during the process, negotiators’ emo- sive effects. In the United States, 22,000 people
tional needs, and trusting and distrusting may not were left out of work; the retirement plan was so
be consistent among participants. These differ- devalued that future financial security vanished.
ences suggest the following (Hofstede 2001): In 1992, Enron promoted its $3 billion natural-
• Power distance affects the degree of centrali- gas power plant in Dabhol, India, the single larg-
zation in decision-making (i.e., importance of est foreign investment in India’s history, as the
negotiators’ status). poster child for economic liberation. Instead, the
• Uncertainty avoidance affects the tolerance of project was an economic disaster and a human
ambiguity and trust in opponents. rights nightmare (i.e., water sources were dam-
• Collectivism affects relationships. In collec- aged). Enron is an example of a “bottom-line”
tive societies, replacing a negotiator means approach. Greed, egoism, materialism, and waste
a new relationship must be built, which takes that is almost endemic in today’s version of cap-
times. italism; the growing disparity between the
• Masculinity affects the need for ego-boosting wealthy and poor; the misuse of the world’s nat-
behavior. Feminine cultures are more likely to ural resources; and the corruption of political
resolve conflicts through compromise and to system by corporate money are all evidence of
strive for consensus. a value system gone awry.
• A long-term orientation affects the persever-
ance with which desired ends are pursued.
Future Directions
The Role of Moral Judgment
Moral judgment is a psychological process and In addressing problems of financial transparency,
the outcome of cognitive moral development Chris Davis, a British Member of the European
(CMD), cultural background, and personal Parliament (MEP), said that although the Euro-
moral code. The quality of moral judgment pean Parliament’s financial rules are complicated
Culture 727 C
and even seem designed to discourage ethical Fiske, S. T., & Taylor, S. E. (1991). Social cognition
behavior, one would expect British MEPs to (2nd ed.). New York: McGraw-Hill.
Harzing, A. W. K. (1995). The persistent myth of high
know right from wrong (Lamond 2008). Davis’s expatriate failure rates. International Journal of
charge attached ethical behavior to individuals Human Resource Management, 6, 457–474.
rather than rules. This notion is highly important Hofstede, G. (2001). Culture’s consequences (2nd ed.).
in today’s marketplace, where more than half Thousand Oaks, CA: Sage Publications.
Kohlberg, L. (1971). From is to ought: How to commit the
of the world’s largest economies are firms naturalistic fallacy and get away with it in the study of
C
(Anderson and Cavanagh 2000). The top moral development. In T. Mischel (Ed.), Cognitive
200 corporations’ combined sales are 18 times development and epistemology. New York: Academic.
greater than the combined annual incomes of the Kroeber, A., & Kluckhohn, C. (1952). Culture: A critical
review of concepts and definitions. New York: Vintage
1.2 billion people living in severe poverty. More- Books.
over, the top 200 corporations are growing faster Lieber, L. (2008). Changing demographics will require
than overall global activity. Individuals guiding changing the way we do business. Employment Rela-
these massive economic entities will instill tions Today, 35, 91.
Nash, M. (1996). The core elements of ethnicity.
values that drive decision-making. In J. Hutchinson & A. D. Smith (Eds.), Ethnicity
Infusion of individual value systems and cor- (pp. 24–28). New York: Oxford University Press.
porate structure is essential for building socially Rakichevikj, G., Strezoska, J., & Najdeska, K. (2010).
responsible organizations. Successful companies Professional ethics – basic component of organiza-
tional culture. Tourism & Hospitality Management
will insure an inclusive environment. Inclusion 2010, Conference Proceedings, pp. 1168–1177.
incorporates involvement, engagement, and the Roberson, Q. M. (2006). Disentangling the meanings of
integration of diversity into organization pro- diversity and inclusion in organizations. Group and
cesses (Roberson 2005). Whereas diversity Organizational Management, 31, 212–236.
