What is meant by
What is meant by Corporate Social ResponsibCorporate Social Responsibility (CSR)?ility (CSR)?
The issue of CSR is centuries old even though the term may appear to be relatively new to the corporate The issue of CSR is centuries old even though the term may appear to be relatively new to the corporate world. The terminology itself has changed over years, and this demonstrates that the development will be world. The terminology itself has changed over years, and this demonstrates that the development will be maintained in the meaning
maintained in the meaning attributed to CSR. attributed to CSR. Definitions hereby reflect current sDefinitions hereby reflect current situation; implyituation; implying thating that they are subject to global trends and
they are subject to global trends and changes in international law as time goes by.changes in international law as time goes by.
CSR in the 20
CSR in the 20ththCenturyCentury
The 20
The 20
ththcentury CSR ideals are still relevant for CSR today with additional statutory
century CSR ideals are still relevant for CSR today with additional statutory
requirements as a result of greater impact of companies on society.
requirements as a result of greater impact of companies on society.
Indeed as pointed out by David C. Korten,
Indeed as pointed out by David C. Korten,
“
“ Business has become, in Business has become, in the last half century, the last half century, the most powerful institution on the planet. the most powerful institution on the planet. The dominant The dominant institution in any society needs to take responsibility for the whole. . . . Every decision that is made, every institution in any society needs to take responsibility for the whole. . . . Every decision that is made, every action that is taken, must be viewed
action that is taken, must be viewed in light of that kind of responsibility.in light of that kind of responsibility.””
The corporate period can be referred to as the Golden age of Corporate Social Responsibility Movement. The corporate period can be referred to as the Golden age of Corporate Social Responsibility Movement. Two broad principles of CSR emerged in the 20th Century: the Charity Principle and the Stewardship Two broad principles of CSR emerged in the 20th Century: the Charity Principle and the Stewardship Principle.
Principle.
Post, Fredrick and Lawrence pinpoint following two principles responsible for emergence of corporate Post, Fredrick and Lawrence pinpoint following two principles responsible for emergence of corporate social responsibility: the Charity Principle and the
social responsibility: the Charity Principle and the Stewardship Principle.Stewardship Principle.
The Charity Principle
The Charity Principle11 states that the wealthy member of society ( business enterprises) should providestates that the wealthy member of society ( business enterprises) should provide voluntary aid to society‟s needy people, whilst the Stewardship Principle
voluntary aid to society‟s needy people, whilst the Stewardship Principle22 states that business executivesstates that business executives act as trustees or steward of society which consider the interest of all those affected by its activities, act as trustees or steward of society which consider the interest of all those affected by its activities, policies and decisions.
policies and decisions.
1 1
The types of activities addressed by the
The types of activities addressed by the Charity Principle are Corporate Philanthropy and voluntary actions toCharity Principle are Corporate Philanthropy and voluntary actions to promote social good.
promote social good. 2
2
The types of actions addressed under the Stewardship principle is based on
The types of actions addressed under the Stewardship principle is based on the acknowledgement of businessthe acknowledgement of business
and society’s interdependence namely meeting legal requirements and undertaking a stakeholder approach in and society’s interdependence namely meeting legal requirements and undertaking a stakeholder approach in
corporate strategic planning. corporate strategic planning.
CSR in the 21stCentury
There was continuity in the debate about the place of CSR in the global economy, with writers
such as Scherer and Smid echoing Solomon‟s opinion that multinational corporations „should
take responsibility for the improvement of world- wide social and environmental conditions‟.
(Scherer and Smid in Windsor 2001, p. 245)
CSR as defined by European Commission (2001) i s “a concept whereby companies integrate
social and environmental concerns in their business operations and in their interaction with their
stak eholders on a voluntary basis”. CSR is about managing change at company level in a
socially responsible manner which can be viewed in two different dimensions:
a) Internal – socially responsible practices that mainly deal with employees and related to
issues such as investing in human capital, health and safety and management change,
while environmentally responsible practices related mainly to the management of natural
resources and its usage in production.
b) External – CSR beyond the company into the local community and involves a wide
range of stakeholders such as business partners, suppliers, customers, public authorities
and NGOs that representing local communities as well as environment.
Corporate social responsibility (CSR) has generated significant debate in academic and corporate
circles in recent times. According to Jamali and Miurshak (2007), this debate acknowledges the
importance of CSR in the first-world, but raises questions regarding the extent to which
corporations operating in developing countries have CSR obligations. They added, due to lack of
knowledge and experience in the CSR field, many corporations in the developing countries may
not feel any obligation to the society. World Business Council for Sustainable Development has
introduced its CSR definition, which 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” (World
Business Council for Sustainable Development, 2008).
With ample definitions of CSR in existence, a search for commonality can be potentially
enlightening. After examining various definitions, one commentator suggests that there are five
key elements found in most definitions of CSR:
31. Corporations have responsibilities that go beyond the production of goods and services at
a profit.
