Corporate social-responsibility

Contents

Introduction to Corporate Social Responsibility (CSR)

Managing CSR

Corporate culture and CSR

Understanding local values, culture and traditions

Conceptualizing and development debate

CSR and Competiveness

Perspectives on CSR

CSR in global context

Criticisms and concerns

Copyright © 2008 - 2012

managementstudyguide.c

Introduction

Corporate Social Responsibility (CSR) as an

analytical tool can be used in the field of

Business Management to facilitate different

business practices from both an ethical angle

and a utilitarian perspective. Business

Managers should try to entrench networks of

trust, loyalty and cooperation within and

without their organizations. This also makes

good business sense in terms of rational

choice theory

Copyright © 2008 - 2012


CSR key benefits and findings

COPORATE

RESPONSIBILITY

• Good business is also about establishing

customer-friendly images in a manner that

highlights values such as reliability,

trustworthiness, quality, economy and durability.

These values evolve our time and are underpinned

by a sustained relationship of confidence

• Brand equity and positioning so generally depend

upon the successful merchandizing of products

and their images

Copyright © 2008 - 2012


CSR key benefits and findings

COPORATE

RESPONSIBILITY

• The problematique of this edited anthology on CSR

is structured around the polemic of civil societal

institutions (networks and embedding) and

democratic governance (including growth and

participating development) among other critical

areas of social scientific research

• The line of theoretical research is expected to

contribute new knowledge and facilitate innovative

research to better understand the interactions and

interplay between in their institutions

Copyright © 2008 - 2012


Dynamics of Trust

A perspective analysis of the dynamics

of trust in any business organization

happens to be a most problematique

exercise that has to be carried out over

a period of time and that involves

multiple stakeholders as well

Copyright © 2008 - 2012


Dynamics of Trust

Why should one trust his/her peers,

superiors and subordinates?

Is trust a construct of culture

specifics?

Can trust be equated with the given

socio-politico-economic realities of

any spatiotemporal context?

Can trust be learned or emulated?

Can trust be analyzed in terms of

cost-benefit calculations?

These are rather disquieting questions

with no unlinear answers. Business

leaders have to realize that the

pedagogics of trust and resilience of

professional relationships can only be

tested against either hypothetical or real

life situations, where the actual

motivations, aspirations, perceptions,

preferences and culture root paradigms

of individuals or groups, are explicitly

exposed in the given content of their

informed self-interest

Copyright © 2008 - 2012


The Relationship

Why should one cooperate with another?

Is it a learnt reflex or is it based on

enlightened self-knowledge and self-

interest? Would cooperation lead to

intense creativity, new images, different

ideas and better emotional and stress

management?

Relationships can be built upon

cooperation, competition and conflict.

Each such mode will explore new models

of interface and would finally lead to an

inchoate world of new possibilities where

men and women in the industry would

steadily learn how best to unlearn past

lessons and deschool themselves from

the cultural baggage handed down the

generations

Copyright © 2008 - 2012


Management of choices

The issue of CSR is all about the

management of choices in the social work

place

Why should workers obey the

management?

What are the concerns of the management

that are reflected in its style of leadership?

Is loyalty related to motivation? Or is loyalty

a function of the chain of command?

What are the effective outputs of the

hierarchy?

Copyright © 2008 - 2012



The management and workers have to mutually entrench an ethos

of cooperation that would both create and sustain the values of

ownership/trusteeship in their given organization

The very fact that targets have to be achieved and new targets

innovated point to the fact that the organizational health of any

given industry is sound. The point of saturation has to be ably and

creatively transformed into an arena of new possibilities that lead to

new challenges and innovative gestures

Achievement of targets is critically dependent on team

performance, and so the team players have to share different

degrees of responsibilities and have to be burdened with different

measures of failures and successes

Copyright © 2008 - 2012



The most important consideration at this point is to determine who

can shoulder what amount of burden. So the question of

authoritative allocation of values has also be pondered upon

actively by the management concerned

The issue of ownership/Trusteeship is also organically related to

the issue of institutions. Each business organization in sociological

terms, is an institution replete with history of evolution, work

culture, trade union ethics and typical management practices. So

the study of business organizations as dynamic institutions of

Power, Authority, Repression, Obedience, Reward and Punishment

may lead to an ulterior understanding of CSR

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


Approaches of Corporate Social Responsibility

The most common approach is “Philanthropy”, which includes donations and

aid to local organizations and backward communities. This approach was

not liked by few organizations since there was no development of skills of

the people, whereas community-based development generally leads to more

sustainable development. Another approach to CSR is to incorporate the

CSR strategy directly into the business strategy of an organization. Another

approach is garnering increasing corporate responsibility interest. This is

called Creating Shared Value, or CSV. The shared value model is based on

the idea that corporate success and social welfare are interdependent.