Yiing, L. H., & Ahmad, K. Z. B. (2009). The moderating
focuses on the makeup of the population, inclu- effects of organizational culture on the relationship
sion is an attitudinal and cultural transformation between leadership behavior and organizational com-
(Lieber 2008). An inclusive environment neces- mitment and between organizational commitment and
sitates an alignment of values, behaviors, and job satisfaction and performance. Leadership & Orga-
nization Development Journal, 30, 56–86.
attitudes of employees with those of the organi-
zation. Corporations must recognize the barriers
that make inclusion difficult to achieve and pro-
vide viable resolutions.
Cultural Pluralism
Cross-References
▶ Cultures, Businesses, and Global CSR
▶ Discrimination
▶ Diversity
Cultural Relativism
References and Readings ▶ Ethical Absolutism Versus Ethical Relativism
Anderson, S., & Cavanagh, J. (2000). Top 200: The rise of
corporate global power. Institute of Policy Studies.
Retrieved November 21, 2010, from http://www.
corpwatch.org/article.php?id¼377 Culture
Chang, Y. L. (1976). Early Chinese management thought.
California Management Review, 19, 71–76.
Draft, R. L. (2005). The leadership experience (3rd ed.). ▶ Cultural Differences in Values/Ethics and
Vancouver, BC: South-Western College Publishing. Decision-Making
C 728 Culture and Organization Performance
which an oil company gradually switches to permissible but this is the issue of business ethics
renewable energy sources production (wind (BE) and it’s founding in deontological theory).
energy, solar energy, etc.), and in which an orga- These two interpretations of CSR and CSI nar-
nization providing healthcare for poor is engaged row the field of research on this particular topic
in numerous socially irresponsible activities and remind one that he or she should proceed in
(bribery, financial frauds, illegal collaborations the course of the research with extreme caution,
with pharmaceutical industry, etc.). always reconsidering operative definitions and
redescribing phenomena of business, culture, and
CSR in the light of new circumstances on the
Introduction global level. In the following sections conceptual
relations between cultures and businesses (the first
Since there are many descriptions of culture, of part) and of relations between multinationals and
business, and of CSR, one cannot start by making local cultures (the second part) will be addressed
any sound statement concerning these phenomena and presented as a summary on the background of
and their relations. This goes even beyond descrip- these limitations.
tions of phenomena in question because various,
often incommensurable, routines are considered to
be hardcore cultural, business, and CSR practices in Key Issues
the same time or not at all. For instance, philan-
thropy is considered as a cultural routine in some 1. Local Cultures and Corporate Cultures:
parts of the world, as well as a typical CSR activity A Preliminary Conceptual Analysis
too, and as such it is rarely performed without great Concerning general conceptual relations between
expectations of certain substantial economic and cultures, businesses, and social responsibilities
noneconomic returns (which in most cases goes (SR) some features can be mentioned and
heavily beyond the costs of it), and therefore, it is questioned. Basically, cultures as well as busi-
essentially inauthentic. In addition, philanthropic nesses have their own SR as their integral parts.
CSR is often performed in order to cover some Some cultures and businesses have SR than
corporate social irresponsibilities (CSI) done in others; some can be educated quite easily and
the same time by the same company but in are eager to learn, others refuse to do it. More to
a different department, or in a different part of the that, there is no business which is not a part of
world; therefore, the CSR is basically selective or a culture in many different ways; therefore:
partial. On the other hand, as far as it is certain (1) Any business is a part of at least one culture,
that there are no criminal cultures, that is to say that meaning that it operates within a community
criminal parts of cultures are always a kind which has more or less distinctive cultural
of subculture phenomena, it is illustrative that features.
non-selective, anonymous, and authentic CSR On the other hand, there is always something
(meaning without expectation of any economic or that can be labeled as the culture of a business;
noneconomic returns whatsoever) is sometimes therefore:
performed by essentially criminal businesses (for (2) Certain corporate culture is always a part of
example, by Yakuza after the Kobe earthquake in a business no matter if it is implicit and indi-
1995), and that some essentially CSI and illegal rectly manifested (by standard routines of
actions are performed by so to say “humanistic” a company), or explicit and clearly stated
institutions (such as by some high UN officials or (in some company’s documents).