2. These responsibilities involve helping to solve important social problems, especially
those they have helped create.
3. Corporations have a broader constituency than stockholders only.
4. Corporations have impacts that go beyond simple market place transaction.
5. Corporations serve a wider range of human values that can e captured by a sole focus on
economic values.
As such theories like Political Economy Theory, Stakeholder Theory, Legitimacy Theory and
Media Agenda Setting Theory were put forward by different school of thoughts in an attempt to
explain the notion of CSR. A brief overview of these theories will be seen in the following part.
Political Economy Theory
Political economy theory places an emphasis on the inter-relationships between political and
economic forces in society and recognises the effects of accounting reports on the distribution of
income, power and wealth (Cooper and Sherer, 1984).
This perspective also “accepts that society, politics, and economics are inseparable so that issues,
such as economic issues, cannot be considered in isolation from social and environmental
issues” (Blomquist and Deegan, 2000, p. 7). It recognises a pluralistic set of recipients of CSR
information, who are considered to be in constant conflict, reflecting the amount of power they
wield in society (Puxty, 1986).
3
R.A. Buchholz , “Corporate Responsibility and the Good Society: From Economics to Ecology,” Business Horizons
Stakeholder Theory
Stakeholder theory is a cornerstone of CSR. Corporate Social Performance (CSP), it is argued,
hinges on well-developed and effectively implemented stakeholder analyses (Clarkson 1995).
But defining critical stakeholders can be challenging (Downey 2002, Vos 2003). Post et al
(2002: 8) suggest that stakeholders in a corporation are, „
the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are therefore its potential beneficiaries and/or risk bearers‟. The different stakeholders of a
single firm share common risks: „
a possibility of gaining benefits or experiencing losses or harm, as a result of corporate operations‟ (Post et al 2002: 8)
Roberts (1992) argues that CSR has been a relatively successful medium for firms, particularly,
to bargain their stakeholder relationships.
Stakeholder theory seeks to overthrow the shareholder orientation of the firm. It is an outgrowth
of the corporate social responsibility (CSR) movement to which Friedman's essay responds.
According to CSR, the firm is obligated to "give something back" to those that make its success
possible. The image of the firm presented in CSR is that of a free rider, unjustly and
uncooperatively enriching itself to the detriment of the community. Socially responsible deeds
(such as patronizing the arts or mitigating unemployment) are necessary to redeem firms and
transform them into good citizens.
4The stakeholder theory attempts to “justify the provision of social information in an attempt to
gain stakeholder support and thus minimize the costs of dealing with complaints and actions that
might otherwise affect them” (Davis, 2003). The stakeholder theo ry advocates that the success of
a company depends on the capability to balance the conflicting demands of its various
stakeholders. A business executing CSR activities, attempts to meet the expectation of those on
whom it depends or those who are associated to it. As argued by MacMillan et al. (2000), CSR is
based on “company behavior which generates the trust and support of key stakeholders”.
4
Legitimacy Theory
Suchman (1995) defines legitimacy as „
a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions.‟
Analysis of prior literature on legitimacy management including the strategic tradition of
resource dependence theory (Pfeffer and Salancik, 1978) and the institutional traditions
(DiMaggio and Powell, 1983), he identifies three types of organizational legitimacy:
Pragmatic
Moral
Cognitive
And he also identifies three key challenges of legitimacy management – gaining, maintaining
and repairing legitimacy. Suchman points out that “
legitimacy management rests heavily on communication”
Lindblom (1994, cited in Gray, Owen and Adams, 1996) notes that legitimacy is not necessarily
a benign process for organizations to obtain legitimacy from society. Sheargues that an
organization may employ four broad legitimating strategies when faced with different
legitimating threats:
51. Seek to educate its stakeholders about the organisation‟s intentions to improve that
performance
2. Seek to change the organisation‟s perceptions of the event (but without changing the
organisation‟s actual performance
3. Distract (i.e. manipulate) attention away from the issue of concern
4. Seek to change external expectations about its performance
Thus legitimacy might be seen as a key reason for undertaking corporate social behaviour and
also then using that activity as a form of publicity or influence (Lindblom cited in Gray et al,
1996 and in Clarke, 1998).
5
Lance Moir, (2001) "What do we mean by corporate social responsibility?", Corporate Governance, Vol. 1 Iss: 2, pp.11
Media Agenda Setting Theory
Brown and Deegan (1198) incorporated the media agenda setting theory to the legitimacy theory
and this is explained by Ader (1195, P.300):
“The Agenda-Setting hypothesis …posits a relationship between the relative emphasis given by the media to various topics and the degree of salience these topics have for the general public. Individuals note the amount of and distribution of media coverage among issues and this determines the salience of each issue for the individuals. According to the agenda-setting hypothesis, the media do not mirror public priorities
Internal Corporate Social Responsibility
According to Dr Ron Sookram, programme director at the newly-established Centre for Corporate Responsibility at the Arthur Lok Jack Graduate School of Business, internal CSR refers to all the
practices that are implemented within a company, such as employee development programmes, health and safety policies, governance practices, creating a motivating and productive work environment within the organisation, and reducing the impact of a company‟s operation on the environment and product
responsibility. Such policies are crucial because the companies' dealings with the outside world mirror how they work internally.