Copyright © 2008 - 2012


Benefits of Corporate Social Responsibility

The benefits of CSR in an organization will likely rest on any of the following

HUMAN

RESOURCE

A CSR program

can be an aid to

recruitment and

retention. Poten-

tial recruits often

ask about a firm's

CSR policy during

an interview, and

having a

comprehensive

policy can give

an advantage.

RISK

MANAGE-

MENT

Managing risk is a

central part of

many corporate

strategies.

Reputations can

be ruined in hours

through incidents

such as corruption

scandals or

environmental

accidents.

BRAND

DIFFEREN-

TIATION

CSR can play a

role in building

customer loyalty

based on

distinctive ethical

values.

LICENSE TO

OPERATE

Corporations are

keen to avoid

interference in their

business through

taxation or

regulations. By

taking substantive

voluntary steps,

they can persuade

governments and

the wider public

that they are taking

issues such as

health and safety.

Copyright © 2008 - 2012


History of Corporate Social Responsibility (CSR)

Though the roots of the concept that we know today

as Corporate Social Responsibility have a long and

wide-ranging history, it is most a product of the 20th

century. Inspite of its recent growth and popularity,

one can trace for centuries evidence of the business

community’s concern for society. Though it is possible

to see evidence of CSR throughout the world, mostly

in developed countries, most early writings have been

most obvious in the U.S.

Copyright © 2008 - 2012


Social initiatives and practices

In the mid-to-late 1800s, it is apparent that emerging businesses were

especially concerned with employees and how to make them more

productive. Now, it is difficult to find out what the organization is doing for

business reasons and what the organization is doing for social reasons. In

addition to concern for ‘employees philanthropy’ was appearing on the

scene in late 1800s, but it was difficult to analyze whether it was ‘individual

philanthropy’ or ‘business philanthropy’. During the period 1918-29,

Heald has suggested that the ‘community chest movement’ also helped

to shape business views of philanthropy, one of the earliest forms of CSR.

As business executives came into contact with social workers, new views of

corporate responsibility began to emerge.

Copyright © 2008 - 2012


CSR takes shape in the 1950s

Patrick Murphy, University of Michigan, classified as 4 CSR eras. Murphy argued

that the period up to the 1950s was the ‘Philanthropy era’ in which

organizations donated to charities. From 1953 to 1967, it is ‘awareness era’, in

which there became more recognition of the overall responsibility of business and

its involvement in community affairs. The period 1968-73 was termed as ‘issue

era’ where companies began focusing on specific issues such as urban decay,

racial discrimination and pollution problems. Finally, in the ‘responsiveness

era’, 1974-8, and continuing beyond, companies began taking serious

management and organizational actions to address CSR issues. The decade of

the 1950s was of more ‘talk’ than ‘action’ with respect to CSR. It was a period of

changing attitudes, with business executives learning to get confortable with CSR

talk. There was very few corporate actions, beyond philanthropy, to report that

stood out in terms of accommodating this new theme.

Copyright © 2008 - 2012


Refinement

By the 2000s, the emphasis on “theoretical” contribution to the concept

and meaning of CSR had given way to empirical research on the topic

and a splintering of interest away from CSR and into related topics such

as stakeholder theory, business ethics, sustainability and corporate

citizenship. Some development and empirical research continued on the

CSR construct.

Copyright © 2008 - 2012


Drivers

It is important to address the central question of

what makes CSR in developing countries different

from its typical manifestation in the developed

world, as defined by America and Europe. One

powerful way to do this is by examining the various

drivers for CSR in developing countries. Although

they are not all unique to developing countries,

together they build up a distinctive picture of how

CSR is conceived, incentivized, and practiced in

emerging economies.

Copyright © 2008 - 2012


Corporate Social Responsibility Theories

Corporate Social Performance (CSP)

CSP theory has evolved from several

previous notions and approaches. CSP is

understood as ‘the configuration in the

business organization of principles of social

responsibility, processes of response to

social requirements, and policies, programs

and tangible results the company’s

relations with society. This theory

maintains that business, apart from wealth

creations, also has responsibilities for

social problems created by business or by

other causes beyond its economic and

legal responsibility.

Copyright © 2008 - 2012


Shareholder Value Theory (SVT)

This approach, which currently is

presented as ‘shareholder value-

oriented’, usually takes shareholder

value maximization as the supreme

reference for corporate governance

and business management. Generally

‘share holder value-oriented’ goes

along with the Agency theory, which

has been dominant in many schools.

In the theory, owners are the principal

and managers are the agents.

This theory holds that only social

responsibility of business is making

profits and, as the supreme goal,

increasing the economic value of the

company for its shareholders. Other

social activities that companies could

engage in would only be acceptable if

there are prescribed by law or if they

contribute to the maximization of

shareholders value. This theory

underlies neoclassical economic

theory, primarily concerned with

shareholders utility maximization.