by Caritas officials). So, there is no strict difference Therefore, what we have here is a kind of
between CSR and CSI and clear-cut descriptions of bottom-up model: culture ➾ business ➾ business
any particular CSR or CSI activity (surely ethical culture (as shown in Fig. 1 within a and b both).
codes of various professions tend to supply precise Here, one should not have in mind just cultural
definitions (duties) of what is forbidden and perspectives of a business such as managerial,
Cultures, Businesses, and Global CSR 733 C
Cultures, Businesses, A continental or global
and Global CSR, contexts: EU, UN, Human
Fig. 1 A range of relations Rights, The Global Compact
within and between α β
cultures and businesses; A culture A culture
where a, b ¼ cultures,
a
a ¼ a relation between A business A business
culture, b ¼ a relation b
between a business and c C
a culture, c ¼ a relation A business b A business
between businesses, and culture d culture
d ¼ a relation between
businesses cultures
very nature aggressive toward local cultures, conducted and it should be accompanied with
while others are so to say local culture friendly. the data about the business doing the research
A similar situation is with different cultures, which should be displayed to a local community
namely, some are business sensitive, and others in order for a local community to research the
are not. If specific types of business cultures are business in return.
added here, cultures such as already mentioned (3) Therefore, the first step in achieving (a)
organizational, work, or management cultures, and avoiding (b) and (c) can be termed as a
then what one gets is the real issue of influence business/culture mutual research. Anything
of a business on a local culture and vice versa. less than such open-minded and friendly
This relation, namely, a business to a local research is plain nonsense. However, the first
culture, is the one of power. It all depends on step is on a business since it enters a local
the power of a business and of a local culture in culture, not the opposite.
terms not just of sensitivity to SR, legal, and On the other hand, sensitivity of a business
economic perspectives, but of the basic motiva- toward a culture and vice versa is of utmost
tion and readiness to act (collectively) in terms of importance as well, meaning that an open discus-
reconciling the fundamental interests of all sion on the future relationships between
included stakeholders. There are numerous vari- a business and a local culture should be
eties here, but the most important (types of) rela- conducted in the spirit of openness, sincerity,
tions are the following: and friendliness without concealing any
(a) All sides included working together for strengths, weaknesses, opportunities, or threats
mutual benefit which cannot be achieved by of all stakeholders included. Here is the point
them alone (meaning that a local culture where besides the legal and the economic per-
influences a business in an essentially posi- spectives the moral as the cultural perspective
tive and creative manner and that a business enters the discussion. Standpoints, interests, and
influences a local culture maintaining and expectations in terms of freedoms and responsi-
improving its most vital features). bilities of all sides included should be clearly
(b) A business aggressively influences, changes, stated. All of this is easy to achieve if a culture
and destroys a local culture (in terms of is a small one and if a business is relevantly
language, habits, standard daily routines, similar to a local culture in terms of language,
lives, heritage, environment, and prospects for working habits, customs, ethnicity, value system,
the future) intruding its business culture as the etc. If this is not the case, many issues can arise.
ultimate standard of a local culture (further on (4) However, it is possible to formulate
interpreted as monoculturalism and global a hypothesis that under certain further condi-
strategy). tions it is expensive to respect a local culture
(c) A local culture (or more often various sub- but in a long run respecting a local culture
cultures; no matter whether they are urban or creates many economic and noneconomic
rural) is irrationally against a business, so benefits for a business; on the other hand, it
a company finally fails to operate in a local is hard for a business to be accepted by a local
culture. Of course, one can see that the pos- culture but in a long run it can create not just
sibility (a) is better than (b) or (c). In addition, an economic but indeed a cultural advance-
(c) is more often a reaction to (b) but there are ment which cannot be achieved without the
opposite cases as well. presence of a business in a local culture (a).