According to Edwin Ebreo, highly experienced training and organization development consultant
practicing in the Philippines, charity should begin at "home". In his opinion, a lot can be made to start an internal CSR and it starts with paying the right taxes, giving what employees are due them in terms of return and benefits which according to him is a moral obligation as much as a legal one. There are a number of things too that can be done that go beyond the basics and give back to the country/society by starting with our very own employees.
According to the Report on “Review of Corporate Social Responsibility policies and actions in Mauritius and Rodrigues” in April 2008, it was found that employers tend to arm their employees with the necessary tools in order to become more productive. From the survey that they conducted, the following results were obtained on Internal CSR:
What does internal CSR encompass for the company?
Training and development - 87% Occupational health and safety - 76% Incentive programs - 76%
Work place diversity - 73%
Profit sharing/share options, employee satisfaction surveys and collective bargaining - 37%, 41%
and 43% respectively
Benefits of internal CSR
Higher Productivity – 81% Better Staff Retention – 85.5% Higher Staff Morale – 93.5%
Who is responsible for CSR?
It has been seen in the report on “Review of Corporate Social Responsibility policies and actions in Mauritius and Rodrigues” in April 2008 that there are different categories of persons who are actually in charge of CSR. Moreover depending upon companies, some engage their employees in their CSR
undertakings while others engage only the management body. Below is the result according to the report:
Who oversees CSR activities?
HR, Personnel, Administration – 39%
Marketing, Communications, External Affairs, Business Development – 23% Compliance – 5%
Dedicated Team / Person – 16%
Others (Board, Top Management, Finance) – 12% No answers – 5%
Who is/are actually involved in the CSR activities?
Employees – 48% Management – 97%
CSR Reporting
CSR reporting is similar to reporting financials, but rather than focusing on the profits, importance is attached on the people and planet impacts.
At the moment, such reporting is voluntary. Certain companies do it while others do not. Some companies report because it enhances their name, even if costs can be added up.
According to European Commission,
“ By disclosing social, environmental and governance information, enterprises often find that they can better identify and manage issues that influence their business success.
Good disclosure of non-financial information enables investors to contribute to a more efficient allocation of capital and better achieve longer-term investment goals.
It can also help to make enterprises more accountable and contribute to higher levels of citizen trust in business.”
According to the survey done on “Review of Corporate Social Responsibility policies and actions in Mauritius and Rodrigues” in April 2008, it has been noted the percentage of 100 Best companies who disclose their CSR undertakings and the way they pave the way.
Do you communicate about your CSR activities?
Yes 68% No 32% 100% If yes, How? Annual Report 100% Newspaper / Magazine 51% Social report 9% Emails 28%
Benefits of CSR
Research suggests that companies may receive external benefits from implementing CSR policies. Study prove that CSR is associated to more positive corporate appraisal, increased purchase behavior, higher customer satisfaction and market value of a f irm which finally turn into amplified profitability for the company.
According to business link, here are some more possible benefits:
A good reputation facilitates the recruitment of employees.
Better staff retention, hence reducing the costs and disruption of recruitment and retraining. Employees are better motivated and more productive.
CSR helps ensure you comply with regulatory requirements.
Activities such as involvement with the local community are ideal opportunities to generate
positive press coverage.
Good relationships with local authorities make doing business easier. See the page in this guide
on how to work with the local community.
Understanding the wider impact of your business(clients) can help you develop new products and
services.
CSR can make you more competitive and reduces the risk of sudden damage to your reputation
(and sales). Investors recognize this and are more willing to finance you.
Let us now consider the benefits derived from the report on “Review of Corporate Social Responsibility policies and actions in Mauritius and Rodrigues” in April 2008.
Better Public Relations – 79% Better Relations – 48%
Better Relations with suppliers – 27%
Challenges for implementation of CSR
Companies face challenges despite the available benefits from CSR. These challenges can be experienced at start of the implementation process of CSR, during the process or post-implementation. In the report “Review of Corporate Social Responsibility policies and actions in Mauritius and Rodrigues” in April 2008, certain challenges were discovered and the 100 Best companies had given their opinion upon the challenges that they faced. Below is the result challenges that were faced:
Lack of coordination -19%
Lack of Audit after implementation – 22% No proper partnership – 19%
Lack of information – 33%
Views against CSR
