CORPORATE SOCIAL RESPONSIBILITY

CORPORATE SOCIAL RESPONSIBILITYFrom \"The A to Z of Corporate Social Responsibility\"The concept of corporate social responsibility (CSR) refers to the general belief held by growing numbers of citizens that modernbusinesses have responsibilities to society that extend beyond their obligations to the stockholders or investors in the firm. Theobligation to investors, of course, is to generate profits for the owners and maximise long-term wealth of shareholders. Othersocietal stakeholders that business would also have some responsibility to typically include consumers, employees, thecommunity at large, government, and the natural environment. The CSR concept applies to all size organisations, but discussionstend to focus on large organisations because they tend to be more visible and have more power. And, as many have observed,with power comes responsibility.A related concept is that of corporate social performance (CSP). For practical purposes, CSP might be seen as an extension ofthe concept of CSR that focuses on actual results achieved rather than the general notion of businesses’ accountability orresponsibility to society. Thus, CSP is a natural consequence or follow-on to CSR. In fact, it could well be argued that if CSR doesnot lead to CSP then it is vacuous or powerless. Interestingly, many advocates of CSR naturally assume that an assumption ofresponsibility will lead to results or outcomes. Therefore, the distinction between the two is often a matter of semantics that is ofmore interest to academics than to practitioners. Most of our discussion will be focused on CSR with the general assumption thatCSP is a vital and logical consequence.Evolution of the CSR conceptThe definition of CSR has evolved over the decades, generally becoming more precise as to the types of activities and practicesthat might be subsumed under the concept. Early definitions were often general and ambiguous. Over the decades, definitions ofCSR have reflected concerns such as:Seriously considering the impact of company actions on others;The obligation of managers to protect and improve the welfare of society; andMeeting economic and legal responsibilities and extending beyond these obligations.A more comprehensive definition of CSR is that it encompasses the economic, legal, ethical, and discretionary or philanthropicexpectations that society has of organisations at a given point in time. This definition specifies four different, but interrelated,categories of responsibilities that business has towards society. This characterisation also attempts to place the traditionaleconomic and legal expectations of business in context by combining them with more socially oriented concerns such as ethicsand philanthropy.A brief elaboration of this definition is useful. First, and foremost, business has a responsibility which is economic in nature orkind. Before anything else, the business institution is the basic economic unit in society. As such it has a responsibility to producegoods and services that society wants and to sell them at a profit. All other business roles are predicated on this fundamentalassumption. The economic element of the definition suggests that society requires business to produce goods and services andsell them at a profit. This is how the capitalistic economic system is designed and functions. Firms that do not generate economicsustainability go out of business and become irrelevant.Just as society expects business to make a profit (as an incentive and reward) for its efficiency and effectiveness, society expectsand requires business to obey the law. The law, in its most rudimentary form, depicts the basic ‘rules of the game’ by whichbusiness is expected to function. Society expects business to fulfil its economic mission within the framework of legalrequirements set forth by the society’s legal system. Law may be thought of as ‘codified’ ethics. Thus, the legal responsibility isthe second part of this CSR definition.The next two responsibilities attempt to specify the nature or character of the obligations that extend beyond obedience to thelaw. The ethical responsibility represents the kinds of behaviours and ethical norms that society expects business to follow.These ethical responsibilities extend to actions, decisions and practices which are beyond what is required by the law. Thoughthey seem to be always expanding, they nevertheless exist as expectations ‘over and beyond’ legal requirements.Finally, there are discretionary or philanthropic responsibilities. These represent voluntary roles, initiatives, and practices thatbusiness assumes but for which society does not provide as clear an expectation as in the ethical responsibility. These are left toindividual managers’ and corporations’ judgement and choice; therefore, they are referred to as discretionary. Regardless oftheir voluntary nature, the expectation that business perform these is still held by society. This expectation is driven by socialnorms. The specific activities are guided by businesses’ desire to engage in social roles not mandated, not required by law, andnorms. The specific activities are guided by businesses’ desire to engage in social roles not mandated, not required by law, andnot expected of businesses in an ethical sense, but which are becoming increasingly strategic. Examples of these voluntary

activities include making philanthropic and charitable contributions, employee volunteerism, support of non-profit organisations,and other attempts to foster improved relationships with various stakeholder groups. In short, these ethical and philanthropicactivities embrace the whole range of how business attempts to do well by doing good.

Though this four part definition includes an economic responsibility, many today still think of the economic component as whatthe business firm does for itself and the legal, ethical and discretionary (or philanthropic) components as what business does forothers. While this distinction represents the more commonly held view of CSR, it is important to think about economicperformance as something business does for society as well, though society seldom looks at it in this way.

Whatever the definition used, CSR is all about business performance in a variety of social and environmental topic areas thatusually embrace issues of diversity, philanthropy, socially responsible investing (SRI), environment, human rights, workplaceissues, business ethics, sustainability, community development and corporate governance.