Now, another problem between (a), (b), and (4.1) The formal argument in favor of (4),
(c) starts with a bit of nonsense and insensitivity. that is to say in favor of (a) and against
It is quite ridiculous to start a business anywhere (b) and possibly (c) is quite straightfor-
without a culture research (to a market research) ward. Namely, in all cases a company’s
and this is how quite often (b) starts. Completely (wealth, stocks) profit maximization
opposed to that, a culture research should be will result with CSI, and there is only
Cultures, Businesses, and Global CSR 735 C
one exception, namely a company’s capitalism in the UK, cooperative managerial
profit maximization will result with capitalism, or social market economy in Ger-
CSR or at least with prevention of CSI many, etc., contrary to say competitive manage-
only if the company’s profit (wealth, rial capitalism in USA; due to different
stocks) reflects the extent to which the free-market clusters such as Germanic, Latin
benefits of such CSI are less than the European, and Nordic one; due to specific busi-
expected present value of the future ness climates in which businesses aim at broader C
costs of CSI (in the form of penalties, social, legal, political, and cultural environment;
lost reputation, or similar). One should due to jurisprudential heritage and practices; and
notice that this is an argument against due to political and social culture of regular
CSI but not in favor of CSR and as such dialogue and negotiations as preconditions of
can be regarded as a necessary but not as all decisions and actions, specific relations and
the sufficient CSR condition as well. at least mutual respect between businesses and
(The lack of international regulations local cultures produces specific approach to CSR
makes this issue much more vital and (nowadays flavored with EU Commission Green
complicated on the global level.) Papers). As a result, most of CSR in EU is done
Concerning further sufficient conditions men- within the whole composed of businesses, cul-
tioned in (4) it can be said that they surely include tures, politics, and different laws and regulations
elements such as the type of economic system and in terms of stakeholder theory application, or
(say a level of economic freedom), the nature of applications of various ethics such as ethics of
legal system, social stratification (major social care, ethics of responsibility, ethics of discourse,
groups, and major subculture groups), the gover- or pragmatist ethics. Such approach releases the
nance standards (within a local culture and within tension between different corporate and cultural
a business as well), etc. These variables substan- methods and goals, and in addition offers an
tially determine relations between cultures and integral understanding of the whole of cultures,
businesses and resulting CSR. businesses, and resulting CSR.
Now let us move from a continental to a global
2. Multinationals on National, International, level where there are several unique relations,
Continental, and Global Cultural Levels which are important since they require special
Previously mentioned issues are quite simply attention, for instance, the relation:
resolved on a national level, or even on interna- • Between the strongest multinational compa-
tional level in some special cases, but they are nies and small local cultures in developing
quite complex on the global/world level. Few countries
examples can be supplied here. There are many • Between multinationals and local cultures in
countries in which two or even more quite diverse leading countries
cultural patterns, business cultures, moral norms, • Among multinationals
ethical considerations, and consequently CSRs There are varieties of values, of doing business,
for centuries exist and coexist as a whole by all and CSRs in different countries and continents.
means (Croatia, hardly noticeable country on the Multinational companies have been focused on
world map, can serve as a fine example). Such three groups of ethical disputes (De George 1993):
countries may be good examples of how to imple- (d) By which rules are multinationals bound:
ment various global CSR standards in terms of those of the home country or those of the
recognizing, avoiding, or resolving standard host country? If those of host country, then
obstacles in this process. Another example can it could mean that a multinational would
be Europe as the continent on which many differ- obey local laws and customs no matter if
ences coexist as a whole (but based primarily on they are unacceptable in the home country.