Copyright © 2008 - 2012


Stakeholder Theory

In contrast to the ‘shareholder theory’ the ‘stakeholder theory’

takes into account the individual or groups with a stake in or

claim on the company.

In general sense, stakeholders are groups and individuals

who benefit from or are harmed by corporate actions.

Stakeholder theory was first presented as managerial theory.

‘The stakeholder concept’ provides a new way of thinking

about strategic management – that is, how a corporation can

and should set and implement direction.

By paying attention to strategic management, executives can

begin to put a corporation back on the road to success.

Copyright © 2008 - 2012


Corporate citizenship

The term “Corporate Citizenship” was introduced

in the 1980s into the business and society

relationship mainly through practitioners.

This has been understood as an expression of

good corporate citizenship.

For decades, business leaders have been involving

their companies in philanthropic activities and

donations to the community where business

operated.

According to Carroll, ‘be a good corporate citizen’

includes ‘actively engaging in acts or programs to

promote human welfare or goodwill and ‘be a good

global corporate citizen’ is related to philanthropic

responsibility which reflects society’s expectations

that business will engage in social activities that are

not mandated by law nor generally expected of

business in an ethical sense.

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


Definition

Corporate Social Responsibility (CSR) is a concept whereby

organizations consider the interests of society by taking

responsibility for the impact of their activities on customers,

employees, shareholders, communities and the

environment in all aspects of their operations

Copyright © 2008 - 2012


Accountability

Does the case for Corporate Social

Responsibility apply to all kinds of company?

Companies have to be accountable for

Can benefits aggregate across an economy

or is it a zero-sum game?

Does it introduce inefficiency when scales up to

the level of the economy as a whole, as

classical economics would argue?

Copyright © 2008 - 2012


What does it ask for?

Corporations are human endeavors, and all

human endeavors should benefit our society

and reflect our morals. They should provide

more than just investor return

Copyright © 2008 - 2012


What does it ask for?

There are many ways that Corporations do benefit to society

They provide jobs They produce goods and

services that people want

They provide return to

investors

But . . .

Corporations in addition meet a higher moral standard:

• To minimize activities that harm life or the environment

• To be truthful

• To bring joy to life and reduce suffering, even if in very small and mundane ways

• To stop encouraging people’s craving and addiction

Copyright © 2008 - 2012


Five maturity stages of CSR

5 MATURITY

STAGESOF

CSR

STRATEGIC MANAGERIAL

COMPLIANCE

DEFENSIVE

CIVIL

Deny practices, outcomes

or responsibilities

“It’s not our job to fix that”

Adopt a policy-based

compliance approach as a

cost of doing business

“We’ll do just as much as

we have to”

Embed the societal issue

into core management

processes.

“It’s the business”

Integrate the societal

issue into core

businesses processes

“It gives us a

competitive edge”

Promote broad industry

participation in

Corporate

Responsibility

“We need to make sure

everybody does it”

Copyright © 2008 - 2012


Why to study?

• Study reveals Corporate Responsibility

is growing in decision-making. After the

accounting scandals, governments

have introduced new legislation new

codes of conduct have been developed

and corporate boards have been ‘re-

balanced’ to include more independent

members

• The over-riding goal in every case have

been to restore investor confidence.

However, these changes have also

brought with them the realization that

good governance is a key topic not only

for shareholders but also for a much

broader set of stakeholders, including

customers, employees, suppliers and

the wider community

Copyright © 2008 - 2012


Why to study?

• That in turn made the term Corporate

Responsibility (CR) much more familiar

than ever before in board rooms across

the globe. The line is far from solid, but

CR can be seen as the extension of

governance beyond simple compliance

to embrace broader social values

• A recent survey from the economist

intelligence unit, produced in

cooperation with Oracle Corporation,

rveals that more business executives

and corporate investors are factoring

corporate responsibility into their

decision-making

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


Factors responsible for CSR-development relationships

Awareness of uneven spread of the benefits

and costs of globalization reinvigorated the

debate about the role of MNCs, in

developing countries for sustainable

development. The debate as highlighted

above has often been acerbic and an

emotionally charged, and tends to be driven

by and concentrate on sensational and high

profile cases with limited analysis of common

themes and possible solutions

Copyright © 2008 - 2012


Factors responsible for CSR-development relationships

A careful review of the literature reveals that there are at least three inter-related factors

that have been responsible for this situation

The complexity and absence

of con-sensual definitions for

the concepts of ‘CSR’ and

‘development’

The-over

emphasis

of corporate

responsibility

to the detriment

of reciprocal

responsibility

and the

importance

of context

Limited

analytical focus

in the research

agenda

Copyright © 2008 - 2012


The complexity and absence of consensual definition

The concepts of “CSR’ and

‘Development’ are both complex and

difficult to concensually define, and are,

therefore, open to different

interpretations. The inability to secure a

common definition of CSR is said to

restrict its usefulness as an analytical

tool and a guide to decision makers

Copyright © 2008 - 2012


Over-emphasis on Corporate Responsibility

Emphasis on whether CSR does or does not contribute

to development has led to a lack of reflexity in the

analysis of CSR-development nexus. Analyses very

often fail to problematize adequately the specific

contect of developing countries and ascertain how this

affects what constitutes corporate responsibilities and

the impact of Corporate CSR initiatives on development

Copyright © 2008 - 2012


Limited analytical focus in the research agenda

Another shortcoming of existing

analyses has been the tendency to

focus too much an ‘outcome’ almost

to the detriment of ‘processes’ and

impact.

