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Corporate Social

Responsibility - Introduction
-
CSR: responsibility, society and
corporations
- Historical origins
- Possible definitions
- Arguments for and against CSR
- Areas of concern
Corporate Social Responsibility
– uses of term
 By businesses as a statement of intent
or marketing device
 By governments and international
organisations to exhort ‘good’ conduct
 By NGOs as a standard to measure
business activity
 - how meaningful is it?
Historical pressures for CSR
 1930s - Economic depression and poverty
 1960s - Race and gender discrimination
 1990s - Environment and global warming
 2000s - Financial bubble and bust
 Major companies perceived as ‘part of the problem’ – in US
and UK, legislative requirements followed in ’30s/’40s,
’60s/’70s (future prospects…?)
Business response to CSR
 Philanthropy – donations, community work
(1960s)
 Responsiveness – communications, stakeholder
engagement (1970s)
 Commitment – Codes of Conduct,
management/reporting (1980s)
 Embeddedness – reexamining business
processes (1990s-)
 Why might this development have been from
the top down of the ‘responsibility pyramid’?
CSR: narrow or tall?
 Milton Friedman – “the business of
business is business” (making maximum
profit, subject to obeying the law)
 Archie Carroll – making a profit, obeying
the law, meeting society’s ethical
expectations and contributing to the
social good
CSR: what and why?
 voluntary decision (beyond what law
requires?)
 to respect and protect varied stakeholders
(such as?)
 and contribute to wider social and
environmental improvement (how far?)
 - is it a matter of sound business or moral
imperative or both?
UK Government
 “The [UK] Government sees CSR as the
business contribution to our sustainable
development goals. Essentially it is about
how business takes account of its
economic, social and environmental
impacts in the way it operates…
Specifically, we see CSR as the voluntary actions
that business can take, over and above
compliance with minimum legal requirements, to
address both its own competitive interests and
the interests of wider society.”
European Union
 “Being socially responsible means not only
fulfilling legal expectations, but also going
beyond compliance and investing ‘more’ into
human capital, the environment and the
relations with stakeholders. The
experience with investment in environmentally
responsible technologies… suggests that going
beyond legal compliance can contribute to a
company’s competitiveness. Going beyond basic
legal obligations in the social area… can also have a
direct impact on productivity.”
International Chamber of
Commerce
 CSR “is the voluntary
commitment by businesses to
manage their roles in society in a
responsible way”
World Business Council for
Sustainable Development
 CSR “is the continuing commitment
by business to contribute to
economic development while
improving the quality of life of the
workforce and their families as well
as of the community and society at
large”
Arguments for CSR
 Corporations granted existence by society through
law – ‘licence to operate’ needed
 Legal requirements are a floor for behaviour, not
the whole story
 Ethical case - emerging and evolving global norms
should concern companies
 Business case – improving reputation, avoiding
threats, seizing opportunities
Arguments against CSR
 Only real human beings can sensibly be
‘responsible’ (or ‘irresponsible’)
 ‘Shareholders’ money’ – should not be spent
on others, except as law demands
 Businesses should not do or try to do
Governments’ job for them
 Inefficient and too vague – accountable to all
really means accountable to none
Disasters and dilemmas
 Nike and ‘sweatshops’ – cheap labour
versus basic development; child labour
and family survival…
 Shell and Nigeria – complicity in
oppression; engagement with
governments
 Union Carbide and Bhopal
 Nestle and infant formula
Key areas of concern
 Labour standards and human rights issues –
especially in developing world (ILO)
 Bribery and corruption issues (OECD)
 Environmental protection – especially climate
change and industrial pollution
 Financial risk and reward
Corporate Social
Responsibility – Good
Business or Good Ethics
(or both? or neither?)
- The ‘Business case’ for CSR
- The ‘Ethical case’ for CSR

- Profits and principles,

compatible or conflicting?
Business Case for CSR 1 -
stakeholders
 Consumers may boycott
‘irresponsible’ companies (Nestle,
Shell…)
 Employees may choose alternative
workplaces
 Investors may avoid companies seen
as short-termist/ unethical
Business case for CSR 2 -
strategy
 ‘Brand premium’ may suffer as a result of
bad publicity
 Prescriptive regulation may be imposed if
business or industry fails to act
 Avoidable costs may be incurred such as
compensation ot later remedial action
Proof of profits?
 Difficult to find comparable ‘responsible’ and
‘irresponsible’ companies
 Not easy to establish a connection between
‘responsibility’ and results
 JC Collins and JI Porras, ‘Built to Last’, Century,
1998 – ‘visionary companies’ outperform
competitors: about ‘more than profits’
 M Goyder, ‘Living Tomorrow’s Company’,
Gower 1998 – having clear values, building
strong relationships key to lasting success
Building a brand
 Marks & Spencer:
 fair trade
 ‘Plan A’ on sustainability
 Health

 What is the market?


 What is the benefit?
Limits of the business case
 Not all businesses are directly
consumer-facing
 Businesses may operate in different
markets e.g. value/ middle/ premium
 Without regulation the ‘irresponsible’
may undercut the responsible
CSR: Ethical case – social
 Companies are powerful actors in
society whose resources can have
major effects

 Companies rely on many stakeholder


groups, not only shareholders
CSR: Ethical case
- responsible
 Corporate systems and structures
(rather than individual will) can result
in harm

 Is it ethically justifiable to ‘exploit’


other stakeholders to benefit the
shareholders?
Ethics and effects
 Stakeholder treatment – maximising
utility (Mill); treating people as ‘ends
in themselves’ (Kant); basic virtues -
justice, benevolence (Adam Smith)
 Social context – how much is relative
to a particular place and culture?
Does the role of business vary
depending on its location?
Engagement and
withdrawal
 Burma boycott – companies that
have withdrawn
 Should some regimes/locations be
excluded from investment?