economic and political reasons). In Europe, due If those of home country, then it could mean
to specific economies, for instance, personal that a multinational will confront the local
C 736 Cultures, Businesses, and Global CSR
laws and customs with its own corporate cul- integrative social contract theory (Th. Donaldson),
ture which can be considered legal and good etc. Now, concerning an application of these and
in the home country but completely criminal similar models not in small-scale cultures but on the
and immoral in the host country (examples global level it should be mentioned that there are at
like child labor, forced labor, discrimination least two major strategies concerning the relation
on the basis of gender or race). between businesses and cultures, namely:
(e) How a multinational should perform if it (g) Global strategy (typical monoculturalism)
operates in a less developed country? To what which seeks workers who are the closest to
extent it should interfere with the host country’s the corporate standards (previously marked
resources, labor, and culture? Should human as (b))
rights be regarded as minimum of interference (h) Adjustment strategy (typical multicultural-
in terms of not ignoring safety, health, protec- ism) which seeks workers who are the closest
tion of land, etc. of the host country? to the local standard of a good worker in
(f) Although there are universal human rights, terms of work habits, values, etc. (Hodgetts
there are no adequate international social insti- and Luthans 2000; De George 1993) (previ-
tutions, laws, and courts which can set rules for ously marked as (a), as shown in Fig. 2, see
multinationals. Therefore, multinationals can relations a–d between a and b in Fig. 1)
fix prices in transfer payments, avoid taxes, The choice between (g) and (h), if it is a real
and circumvent national legal restrictions. choice at all since there are many mixed models,
What kind of global institution is needed in in order to solve practical daily issues implicit in
order to control multinationals? (For instance, (d–f), is primarily the choice between different
the Clinton White House in July 1998 declined modes of corporate governance, which can be
to sign the documents of the International qualified as being proper or improper, sensitive
Criminal Court (ICC) precisely because of or insensitive, responsible or irresponsible,
a clear view on these matters). etc. Furthermore, it is not obvious that (g) is bad
The hypothesis (4) can be viewed from and that (h) is good since there are circumstances
a variety of perspectives, but two are of impor- in which good corporate standards can improve
tance here, namely, from the cultural point of the life of a local culture (no matter if they de
view, and from business point of view. These facto rarely do). However, in most cases (g) tends
viewpoints are not as mutually radically opposed to change the local culture and this quite often
as they seem to be: ends with irreparable damage to a local culture
• Since under the cultural point of view, one (in terms of lives, health, habits, heritage, envi-
should have in mind some elements of cultural ronment, or simply language or a dialect). It is
anthropology dealing with economic, busi- possible even that (h) is not always the best for
ness, and entrepreneurship phenomena. a local culture since surely it is possible that there
• Under the business point of view, one should are some corporate practices that can be useful
have in mind some elements of international for a local culture in terms of its better mainte-
and inter- and transcultural business practices nance and improvement. Basically, the choice
(in spheres of international management, mar- here should be made on the basis of understand-
keting, governance, etc.). ing of business and local cultures communicating
Both views meet in different pragmatic models and working together and this point is frequently
of integration of CSR in the whole composed of overlooked. (Prosser 1989; in Fig. 2 g/h is pro-
businesses and cultures. The most fitting model is posed as more adequate then a) In short, CSR
an application of the stakeholder theory contrary to experts and practitioners are still looking for
the most popular practice which is the stockholder a proper analysis of the phenomena and for effec-
theory, but there are other theories such as an tive models.
Cultures, Businesses, and Global CSR 737 C
Cultures, Businesses,
and Global CSR,
Fig. 2 Two basic a company
a local
strategies; global (g), and a company + culture
=
adjustment (h), and in a local
a possible mutually culture
transactional strategy (g/h)
Global strategy (g)
C
a local a local
a company + culture
= a company + culture
a company
a local
a company + culture
= a local
culture
Business +
CSR theory
manifests
A CORE
Business + BUSINESS Business ethics +
CSR practice governs exemplifies CSR principles
Standard business (ethical codes...)