It is as if in their rush to findout

whether or not CSR meets its

advertised objectives, academics

feel they can afford to treat as

insignificant the question of how

business tries to neet these

objectives

Copyright © 2008 - 2012


The foregoing analytical short comings

are by no means be only challenges

confronting the discourse on CSR

development linkage. The issues are

highlighted here largely because they are

crucial for the advancement of theoritical

development on the field of Corporate

Social Responsibility. It is important

because the most serious problem with

Social Responsibility doctrine is still at

the level of theory rathen than practice

Strengthening the critical perspective of the CSR-

development cycle

Copyright © 2008 - 2012


Managing the problem of conceptual complexity

While the lack of common CSR

definition contraints the conceptual

usefulness of CSR as an analytical

concepts this should not be

exaggerated. Few will deny that

conceptual specificity and clarity will

facilitate intellectual thought and

communication. A number of

frequently used conceots are

intrinsically abstract and, therefire,

inevitably subject to diverse

interpretation

Copyright © 2008 - 2012


The need of focus on reciprocal responsibility

CSR practices do not take place in vacuum.

Such initiatives are often under taken within

certain social, economic and cultural context

with diverse actors seeking to leverage their

interest. There is, therefore, the need for this

complexity to be appreciated not only during

data collection in the field but also in the

analysis of CSR-development linkage

Copyright © 2008 - 2012


A change research focus in analyzing the CSR-development

IMPACT ON SOCIETY

Corporate

Social

Responsibility

So far emphasis on whether CSR contributes to

development says little about the impact of CSR

on society. Besides the issue of analytical

oversight, business impact on development is

difficult to measure. If the impacts of corporate

activity are difficult to assess at local level, then

these difficulties are compounded at larger

scales of analysis

Copyright © 2008 - 2012


The implications of emerging issues and conclusions

The first is how to identify the appropriate balance of responsibilities

between the different actors and how they could beat the combined to

maximize the different actors and how they could best be combined to

maximize the contribution of business to sustainable development

There are two main emerging issues with regard to the critical

challenges facing CSR-development relationships

1

Similarly, by distinguishing between negative injunction and affirmative

duties, the business case argument ceases to be the corner stone of

the argument that drives CSR practices, especially as it relates to

negative injunction duties

2

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


Abstract

Cultural values, traditions and local

knowledge are always have been central

to development, but frequently

overlooked. To some extent the role of

cultures in development is already

centralized, but there is a dilemma over

proclaiming what is appropriate and

inappropriate culture for responsible

development objectives

Copyright © 2008 - 2012


Quote

“. . . unless economic development

has a cultural basis it can never lead

to truly lasting development. Culture

is ‘not’ something ‘to be taken into

consideration’. It is fundamental . . .

– UNESCO 1995:1

Copyright © 2008 - 2012


The synergy

Cultural values,

traditions and

knowledge

Rural livelihoods

Synergy

Exploring synergy between cultures, traditional values and livelihoods

Copyright © 2008 - 2012


Conceptualizing culture and livelihoods – analytical framework

Cultural norms, customs, behaviors and

attitudes are as they are elusive and

dynamic. Therefore, conceptualizing culture

has proven notoriously a difficult task

”Everything should be made as simple as

possible, but not simpler”

Albert Einstein

“Culture consists of patterns, explicit and implicit, of

and for behavior acquired and transmitted by

symbols, constituting the distinctive achievements of

human groups, including their embodiments in

artefacts; the essential core of culture of ‘traditional’

ideas and especially their attached values; culture

systems may, on the one hand, be considered as

products of action, on the other hand as conditioning

elements of further action”

Copyright © 2008 - 2012


Conceptualizing culture and livelihoods – analytical framework

As a concept, livelihood has been

particularly useful in the field of

development, both analytically and

practically. Like culture, livelihood is also a

complex and all-encompassing concept that

is not restricted to the ecological, economic

or productive aspects of life

”Everything should be made as simple as

possible, but not simpler”Albert Einstein

“Livelihood is never just a matter of finding or

making shelter, transacting money, getting food to

put on the family table or to exchange in the market

place. It is equally a matter of ownership and

circulation of information, the management of skills

and relationships”

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


The pyramid of CSR

ECONOMIC RESPONSIBILITY

Be profitable

LEGAL RESPONSIBILITY

Obey the law

ETHICAL RESPONSIBILITY

Be Ethical. Do what is right.