 Are boycotts right?


 Why?
Objections to ethical case
 Lack of focus on profit reduces
business effectiveness (general
disutility)
 Managers should not make socio-
political judgments beyond obeying
the law
 Whose morals count here, e.g. high
labour standards or more jobs?
Profit and Principles
 Often, the two may support each other (at
least over the long term): e.g. using less
energy saves money; better-trained workers
are more productive;
 Sometimes, however, cutting costs may be at
the expense of, e.g., labour and environmental
standards. What should be the
bottom line?
Summing up…
 Business case important and often
persuasive but not always solid;
 Ethical case tenable but increasingly
complex to elaborate;
 Link to next point: to what extent is
there a need for more regulation?
Possible synthesis
 Instrumental (profit-driven) view of
business is too narrow?
 Putting all stakeholders on same footing is
too broad?
 Special (fiduciary) duty to shareholders?
 Different responsibilities to other groups?
CSR: crossover with law
 Labour issues
 Environmental concerns
 Consumer protection
 Finance and accounting policies
 What rules should apply
 - to all businesses?
 - in all locations?
 Further action a matter for CSR?
Government: balancing varied
demands
 Is business too powerful (at the
expense of the less
wealthy/organised)?

 Are NGOs given an appropriate


hearing (considering their specific
agendas and expertise)?
In favour of legislation
 Democratic political concerns should
come before business profit
 Some issues are simply too serious to
be left to voluntary action
 Business has too often failed to live up
to standards it proclaimed
 Law creates a level playing field for all
businesses in a sector
In favour of voluntarism
 Major companies are the real leaders in
good CSR practice
 Legislation restricts beneficial
innovation
 Different sectors and sizes of business
will vary in approach
 Market forces will lead companies to
‘do the right thing’
What can governments do?
 Spreading message on CSR
 Rewarding ‘champions’
 Facilitating transparency
 Co-ordinating practice between cos.
 Building relationships with NGOs
 Linking CSR to wider public policy
Regulatory techniques
 Supporting compliance with Codes of
Conduct
 Requiring publication of social and
environmental performance
information
 Incentives for ‘good’ behaviour
 Possibility of criminal action - last
resort?
Issues for individual
governments
 Pressures to deregulate
 Developed world – avoidance of additional costs
(maintaining competitiveness)
 Developing world – concern about imposing costs
(attracting investment)
 Power of business (Naomi Klein, No Logo, 2000;
Noreena Hertz, The Silent Takeover, 2001)
European Commission
Communication March 2006
 The Commission… wishes to give greater political
visibility to CSR, to acknowledge what European
enterprises already do in this field and to encourage
them to do more.
 Because CSR is fundamentally about voluntary
business behaviour, an approach involving additional
obligations and administrative requirements for
business risks being counter-productive and would be
contrary to the principles of better regulation.
 Acknowledging that enterprises are the primary actors
in CSR, the Commission has decided that it can best
achieve its objectives by working more closely with
European business…
European Parliament
Resolution of 13 March 2007
on CSR
 Concern about genuineness of
dialogue including employees
 Concern about competitiveness and
sustainability
 Concern about reporting
 Concern about global supply chains
EU Focus
 Business contribution to delivering
sustainable growth both
environmentally and socially
 CSR defined as being about dealings
with stakeholders and wider society
(corporate governance about
relations between management and
shareholders)
OECD Guidelines for
Multinational Enterprises
(revised 2000)
 Guidelines cover:
 General policies
 Disclosure
 Employment and Industrial Relations
 Environment
 Combating Bribery
 Consumer Interests
 Science and Technology
 Competition
 Taxation
OECD approach
 Voluntary and non-binding
 Addressed to companies operating

from OR in OECD countries


 National Contact Points are

established for information


OECD impact
 Encouragement to spread jobs
and technology
 Reference to national laws –

diversity persists
 On complaints, name and shame

only
United Nations Global Compact
(launched 2000, as amended)
 Human Rights
 Labour standards
 Environmental protection
 Combating Bribery

 - embedded in corporate operations


 - subject to regular reporting
UN GC advantages
 Grounded in established provisions
known from international law
 Strong involvement of NGOs as well
as business
UN critics
 Problems with possible ‘bluewash’ –
good public relations without real
responsibility
 ‘Naming and shaming’ participants
whose reporting is inadequate too
slow
A ‘third way’?
 Codes of Conduct as ‘soft law’, self-
generated by business but with
consequences for non-compliance
 Transparency requirements –
requiring reporting to enable informed
choice
 Stakeholder participation with
business and government
Responsible conduct
‘required’?
 Linked in to stock exchange listing
via reporting
 Linked in to obtaining of licences and
permissions
 Defence to legal challenge if key CSR
standards were followed?
A Market for Virtue?
 How concerned are customers about
e.g. labour standards and
environmental issues?
 How concerned are employees?
 Crucially today, how concerned are
shareholders?
 Are they well informed to choose?
Management Viewpoint
 Charitable donations are no longer
enough?
 What are the values and mission of
the company?
 Obedience to laws of host state not
enough?
 Can the company ultimately be
profitable?