Business’s interest in CSR

Academics have had an interest in the concept of CSR for close to 50 years. But, it is important to emphasise that the businesscommunity has had a parallel development of its interest in the concepts as well, though they have not always been clearlyarticulated. The business community, moreover, has been less interested in academic refinements of the concept and more

interested in what all this means for them, in practice. Prominent business organisations have developed specialised awards forfirms’ social performance. One example of this would be Fortune magazine’s ‘most admired’ and ‘least admired’ categories ofreputational performance. Among Fortune’s eight attributes of reputation, one will find the category of performance titled ‘socialresponsibility’. The Conference Board is another organisation that has developed an award for corporate leadership in the CSRrealm. The Conference Board annually gives an award titled the ‘Ron Brown Award for Corporate Leadership’ that recognisescompanies for outstanding achievements in community and employee relations. Among the core principles for this award are thatthe company be committed to corporate citizenship, express corporate citizenship as a shared value visible at all levels, and itmust be integrated into the company’s corporate strategy.

For many years now, Business Ethics magazine has published its list of Annual Business Ethics and Corporate Citizenship

Awards. In these awards, the magazine has highlighted companies that have made stellar achievements in CSR/CSP. One of theimportant criteria used by the magazine in making this award is that the companies have programmes or initiatives in socialresponsibility that demonstrate sincerity and ongoing vibrancy that reaches deep into the company. The award criteria alsostipulate that the company honoured must be a standout in at least one area of social responsibility, though the recipients neednot be exemplary in all areas.

Though one will always find individual business people who might reject or fight the idea of CSR/CSP, for the most part today,large companies all over the world have accepted the idea and internalised it. One of the best examples of this acceptance wasthe creation in 1992 of the association titled Business for Social Responsibility (BSR) in the USA. BSR is a national business

association that helps companies seeking to implement policies and practices that contribute to the companies’ sustainability andresponsible success. In its statement of purpose, BSR describes itself as a global organisation that helps its member companiesachieve success in ways that respect ethical values, people, communities, and the environment. A goal of BSR is to make CSR anintegral part of business operations and strategies. An illustrative list of BSR’s over 1000 members includes such well-knowncompanies as ABB, Inc., AstraZeneca plc, Coca-Cola, Johnson & Johnson, Nike, Inc., Office Max, General Electric, General

Motors, UPS, Procter & Gamble, Sony, Staples, Inc. and Wal-Mart. Similar organisations exist now in Europe, such as Business inthe Community, or Asia, such as CSR Asia.

The business case for corporate social responsibility

After weighing the pros and cons of CSR, most businesses today embrace the idea. In recent years, the ‘ business case’ for CSRhas been unfolding. Before buying in to the idea of CSR, many business executives have insisted that the ‘ business case’ for it befurther developed. The business case embraces arguments or rationales as to why businesspeople believe these concepts bringdistinct benefits or advantages to companies specifically, and the business community generally. Even the astute business

strategy expert, Michael Porter, who for a long time has extolled the virtues of competitive advantage, has embraced the beliefthat corporate and social initiatives are intertwined. Porter has argued that companies today ought to invest in CSR as part oftheir business strategy to become more competitive. Of course, prior to Porter, many CSR academics had been presenting thissame argument.

Simon Zadek, a European, has presented four different business rationales for being a civil (socially responsible) corporation.These reasons form a composite justification for business adopting a CSR strategy. First, is the defensive approach. This

approach to CSR is designed to alleviate pain. That is, companies should pursue CSR to avoid the pressures that create costs forthem. Second, is the cost – benefit approach. This traditional approach holds that firms will undertake those activities that yield agreater benefit than cost. Third, is the strategic approach. In this rationale, firms will recognise the changing environment andengage in CSR as part of a deliberate corporate strategy. Finally, the innovation and learning approach is proposed. Here, anactive engagement with CSR provides new opportunities to understand the marketplace and enhance organisational learning,which leads to competitive advantage. Most of these rationales have been around for years, but Zadek has presented them as an

which leads to competitive advantage. Most of these rationales have been around for years, but Zadek has presented them as anexcellent, composite set of business reasons for pursuing CSR.

Putting forth the business case for CSR requires a careful and comprehensive elucidation of the reasons why companies

increasingly understand that CSR is in their best interests to pursue. Two particular studies have contributed towards buildingthis case. First, a study by PricewaterhouseCoopers, presented in their 2002 Sustainability Survey Report, identifies thefollowing top 10 reasons why companies are deciding to be more socially responsible:

Enhanced reputationCompetitive advantageCost savingsIndustry trends

CEO/board commitmentCustomer demandSRI demandTop-line growthShareholder demandAccess to capital

Second, a survey conducted by The Aspen Institute, in their Business and Society Program, queried MBA student attitudes

regarding the question of how companies will benefit from fulfilling their social responsibilities. Their responses, in sequence ofimportance, included:

A better public image/reputationGreater customer loyalty

A more satisfied/productive workforceFewer regulatory or legal problemsLong-term viability in the marketplaceA stronger/healthier communityIncreased revenuesLower cost of capital

Easier access to foreign markets

Between these two lists, a comprehensive case for business interest in CSR/CSP is documented. It can be seen how CSR/CSP notonly benefits society and stakeholders, but how it provides specific, business-related benefits for business as well.