Avoid harm

PHILANTHROPIC

RESPONSIBILITIES

Be a good corporate citizen

Copyright © 2008 - 2012


CSR five areas

CSR

Human

rightsWorkforce

Sustainability

and

environment

Corporate

governance and

accountability

Community

involvement

The company is accountable to shareholders,

government, employees, customers and community.

The hard part: setting targets that would make it

accountable to all these stakeholders

This takes in a huge area including

greenhouse gas emissions, water, paper,

degradation, supply chain impact, green

investment, salinity and agricultural

practices and cultural heritage

This covers areas like fair pay

and conditions, women and

minorities in management roles,

maternity leave and re-entry,

people with disabilities, mature

aged workers, disadvantaged

youth, long term unemployed

and indigenous communities. It

also includes occupational

health and safety, training and

work-life balance

Takes in supply chain

issues, fair trading,

alliances and partnerships

with certain governments

and the impact of products

This covers all sorts of

areas including meaningful

volunteering programs,

staff lending their skills to

the boards of non-profit

organizations and

philanthropy

Copyright © 2008 - 2012


Five key issues that need to be addressed

Companies need to demonstrate CSR as a value

proposition to the board

They need to find ways of getting support from

shareholders and consumers

It is absolutely critical for the organization to

develop CSR audit tools so that they can place a

dollar value and conduct a cost-benefit analysis

of all their CSR expenditure

They need to approach it in a business-like way.

Good CSR should be good business

The CSR programs need to be run at a senior

level. There is no point fobbing it off on to the

corporate affairs or marketing departments

because all that does is create silos and prevent

any impact on the corporate culture

If organizations fail to do all of these, it becomes a meaningless exercise

Copyright © 2008 - 2012


Demonstrates a commitment to society’s value and contribute to

society’s social, environmental, and economic goals through action

Insulate society from the negative impacts of company operations,

products and services

Share benefits of company activities with key stakeholders as well as

with shareholders

Demonstrate that the company can make more money by doing the

right thing

CSR business responsibilities

Copyright © 2008 - 2012


Corporate Social Responsibility – Arguments For

Arguments For

• Addresses social issues business caused and

allows business to be part of the solution

• Protects business self-interest

• Limits future government intervention

• Addresses issues by using business resources

and expertise

• Addresses issues by being proactive

Copyright © 2008 - 2012


Corporate Social Responsibility – Arguments Against

Arguments

Against

• Restricts the free market goal of profit

maximization

• Business is not equipped to handle social

activities

• Dilutes the primary aim of business

• Limits the ability to compete in a global market

place

Copyright © 2008 - 2012


Contents


Managing CSR





Perspectives on CSR



Copyright © 2008 - 2012


Corporate Governance and CSR

The wave of corporate scandals that ushered in the 21st century represented a complete

failure of the checks and balances that good corporate governance is intended to

provide. This failure of corporate governance affected more than the shareholders of

the companies involved.

Employees not only in the firms involved, but of others in the value chains found that

their work was either curtailed or disappeared. Charities that relied or corporate

philanthropy had their budgets reduced dramatically and local governments founds their

tax bases eroded, leadership to deep cuts in the services upon which community

residents depend. The Board of Directors is charged with the ultimate responsibility for

corporate governance.

They are tasked with designing mechanisms that protect shareholder interests and

putting those mechanisms into the place. Board composition is an area of corporate

governance that receives attention for the role of composition in providing governance

guidelines, as well for its role in firm financial and social performance.

Copyright © 2008 - 2012


Corporate Democracy

Despite their heterogeneity in expectation, shareholders have much in

common. They are the owners of the company, and, as such, they

have ultimate control over the corporations. This control carries with

it the right to select the Board of Directors and to voice concerns over

corporate governance. The board then is charged with the response

for ascertaining that managers act in the best interest of the

shareholders.

Boards are charged with being accountable to

shareholders. Accountability is the answerability for one’s

actions or behaviors and it involves both process and

outcome accountability. The recent rash of corporate

scandals involved not only lack of transparency, which

would be bad enough, but also a conscious decisions to

deceive.

Another obstacle on the road to corporate

democracy is the issue of classified boards.

With a classified board, only a fraction of board

members are elected in any given years.

Copyright © 2008 - 2012


Responsibility in the Supply Chain

Firms have consistently

sought to reduce costs

and increase strategic

flexibility by outsourcing

non-core activities

replacing hierarchies with

networks.

At the same time supply

networks have been

substituted for markets as

much of the world trade in

labor-intensive products.

The substitution of supply

networks for markets and

hierarchies has profound

implications for Corporate

Social Responsibility.