/ CSR procedure
Finance,
accounting,
management
creates and marketing
culture
Global
Business + Business
CSR facts Culture A local
culture
Cultures, Businesses, and Global CSR, Fig. 3 An integral unity of business, cultures and CSR
being done legally or not, but socially respect for the different/others, no matter if
responsibly or not as well. “we” are part of a company or of a local
(5.3) Based on such observations one can culture, or both, but our acknowledgment of
research in all other directions using all the whole integral process and its dignity as
convenient methods for creating global well. Such understanding will result with
minimum standards of CSR which will a CSR/culture sense and sensitivity, and prac-
respect all sides included (For global tices as integral to global businesses. There-
marketing ethics see Brenkert 2009; and fore, global businesses and local cultures
for global management see Hodgetts and have a responsibility to acquire and to share
Luthans 2000; and Allinson 2005). all that is mentioned in Fig. 3; in short – the
To return to the examples from the beginning, duty to understand. Without mentioning
this is why one can and perhaps should be some- other prerequisites for a global CSR even
what reluctant while deciding which is worse, this one taken solely obviously presupposes
namely, a legal global business being only selec- certain social and cultural climate and sensi-
tively CSR, in one part of the world (and say in tivity without which it cannot be achieved.
terms of philanthropy), while being completely CSI (6.1) The crucial category of this “model” is a
in some other part, or an illegal global business standard business procedure (SBP). Its
being authentically, nonselectively, and anony- CSR naturally flows from understanding
mously CSR. it in terms of a core business (as shown in
(6) Such procedural or in fact organic unity and Fig. 3 in the middle). However this is the
a morphological understanding of the inter- result of particular procedures in partic-
action between businesses and cultures can ular company’s departments. If
improve not just our initial motivation for a company is a multinational one, then
acquiring knowledge about others and our its global business culture is determined
Customer Lifetime Values 739 C
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procedures which manifest SBP. There- international business. New York: Oxford University
Press.
fore, local cultures and core businesses Deal, T. W., & Kennedy, A. A. (1982). Corporate cul-
of a company are inter-reliant. tures. Reading, MA: Addison-Wesley.
(6.2) Now, how is this done? If a company and Frost, P. J., et al. (1985). Organisational culture. Beverly
a local community understand the Hills: Sage.
Hodgetts, R. M., & Luthans, F. (2000). International man-
company’s core business, then SBP is agement: Culture, strategy, and behaviour. Boston:
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the way via which such understanding McGraw-Hill.
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ethics. Westport: Quorum Books.
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(production, marketing, etc.), creates tional differences in work-related values. Beverly
facts (results), and exemplifies BE and Hills: Sage.
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duction to intercultural communication. Washington
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Only within such redescription of a global Wittgenstein, L. (1998). Culture and value. Oxford:
CSR as a kind of context of understanding, Blackwell.
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the protection of human rights, various global Global Applied Perspectives
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various global codes of various professions, and issues in theory and practice. Oxford: Wiley.
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the starving nations”). Accounting and ethics (pp. 156–184). Oxford:
Blackwell.
Cross-References
and a power-based notion is gradually replaced perceived utility derivable from the product’s
by dynamic value-chain relational longevity physical, utilitarian, economic, and psycho-
and harmonic connections. Fragmented focus on logical specifications. Sometimes, customer
maximizing the interests of one group (say values are driven by an emotion rather than
customers or investors) may not guarantee sustain- actual functional performance; that is, feelings
able value creation and growth; rather of love and affection make a product to enjoy
a precise understanding of customers’ relative favorable halo effects.
