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Corporate Social Responsibility - What does it mean?

One of the most frequently asked questions at this site - and probably for all those individuals and
organisations dealing with CSR issues is the obvious - just what does "Corporate Social
Responsibility" mean anyway? Is it a stalking horse for an anti-corporate agenda? Something
which, like original sin, you can never escape? Or what?

Different organisations have framed different definitions - although there is considerable common
ground between them. My own definition is that CSR is about how companies manage the
business processes to produce an overall positive impact on society.

Take the following illustration:

Companies need to answer to two aspects of their operations. 1. The quality of their management
- both in terms of people and processes (the inner circle). 2. The nature of, and quantity of their
impact on society in the various areas.
Outside stakeholders are taking an increasing interest in the activity of the company. Most look to
the outer circle - what the company has actually done, good or bad, in terms of its products and
services, in terms of its impact on the environment and on local communities, or in how it treats
and develops its workforce. Out of the various stakeholders, it is financial analysts who are
predominantly focused - as well as past financial performance - on quality of management as an
indicator of likely future performance.

Other definitions
The World Business Council for Sustainable Development in its publication "Making Good Business
Sense" by Lord Holme and Richard Watts, used the following definition. "Corporate Social
Responsibility is the continuing commitment by business to 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"

The same report gave some evidence of the different perceptions of what this should mean from a
number of different societies across the world. Definitions as different as "CSR is about capacity
building for sustainable livelihoods. It respects cultural differences and finds the
business opportunities in building the skills of employees, the community and the
government" from Ghana, through to "CSR is about business giving back to society" from
the Phillipines.

Traditionally in the United States, CSR has been defined much more in terms of a philanphropic
model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they
donate a certain share of the profits to charitable causes. It is seen as tainting the act for the
company to receive any benefit from the giving.

The European model is much more focused on operating the core business in a socially responsible
way, complemented by investment in communities for solid business case reasons. Personally, I
believe this model is more sustainable because:

1. Social responsibility becomes an integral part of the wealth creation process -


which if managed properly should enhance the competitiveness of business and
maximise the value of wealth creation to society.
2. When times get hard, there is the incentive to practice CSR more and better - if it
is a philanphropic exercise which is peripheral to the main business, it will always be
the first thing to go when push comes to shove.

But as with any process based on the collective activities of communities of human beings (as
companies are) there is no "one size fits all". In different countries, there will be different
priorities, and values that will shape how business act. And even the observations above are
changing over time. The US has growing numbers of people looking towards core business issues.

For instance, the CSR definition used by Business for Social Responsibility is: "Operating a
business in a manner that meets or exceeds the ethical, legal, commercial and public
expectations that society has of business���.

On the other hand, the European Commission hedges its bets with two definitions wrapped into
one: "A concept whereby companies decide voluntarily to contribute to a better society
and a cleaner environment. A concept whereby companies integrate social and
environmental concerns in their business operations and in their interaction with their
stakeholders on a voluntary basis".

When you review each of these, they broadly agree that the definition now focuses on the impact
of how you manage your core business. Some go further than others in prescribing how far
companies go beyond managing their own impact into the terrain of acting specifically outside of
that focus to make a contribution to the achievement of broader societal goals. It is a key
difference, when many business leaders feel that their companies are ill equipped to pursue
broaders societal goals, and activists argue that companies have no democratic legitimacy to take
such roles. That particular debate will continue.
Corporate social responsibility
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Corporate social responsibility (CSR), also known as corporate responsibility, corporate


citizenship, responsible business, sustainable responsible business (SRB), or corporate
social performance,[1] is a form of corporate self-regulation integrated into a business model.
Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby
business would monitor and ensure its adherence to law, ethical standards, and international
norms. Business would embrace responsibility for the impact of their activities on the
environment, consumers, employees, communities, stakeholders and all other members of the
public sphere. Furthermore, business would proactively promote the public interest by
encouraging community growth and development, and voluntarily eliminating practices that
harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of
public interest into corporate decision-making, and the honoring of a triple bottom line:
People, Planet, Profit.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a
strong business case for CSR, in that corporations benefit in multiple ways by operating with
a perspective broader and longer than their own immediate, short-term profits. Critics argue
that CSR distracts from the fundamental economic role of businesses; others argue that it is
nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-
empt the role of governments as a watchdog over powerful multinational corporations.