While companies are able to

maintain and extend their

economic control over supply

chains, outsourcing devolves the

legal obligations for social and

environmental impacts from the

lead company to suppliers.

On the other hand the

substitution of supply network

for market provides lead

companies with opportunities

for control and influence which

would not have been present

within market relationship.

Such governance structures

may become essential as

buyers become increasingly

involved in product

specification in the supplier.

Copyright © 2008 - 2012


What is Globalization?

“Globalization” refers to the

relationship of culture, people

and economic activity in a

global scenario. Globalization

may contribute to economic

growth in developed and

developing countries through

increased specialization.

Globalization is a process of

interaction and integration among the

people, companies, and governments

of different nations. This process is

driven by inter-national trade and

investment. Globalization has impact

on economic development, culture,

environment, political systems and

human physical well being in

societies.

This current wave of

globalization has been driven by

policies that have opened

economies domestically and

internationally. Technology has

been the other principal driver of

globalization. Advances in

information technology, in

particular, have dramatically

transformed economic life.

Copyright © 2008 - 2012


Traditional paradigm of Corporate Social Responsibility

COPORATE

RESPONSI-

BILITY

In 1993, Shell was confronted with a massive but non-violent

protest by the Ogoni people in Nigeria. Led by the writer Ken Saro

Wiwa, the Ogoni protested against the fact that the money for oil

extracted from their land disappeared into the pockets of corrupt

Nigerian Military junta while for them there was nothing left but a

wasted and highly polluted region.

When Saro Wiwa was arrested as a rebellion leader, human rights

groups urged Shell to use its influence on the Nigerian government

to prevent them from executing him. At that time, Shell Group

chairman Henkstroten argued that the corporation as an economic

actor had no license to interfere with political processes and Shell

preferred to remain politically neutral.

Whatever the scope of corporate responsibility in management

theory and practice, it implicitly builds upon the neoclassical

concept of a strict division of labor between political and economic

actors and domains. The corporation as a private sector should

focus on profit seeking and public problems should be dealt with by

state and its institutions.

Copyright © 2008 - 2012


Towards a new paradigm

We have seen, in a globalized world the capacity of the state to regulate economic behavior

and to set the conditions for market exchange is in decline.

Therefore we have to consider the new form of political regulation above and beyond the

nation-state in order to re-establish the political order and circumscribe economic rationality by

new means of democratic institutions and procedures.

The stakeholder management approach as well as widely accepted attempt to justify CSR

with an empirical argument that social performance contributes to financial performance.

We see failures by state apparatus of all sorts. In addition, due to the individualization and

pluralization of values in social communities, the moral standards get fuzzy and lose their

power.

Current theories in CSR is still dominated by economic view of the firm and an instrumental

view of CSR projects.

Copyright © 2008 - 2012


CSR in developing countries

The rationale for focusing on CSR in developing countries

as distinct from CSR in the developed world is fourfold:

Developing countries represent the

most rapidly expanding economies,

and hence the most lucrative growth

markets for business.

Developing countries are where

globalization, economic growth,

investment, and business activity

are likely to have the most dramatic

social and environmental impacts.

Developing countries are where the

social and environmental crises are

usually most acutely felt in the

world.

Developing countries present a

distinctive set of CSR agenda

challenges which are collectively

quite different to those faced in the

developed world.

Copyright © 2008 - 2012


Drivers of CSR in developing countries

INTERNAL

DRIVERS

EXTERNAL

DRIVERS

Political

reform

Cultural

tradition

Socio-economic

priorities

Governance

gaps

Crisis

response

Market

access

International

standardization

Supply chain

Investment

incentives

Stakeholder

activism

Copyright © 2008 - 2012



CSR in developing countries cannot be divorced from the socio-

political reform process, which often drives business behavior

towards integrating social and ethical issues.

POLITICAL

REFORM

There is a powerful argument that CSR in developing countries is

most directly shaped by the socio-economic environment in which

firms operate and the development priorities this creates.

SOCIO-

ECONOMIC

PRIORITIES

A particular relevance for developing countries is the fact that CSR

is often seen as a way to plug the ‘governance gaps’ left by weak,

corrupt, or under-resourced governments that fail to adequately

provide various social services

GOVER-

NANCE GAPS

Copyright © 2008 - 2012



Various kinds of crises associated with developing countries often

have the effect of catalyzing CSR responses. These crises can be

economic, social, environmental, health-related, or industrial.

CRISIS

RESPONSE

The flipside of the socio-economic priorities driver is to see these

unfulfilled human needs as an untapped market. CSR may also be

seen as an enabler for companies in developing countries trying

to access markets in the developed world.

MARKET

ACCESS

Despite the debate about the Western imposition of CSR

approaches on the global South, there is ample evidence that

CSR codes and standards are a key driver for CSR in developing

countries. Often, CSR is driven by standardization imposed by

multinationals striving to achieve global consistency among its

subsidiaries and operations in developing countries.

