CSR And Social Capital

Not much work has been done on the relationship between CSR and social capital. However, the prevalent researchers have found CSR to create reliable social networks for organizations and social capacity. Corporate activity that benefits the community can increase the level of social participation and generate positive attitudes in the business, and can be a critical component in economic prosperity and sustainable development. According to Putnam, social capital is accumulated through actual human relationship and interactions that initiate and facilitate strong internetwork ties and norms, which boost cooperation and collective action. Such network of relationship can be developed consciously by the people and also by other social activities. The creation of social capital is embedded into many organizational activities such that it helps knowledge.

Historically, companies have developed great expertise in, and elaborate processes for, managing physical assets. As vertically integrated companies refocus on their core businesses, they become increasingly reliant on their ties to these critical stakeholders: They involve customers in developing products and services, share more information with vendors, build deeper connections with alliance partners, and demonstrate these tendencies toward partnership within their own organizations. One way for corporations to connect with their key stakeholders is by accumulating social capital. As defined by the World Bank, social capital includes institutions, relationships, and standards that shape social interactive capability and quality. Social capital not only pools each institution in the society together but also works as glue integrating each institution into unity. Generally, the concept is considered to include the following elements:

• Network: the collection of all communication channels; contact and sustainable development between individuals and institutions
• Trust and care: the bonds between individuals and institutions
• Mutual assistance and benefits: individuals’ or organizations’ willingness to contribute to help others
• Participation in social affairs: individuals’ participation in social and community affairs and volunteer issues; the way civilians’ recognition and sense of belonging to the community can be strengthened

Why is social capital also important in a business context? Start by first considering the metaphor of the so-called prisoners’ dilemma. In this game-theory-based model, two criminals have been arrested and are about to be questioned independently of each other. Each criminal has the choice to stick with his partner and at the end be released without any charges or to betray his partner and earn a chance to reduce the penalty (on another criminal charge) while the betrayed party will be sentenced severely. To the criminals, the best scenario would be if they both stuck the same story, while the worst case would be if they betray each other at the same time and both receive severe penalties. From a self-centred perspective, the best case would be to betray his partner because there is an obvious possibility that he will himself be betrayed. Given that most people would consider their own benefit first, one would argue that criminals would betray their partners and prioritize their own benefits over the potential group benefits. However, research shows that as long as the two criminals are able to communicate, the probability for them to betray each other is largely reduced. Communication makes individuals learn about each other’s’ preferences and strengthens the trust between the parties. The process of communication may also stimulate shared values or a sense of group belonging that serve to prevent mutual betrayals. In other words, amongst a group of people, if there is an institution that facilitates to create more communication, the mutual understanding within the group is likely to increase, potentially to a stage where a common belief and a sense of group belonging are established.

What does this tell us about social capital in a business environment and CSR context? Strategic CSR requires corporations to be as selective with CSR initiatives as with business-critical strategic decisions. The means companies’ understanding of what opportunities to pursue increasingly come from sources outside of the company, i.e., from its key stakeholders. However, to create or recreate the trust necessary for stakeholders to openly discuss their preferences and priorities, as well as to get their positive influences, corporations need to first accumulate sufficient social capital. For example, if a company has developed trust-based relationships with its business partners and relevant regulators and policy makers, it is likely that the company will save valuable time and resources in information collection and analysis, negotiations, controls, and reporting. The same arguments are applicable companies’ internal functioning: The benefits from social capital include strengthening internal communication and collaboration and effectively improving the productivity of the organization. Not only is social capital a key enabler for strategic CSR, it provides significant benefits for company executives in realizing their business strategies and managing day-to-day operations.

Tracing the theoretical background of the two concepts, it is now clear that Social Capital and CSR have in common the idea that social context and networks shape business actions and economic life. Even if both concepts suffer from multiple definitions and a still ongoing academic debate on their nature, we have considered a first thinking and analysis on their possible connections worthy and appealing. Social actors, including economic organizations, create reciprocally expectations and opportunities, with the shared aim of development and improvement. As we mentioned before, the presence of a social network and the relevance of stakeholders, respectively of Social Capital and CSR theory, represents the starting point of the common ground of the two concepts.

Social Capital	Corporate Social Responsibility
“Relationships matter” – Long-term network, repeated interactions, and cooperation among actors	Stakeholder management theory Long-term cooperative relationships between the organization and its stakeholders.
Web of trust among actors	Trust and reputation values of the organization toward the community
Information and communication flows among actors	Information and communication flows from the organization toward the community: accountability
Acting together – building common policies	Stakeholders engagement approach
Possibility to go beyond the use of formal procedures in order to achieve a common goal	Go beyond the law, voluntary actions in favour of sustainability
Common -implicit or explicit- goal: growth and well-being of the social network	Overall sustainability both of the organization and the community
Long-term investment of the actors	Long-term strategy and view of the organization, long-term sustainability of the community

The possible interactions between SC and CSR are at least twofold, the pre-existing presence of SC usually lead each actors of the network to act for an overall sustainable development and the common good. This presumes repeated interactions and cooperation, widespread trust and facilitated flows of information among actors. CSR can be considered one of the links which positively reinforces the connection between the community and business. To this end, the recognition of being part of a community and a social network causes the adoption of an integrated strategy within an open system, aimed to combine the efforts in promoting best practice, knowledge sharing and positive externalities. In a reversed logic, a structured and integrated path of CSR along with social capital is undertaken by an organization in order to increase and improve the relationships in a given community.