Contents
[hide]

• 1 Development
• 2 Approaches
• 3 Social accounting, auditing, and reporting
• 4 Potential business benefits
o 4.1 Human resources
o 4.2 Risk management
o 4.3 Brand differentiation
o 4.4 License to operate
• 5 Criticisms and concerns
o 5.1 CSR and the nature of business
o 5.2 CSR and questionable motives
• 6 Motivations
o 6.1 Ethical consumerism
o 6.2 Globalization and market forces
o 6.3 Social awareness and education
o 6.4 Ethics training
o 6.5 Laws and regulation
o 6.6 Crises and their consequences
o 6.7 Stakeholder priorities
• 7 See also
• 8 Footnotes
• 9 References

• 10 Further reading

[edit] Development
Business ethics is one of the forms of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for
more ethical business processes and actions (known as ethicism) is increasing.
Simultaneously, pressure is applied on industry to improve business ethics through new
public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate practice
and a career specialization, the field is primarily normative. In academia, descriptive
approaches are also taken. The range and quantity of business ethical issues reflects the
degree to which business is perceived to be at odds with non-economic social values.
Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s,
both within major corporations and within academia. For example, today most major
corporate websites lay emphasis on commitment to promoting non-economic social values
under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases,
corporations have re-branded their core values in the light of business ethical considerations
(e.g. BP's "beyond petroleum" environmental tilt).

The term CSR came in to common use in the early 1970s although it was seldom abbreviated.
The term stakeholder, meaning those impacted by an organization's activities, was used to
describe corporate owners beyond shareholders as a result of an influential book by R
Freeman in 1984. [2]

Whilst there is no recognized standard for CSR, public sector organizations (the United
Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR
adheres to similar principles but with no formal act of legislation. The UN has developed the
Principles for Responsible Investment as guidelines for investing entities.

[edit] Approaches
Some commentators have identified a difference between the Continental European and the
Anglo-Saxon approaches to CSR.[3] And even within Europe the discussion about CSR is
very heterogeneous.[4]

An approach for CSR that is becoming more widely accepted is community-based


development projects, such as the Shell Foundation's involvement in the Flower Valley,
South Africa. Here they have set up an Early Learning Centre to help educate the
community's children, as well as develop new skills for the adults. Marks and Spencer is also
active in this community through the building of a trade network with the community -
guaranteeing regular fair trade purchases. Often alternative approaches to this is the
establishment of education facilities for adults, as well as HIV/AIDS education programmes.
The majority of these CSR projects are established in Africa. A more common approach of
CSR is through the giving of aid to local organizations and impoverished communities in
developing countries. Some organizations[who?] do not like this approach as it does not help
build on the skills of the local people, whereas community-based development generally
leads to more sustainable development.[clarification needed Difference between local org& community-dev? Cite]

Procurement of Fair Trade tea and coffee has been adopted by various businesses: KPMG
CSR manager commented, "Fairtrade fits very strongly into our commitment to our
communities."[5]

Impact
This paper critically reviews and analyses the empirical and theoretical literature relating to
Corporate Social Responsibility (CSR) programs and their impact on the attitudes and
behaviours of consumers.

Given the increasingly important and influential role that corporations are playing in society,
this review considers the contrasting arguments surrounding the extent to which a well-
designed and implemented CSR program will impact consumers. In doing so, this review
improves our understanding of the importance of corporate socially responsible action and
identifies gaps in the field of CSR research that need to be addressed in order to help
organizations more effectively adopt CSR programs.