INTER-

NATIONAL

STANDARDI-

ZATION

Copyright © 2008 - 2012



The belief that multinational investment is inextricably linked with

the social welfare of developing countries is not a new

phenomenon. However, increasingly these investments are being

screened for CSR performance. Hence, socially responsible

investment (SRI) is becoming another driver for CSR in

developing countries.

INVESTMENT

INCENTIVES

In the absence of strong governmental controls over the social, ethical,

and environmental performance of companies in developing countries,

activism by stakeholder groups has become another critical driver for

CSR. In developing countries, four stakeholder groups emerge as the

most powerful activists for CSR, namely development agencies, trade

unions, international NGOs, and business associations.

STAKE-

HOLDER

ACTIVISM

Another significant driver for CSR in developing countries, especially

among small and medium-sized companies, is the requirements that

are being imposed by multinationals on their supply chains. This

trend began with various ethical trading initiatives, which led to the

growth of fair trade auditing and labeling schemes for agricultural

products sourced in developing countries

SUPPLY

CHAIN

Copyright © 2008 - 2012



While many believe CSR is a Western invention (and this may be

largely true in its modern conception), there is ample evidence that

CSR in developing countries draws strongly on deep-rooted

indigenous cultural traditions of philanthropy, business ethics, and

community embeddedness. Indeed, some of these traditions

go back to ancient times.

CULTURAL

TRADITION

Copyright © 2008 - 2012


CSR pyramid for developing countries

ETHICAL

RESPONSI-

BILITIES

Adopt voluntary codes of

governance and ethics

LEGAL

RESPONSIBILITIES

Ensure good relations

with government officials

PHILANTHROPIC

RESPONSIBILITIES

Set aside funds for corporate

social/community projects

ECONOMIC

RESPONSIBILITIES

Private investment, create

jobs and pay taxes

Copyright © 2008 - 2012


An ideal CSR pyramid

If we work towards an ideal CSR

Pyramid for CSR in developing

countries, improved ethical

responsibilities, incorporating good

governance, should be assigned the

highest CSR priority in developing

countries. Governance reform holds

the key to improvements in all the

other dimensions, including

economic development, rule of law,

and voluntary action.

Hence, embracing more transparent,

ethical governance practices should

form the foundation of CSR practice

in developing countries, which in

turn will provide the enabling

environment for more widespread

responsible business.

Copyright © 2008 - 2012


CSR in various regions – Asia

In a survey of CSR reporting in Asia, nearly three quarters of large

companies in India present themselves as having CSR policies and

practices versus only a quarter in Indonesia. Falling somewhere

between these two extremes are Thailand (42%), Malaysia (32%), and

the Philippines (30%). They also infer from the research that the

evolution of CSR in Asia tends to occur in three waves, with

community involvement being the most established form of CSR,

following by successive second and third waves of socially responsible

production processes and employee relations.

Copyright © 2008 - 2012


CSR in various regions – Africa

The literature on CSR in Africa is heavily dominated by South Africa

while other pockets of research exist for Côte D’Ivoire (e.g. Schrage

and Kenya, Tanzania, and Mali and Zambia. The other themes, such

as stakeholder engagement, social responsibility, and health (including

HIV/AIDS) will move up the agenda as CSR increasingly addresses

these issues in an African context. In practice, however, it is likely that

the economic and philanthropic aspects of CSR (rather than the legal

and ethical responsibilities) will continue to dominate CSR

conceptualization and practice in Africa.

Copyright © 2008 - 2012


CSR in various regions – Latin America

CSR in Latin America is the least covered of the developing country

regions, with the focus mainly on Argentina, Brazil and Mexico,

although Nicaragua and Venezuela also feature. The trend towards

increasing CSR in the region has been generally upward. De Oliveira

(2006) notes that the CSR agenda in Latin America has been heavily

shaped by socio-economic and political conditions, which have tended

to aggravate many environmental and social problems such as

deforestation, unemployment, inequality, and crime. Schmidheiny

(2006) frames this in a constructive way, claiming that CSR is seen by

many Latin Americans as the hope for positive change in the

face of persistent poverty, environmental degradation, corruption, and

economic stagnation. Araya’s (2006) survey of CSR reporting among

the top 250 companies in Latin America also gives some indication of

practices in the region. Overall, 34% of the top companies publish

sustainability information in a separate report, the annual report, or

both, mostly from the energy and natural resources sectors.