and dynamic propositions requires the commit- 2. Social and Psychological Values. Sometimes,
ment, energy, and distinct imagination of consumer values are derived from who is pre-
employees and other subsystems, including sent at the point of purchase and his apparent
the delivery of consistent maximized share- roles in decision making as well as the extent
holders’ wealth. Employees are an enviable of membership cohesiveness to the norms and
source of competitive advantage or difficult- values of demographic, socioeconomic, cul-
to-copy innovative services; thus, management tural, religious, racial, or ethnic groups. Cus-
theories emphasize they should be adequately tomer value is also derived from buyers’
motivated and rewarded, counseled, trained and psychological motivation and goals arising
retrained, treated mature, and encouraged to do from needs for visibility, recognition, prestige,
challenging jobs and be involved in decision and self-esteem, and belongingness. Other
making. goals may be to avoid high-profile failures
The question is what drives customer values? and to be viewed as opinion leader and prob-
Customer value drivers are the outcome of lem solvers.
buyers’ beliefs about a product, its maker, buyer 3. Epistemic Values. Customer value is also
motivation, and buying situation. They facilitate driven by some product’s or firm’s character-
cognitive processing and retrieval of information, istics of creating curiosity, novelty, and desire
provides basis for differentiation, creates atti- for knowledge. Values may be creatively
tudes and feelings, and ultimately provides rea- made or improved upon customer-delivery
son to buy. Consumer behavior scientists support attributes to offer low price and superior ser-
the notion that choice among alternatives is vice; to ensure on-time delivery, innovative
a function of customer value perception. Value solution, and integration with existing sys-
perception is influenced by customer value tems; to minimize learning complexity and
drivers – decision-related attributes perceived to dexterity, costs of installing, operating and
hold top-notch position in consumer decision servicing; and to provide additional service,
exercise. Scholars including Sheth and his or to appeal to other market segments.
coauthors proposed theoretical models that pro- 4. Situational Values. Specific situations and
vide lenses to the understanding of values that purchase decision contexts drive customer
drive customer choice. values. Situation may facilitate or debar
1. Functional and Emotional Values. Buyers’ a given purchase behavior or may not even
motivations are often objective, subjective, have influence at all. Buying situation consists
or emotional. The theory of hedonism assumes of temporary environmental factors that form
man seeks pleasure; he often draws perceived the context within which purchase-related
values from subjective cost-benefit analysis of activity occurs. Russell Belk’s classic work
a product. The cost relates to consumers’ per- proposed that current values and behaviors
ception about information search, acquiring, may be shaped by time and place of observa-
owning, installing, using, servicing, and/or tion outside personal and stimulus attributes.
disposing of a product. Others are environ- We may infer that the five situational factors
mental and opportunity costs, degree of bud- addressed in his work influence customer
get fit, price, volume discounts, profitability, value assessment and ultimately behavior.
and cash flow. And the benefit results from the Physical surroundings, e.g., store
Customer Value Creation 743 C
environments – decors, sound, visible config- kiosks, etc. When a customer calls, the system
uration of merchandise, etc; social surround- can be used to retrieve and store information
ings (see 2 above); task antecedent, e.g., relevant about him. By serving the customer rel-
momentary moods such as anxiety, pleasant- atively faster and better, and by keeping all infor-
ness, hostility, and excitements or momentary mation about him centrally, a company aims at
conditions such as cash on hand, fatigue, and customer retention, cost savings, and profitabil-
illness rather than chronic traits; task defini- ity; encouraging new customers and customer C
tion, e.g., shopping for use or for gift; and referrals; and building customer values. The key
temporal perspective, e.g., time of the day to infrastructural requirements of CSS include
season of the year. Computer Telephony Integration (CTI), which
5. Buyer Perception about the Vendors. Often provides high volume processing capability and
customer values are driven by the extent to reliability. This means issues such as product
which buyers perceive firms as good strategic availability and ease of acquisition, price
partners. This view is informed by the firm’s and discount plans, installment credit policy,
perceived financial, technology and man- service and delivery plans, information booklet
power strengths, credibility, trust, expertise, and dissonance reducing and/or eliminating
and commitment to shared values. Where eco- details, promotions, and others are integral in
nomic and performance values can be building consumer values and so, they are
influenced relatively rapidly by changes in assumed ongoing and essential functions of dig-
price and product design, it takes longer time ital interactions.
to change perceptions about a company. Excellent customer service is anchored on
a tripod – people, processes, and environment.