Examples of CSR in practice

There are many ways in which companies may manifest their CSR in their communities and abroad. Most of these initiativeswould fall in the category of discretionary, or philanthropic activities, but some border on improving some ethical situation forthe stakeholders with whom they come into contact. Common types of CSR initiatives include corporate contributions, orphilanthropy, employee volunteerism, community relations, becoming an outstanding employer for specific employee groups(such as women, older workers, or minorities), making environmental improvements that exceed what is required by law,designing and using codes of conduct, and so on.

Among the 100 Best Corporate Citizens selected in 2006 by Business Ethics magazine, a number of illuminating examples of CSRin practice are provided. Green Mountain Coffee Roasters of Waterbury, Vermont, was recognised for its meticulous attention to

in practice are provided. Green Mountain Coffee Roasters of Waterbury, Vermont, was recognised for its meticulous attention toCSR including its pioneering work in the fair trade movement, which pays coffee growers stable, fair prices.

Another example of CSR in practice is the Chick-fil-A restaurant chain based in Atlanta, Georgia. Founder and CEO Truett Cathyhas earned an outstanding reputation as a business executive deeply concerned with his employees and communities. Throughthe WinShape Center Foundation, funded by Chick-fil-A, the company operates foster homes for more than 120 children,

sponsors a summer camp, and has hosted more than 21 000 children since 1985. Chick-fil-A has also sponsored major charity golftournaments.

In the immediate aftermath of Hurricane Katrina in 2005, judged to be the worst and most expensive ever in terms of

destruction, hundreds of companies made significant contributions to the victims and cities of New Orleans, Biloxi, Gulfport andthe entire Gulf Coast of the US. These CSR efforts have been noted as one of the important ways by which business can helppeople and communities in need.

As seen in the examples presented, there are a multitude of ways that companies have manifested their corporate socialresponsibilities with respect to communities, employees, consumers, competitors, and the natural environment.

CSR in the future

What is the future for corporate social responsibility? The most optimistic perspective seems dominant and it is depicted well bySteven D. Lydenberg in his book Corporations and the Public Interest: Guiding the Invisible Hand. Lydenberg sees CSR as ‘amajor secular development, driven by a long-term reevaluation of the role of corporations in society’. Lydenberg says thisre-evaluation is more evident in Europe, where the stakeholder responsibility notion is more readily assumed, but that US

business people are more sceptical of this assumption. He goes on to argue, however, that the European influence will be veryhard to resist over the long run.

By contrast with the optimistic perspective, David Vogel is genuinely sceptical of CSR and he develops this argument in his book The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, in which he critiques CSR’s influence and

success. Vogel is very much of the mind that CSR will not be successful until mainstream companies begin reporting some aspectof CSR as being critical to the company’s past or future performance. In other words, CSR is successful only to the extent that itadds to the bottom line and can be specifically delineated as having made such an impact. In reacting to Vogel’s scepticism, itmust be observed that this convergence of financial and social objectives characterises the trajectory that CSR has taken in thepast two decades.

It is evident by CSR practices and trends, that social responsibility has both a social component as well as a business component.In today’s world of intense global competition, it is clear that CSR can be sustainable only so long as it continues to add value tocorporate bottom lines. It must be observed, moreover, that it is that conglomerate of stakeholders known as society, or the

public, not just business executives alone, that plays an increasing role in what constitutes business success and for that reason,CSR has an upbeat future in the global business arena. The pressures of global competition will continue to intensify, however,and this will dictate that the ‘ business case’ for CSR will always be at the centre of discussions.

ARCHIE CARROLL

2007 John Wiley & Sons Ltd

Persistent URL to this entry: http://www.credoreference.com/entry.do?format=html&id=9702958APACORPORATE SOCIAL RESPONSIBILITY. (2007). In The A to Z of Corporate Social Responsibility. Retrieved fromhttp://www.credoreference.com/entry/wileyazcsr/corporate_social_responsibilityChicagoThe A to Z of Corporate Social Responsibility. Hoboken: Wiley, 2007. s.v. \"CORPORATE SOCIAL RESPONSIBILITY,\"http://www.credoreference.com/entry/wileyazcsr/corporate_social_responsibility (accessed October 17, 2011).Harvard‘CORPORATE SOCIAL RESPONSIBILITY’ 2007, in The A to Z of Corporate Social Responsibility, Wiley, Hoboken, NJ, USA,viewed 17 October 2011, MLA\"CORPORATE SOCIAL RESPONSIBILITY.\" The A to Z of Corporate Social Responsibility. Hoboken: Wiley, 2007. CredoReference. Web. 17 October 2011.