Copyright © 2008 - 2012


Nature of business

Critics of CSR debate a number of concerns related to it. These include CSR's relationship to the

fundamental purpose and nature of business and questionable motives for engaging in CSR, including

concerns about insincerity and hypocrisy. The objective of a corporation is to maximize their returns to

the shareholders. Miton Friedman had argued that since people can have social responsibilities,

corporations are only responsible to shareholders. Although there is an acceptance that the

corporations should obey the laws of the country whether they operate, they assert that they have no

other obligation to society. Some people perceive CSR as in-congruent with the very nature and

purpose of business, and indeed a hindrance to free trade. Critics of this argument perceive the free

market as opposed to the well-being of society and a hindrance to human freedom. They ascertain that

the type of capitalism practiced in many countries is a form of economic and cultural imperialism. A

wide variety of individuals and organizations operate in between these poles. CSR proponents point

out that CSR can significantly improve long-term corporate profitability because it reduces risks and

inefficiencies while offering a host of potential benefits such as enhanced brand reputation and

employee engagement.

Copyright © 2008 - 2012


Motives

Some companies like British Petroleum, McDonald's and British American Tobacco started CSR

programs. They argue that the main objective of starting these programs for commercial benefit by

building a good rapport with the government and public. They suggest that corporations which exist

solely to maximize profits are unable to advance the interests of society as a whole.

Another concern is that sometimes companies claim to promote CSR but simultaneously engage in

harmful business practices. For example, since the 1970s, the McDonald's Corporation's association

with Ronald McDonald House has been viewed as CSR and relationship marketing. More recently, as

CSR has become mainstream, the company has beefed up its CSR programs related to its labor,

environmental and other practices.

Similarly, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill, May and Keane ruled that it

was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and

conditions and true that if one eats enough McDonald's food, one's diet may well become high in fat

etc., with the very real risk of heart disease. According to critics, better governmental and international

regulation is necessary to make the companies behave in socially responsible manner.

Copyright © 2008 - 2012


Ethical consumerism

The rise of CSR is because of the popularity of Ethical

consumerism. When the global population increase the

demand for natural resources also increases

proportionately. Because of improvement in technology and

globalization, industrialization is also booming. Consumers

are also becoming more aware of the social and

environmental implications and they make purchasing

decisions related to ethical concerns.

Copyright © 2008 - 2012


Globalization and market forces

Whenever corporations grow through the process of globalization, they

have to deal with various problems and challenges that limits their growth

and profits. Government regulations, political influence, tariffs, and

environmental restrictions are various barriers which cost the corporations

million of dollars. The ethical issues are simply a costly hindrance, while

some companies use CSR methodologies as a strategic tactic to gain

public support for their presence in global markets, helping them sustain a

competitive advantage by using their social contributions to provide a

subconscious level of advertising.

Copyright © 2008 - 2012


Social awareness and education

Shareholders and investors themselves, through investing are

exerting pressure on corporations to behave responsibly.

Non-governmental organizations are also taking an increasing

role, leveraging the power of the media and the Internet to

increase their scrutiny and collective activism around corporate

behavior.

Copyright © 2008 - 2012


Ethics training

The need for ethics training in the

organization, required by the govern-

ment regulations, is an important driver

for changing the company’s behavior

and culture of the organizations.

It helps the employees to take ethical

decisions when the answer is unclear.

The important advantage is reducing

the likelihood of "dirty hands", fines

and damaged reputations for

breaching laws or moral norms.

Organizations also see secondary

benefit in increasing employee loyalty

and pride in the organization.

Caterpillar and Best Buy are

examples of organizations that have

taken such steps.

Copyright © 2008 - 2012


Laws and regulations

The government and other mediators have to ensure that the corporations

do not harm the economy as a whole. There are several issues surrounding

government regulation. Regulation in itself is unable to cover every aspect

in detail of a corporation's operations. Another issue is the financial burden

that regulation can place on a nation's economy.

Australian federal government's actions to avoid compliance with the Kyoto

Protocol in 1997, on the concerns of economic loss and national interest.

The Australian government took the position that signing the Kyoto Pact

would have caused more significant economic losses for Australia than for

any other OECD nation.

Copyright © 2008 - 2012


Crisis and their consequences

• Often it takes a crisis to precipitate attention to CSR.

• One of the most active stands against environmental management is the CERES

Principles that resulted after the Exxon Valdez incident in Alaska in 1989).

• Other examples include the lead poisoning paint used by toy giant Mattel, which

required a recall of millions of toys globally and caused the company to initiate new

risk management and quality control processes.

• In another example, Magellan Metals in the West Australian town of Esperance was

responsible for lead contamination killing thousands of birds in the area.

• The company had to cease business immediately and work with independent

regulatory bodies to execute a cleanup.

Copyright © 2008 - 2012


Stakeholder priorities

The stakeholders expect the corporation to address the social

and community issues which are related to them. The first

priority is interrelated business benefits that can be derived

from increased employee engagement (i.e. more loyalty,

improved recruitment, increased retention, higher productivity,

and so on). Key external stakeholders include customers,

consumers, investors (particularly institutional investors),

communities in the areas where the corporation operates its

facilities, regulators, academics, and the media.

Copyright © 2008 - 2012


Corporate social-responsibility

Business

Transcript of Corporate social-responsibility