People – staff is monitored through actual mea-
Strategic Tips on Customer Value surements of external and internal customer sat-
Creation isfaction as well as compliance to customer
defined service level; processes are continually
Customer value is created when a firm delivers monitored and improved upon through models –
customer delight and satisfaction. Seven tips are TQM, Benchmarking, Control Charts, Matrices,
provided below to guide building customer value. PERT, etc; and environment – recognizes
Mutual exclusiveness does not apply in choosing the peculiarities of the local and nonlocal
these tips since the use of one does not preclude changes. However, customer service develop-
the use of the other, especially among firms that ment is anchored on 7 Cs; a model proposed to
have different business/product portfolios that guide organization on how to tailor customer
perhaps demand a blend. values.
1. Customer Service – Contacts/interactions. Regular and stress-free
Early marketing mix taxonomy recognizes contacts with customers as well as visible and
customer service as an integral supportive func- accessible solution to customer problems
tion. Perhaps, the stiff competition in most indus- improve managerial decisions. The firm’s
tries precipitates customers’ new pedestal – social relationships should portray it as
providing overtime support to avoid opponents a good corporate citizen.
encroaching and/or to encourage trial or – Compassion. Commitment and supportive-
switching behaviors. The contemporary approach ness to customers’ ideals; making accounts
involves the use of call centers and Customer feel their business quota contributes
Interaction Center’s (CIC) CRM software to significantly to the growth of the organization;
store all customers’ details in terms of their ser- understanding consumer problems and
vice requests, complaints, product returns, and aiding risk reduction; and alerting
information requests. Such information are mul- customers on the need for other product or
tiple sourced – Web, fax, phone, face-to-face, service items.
C 744 Customer Value Creation
Schlitz, you’re out of beer, and following the that there is a paradigmatic shift from short-
result of a psychographic study, Schlitz was term buyer-seller interactions to an overtime rela-
repositioned to appeal to the heavy beer con- tionships, the future directions of research should
sumers’ sense of masculinity, hedonism, and focus on
fantasy. – Proposing more dynamic mechanisms that
Firms are guided by the following steps in guide management on thorough grasping of
their choice of positioning and repositioning; the world of consumers with special interest
identify relevant unique selling propositions (or on what drives customer perceptions, and
value drivers), assess the relative importance of translating same to superior and compelling
each in the consumer decision process, compare values.
the product with competitors on important value – Redefining and revalidating the linkages
drivers, and determine the information needs in between customer values, marketing strate-
the buyer decision process. gies, business purpose, and business process.
– Regularly reconsidering the dynamics of cus-
tomer values and buying situations in order to
Key Issues make reliable forecasts bearing in mind the
length of time required to implement invest-
Customer value creation evolves to offer sustain- ments in service/product development, mar-
able and more strategic growth opportunities to keting channels, and other business
firms. Writings on it have long existed but it is processes. Apparently ample studies focus on
only recently their application began to gather this but not much applies to practical settings.
moment owing to stiff competition and other Therefore, organizations wanting successful
environmental variables. The philosophy is that growth potentials amid changing environment
profit maximization is not the purpose of an must critically explain the customer in terms
enterprise but a limiting factor. Profit is a result of his value propositions and value expecta-
and not a cause; it is a test of business validity or tions, and deliver same better than
performance against the classical economic competitors.
invention emphasizing the explanation, cause,
or rational of business behaviors. Business pur-
pose lies in the society; its ability to continually
deliver customer values measures its competi- Cross-References
tiveness and permits the mantra of your money
back and no question asked. Therefore redefining ▶ CSR and Catholic Social Thought
business purpose to reflect customer values is ▶ Customer Perceived Value
increasingly important because the competitive
world demands long-term buyer-seller affairs
rather than the traditional interactions created by
References and Readings
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