| More

Keywords

corporate social responsibility, environmental responsibility, consumer engagement, business


ethics, corporate performance, literature review

Article Text

In recent times, Corporate Social Responsibility (CSR) has become an ever-increasing topic
of interest among researchers and practitioners. However, an exact definition of CSR is
elusive and opinions vary. CSR has been defined as a function that transcends but includes
making profits, creating jobs and producing goods and services (Oketch 2005). Some
researchers claim that it has come to mean the positive actions that a company takes to help
discharge its responsibilities to external stakeholders (Rushton 2002). Still other definitions
include financial performance as an aspect of CSR. In line with this, a wide range of
behaviours are classified under CSR including cause-related marketing, sponsoring charitable
events, offering employee volunteerism programs, making charitable donations, utilising
environmental initiatives and demonstrating a commitment to health and safety issues
(Maignan & Ralston 2002). Perhaps the most oft-cited definition of CSR is that of Carroll's
model (1979). Carroll designed a four-part conceptualization of CSR that included economic,
legal, ethical and philanthropic elements. According to this model, all business
responsibilities rely upon the economic responsibility, which includes maximizing
profitability and maintaining a strong competitive position. Legal responsibilities include
complying with laws and regulations. Ethical responsibilities reflect societal standards,
expectations and norms that have not been specifically legislated. Finally, philanthropic
responsibilities encompass actions that are in response to society's expectation that businesses
be good corporate citizens. These are distinguished from ethical responsibilities in that they
are of a charitable nature and, as such, a company is not considered unethical if it does not
provide them (Carroll 1991).

However, despite the common use of Carroll's definition, the literature still lacks a unified
and definitive understanding of CSR. This weakness is problematic for both practitioners and
academics. It provides little guidance as to what practices corporations should be undertaking
due to the broad assortment of activities now considered to constitute CSR. For example, if a
company responds to a crisis related to its business activities, such as the Chernobyl Nuclear
Power- Plant accident, the Exxon Valdez oil spill or the Union Carbide pesticide plant
accident in Bhopal, does this constitute CSR? Does CSR only cover behaviour not required
by society? According to Carroll's definition, this is certainly not the case because Carroll's
model includes economic and legal responsibilities, both of which are required. However,
there are definitions that do suggest CSR goes beyond that which is socially required,
including Carroll's, which comprises philanthropic elements. This lack of a unified definition
of CSR also inhibits a cohesive empirical view of CSR and its impact, such that research
cannot measure CSR effectively, nor pronounce conclusive findings.

Nevertheless, whilst a universally accepted definition of CSR will vastly improve progress in
the field, how to go about developing this definition is a rather complex process, largely
because CSR could mean different things to different stakeholder groups. To shareholders
CSR may mean maximisation of profits. To Governments it may mean meeting legislative
requirements and ensuring safe products and workplaces. To consumers CSR may mean high
quality products at a good price, and perhaps ethical or philanthropic behaviour. Finally, to
other stakeholder groups such as the community, employees and society, the meaning of CSR
is likely to vary even more. Hence, whilst a succinct single definition of CSR would be
convenient, it is argued herein that an adequate conception of CSR needs to be developed in
terms of each stakeholder group.

Subsumed under the umbrella term Corporate Social Responsibility (CSR), the
assumed duties of business in society have been an increasingly debated topic in
academic research,1 business practice,2 politics3 and media.4 Especially within
the scientific discussion, two contradicting positions can be distinguished: on the
one hand, there is the argument that resources spent on other than economic
goals are an illegitimate waste of resources, because they are contradictory to a
firm's responsibility to its shareholders and therefore even to the very function
of business in modern societies.5 On the other hand, proponents of CSR try to
champion their idea by emphasising the so-called business case for CSR. Arguing
that CSR can come along with certain benefits that might outweigh its costs,
they see CSR engagement as a necessity for business, not least for the sake of
its own economic interest.
This notion is of particular importance, because if CSR and profit maximising
interests could indeed be shown to go hand in hand, two conflicts could be
resolved. First, on a conceptual level, (economists') arguments against CSR as
an illegitimate expenditure would lose their basis and two conflicting positions
would eventually be united. Second, managers in practice could justify CSR
expenses to the shareholders not only due to their moral quality but also with
reference to their economic benefits. Similarly, investors would not have to
worry about a trade-off between their hope for a maximum return on their
investment on the one hand, and their ethical considerations on the other.
However, as long as this parallelism of societal engagement and private business
interests lacks empirical support, it risks corresponding to its advocates' wishful
thinking rather than to a reliable fact that can serve as the ground for
management decisions. Consequently, a profound understanding of CSR's
economic impacts is highly relevant to both academic debate as well as practice.