Principles

Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT), the petroleum giant BP (well known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald’s (see below) to distract the public from ethical questions posed by their core operations. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. 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 and be committed to sustainable development 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. All the same, 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.’

Royal Dutch Shell has a much-publicized CSR policy and was a pioneer in triple bottom line reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves, which seriously damaged its reputation and led to charges of hypocrisy. Since then, the Shell

Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa.

Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. A major area of necessary international regulation is the reduction of the capacity of corporations to sue states under investor state dispute settlement provisions in trade or investment treaties if otherwise necessary public health or environment protection legislation has impeded corporate investments. Others, such as Patricia Werhane, argue that CSR should be considered more as a corporate moral responsibility, and limit the reach of CSR by focusing more on direct impacts of the organization as viewed through a systems perspective to identify stakeholders. For a commonly overlooked motive for CSR, see also Corporate Social Entrepreneurship, whereby CSR can also be driven by employees’ personal values, in addition to the more obvious economic and governmental drivers.

In the wake of recent high profile corporate scandals around the globe, companies today face growing pressure from stakeholders to follow ethical business practices. Customers increasingly expect business to consider human rights in their employment practices and demonstrate stewardship toward the natural environment. Individual and institutional investors have begun considering business sustainability as a factor in their investment decisions. Job seekers are inclining toward firms that demonstrate a strong social portfolio. And employees are showing greater loyalty toward companies that work for the betterment of society.

Over the last quarter century, these topics have captured the attention of mainstream management scholars, with studies of corporate citizenship, ethics and social responsibility appearing with greater frequency in management journals. As interest in the study of corporate social performance has grown over the years, scholars around the globe have examined the question of why companies engage in activities that benefit society. Their research reveals that business managers are motivated by ethical and instrumental considerations. These consideration can be of internal values as well as external pressures. These motivations frequently overlap and it is often difficult to determine whether initiatives are genuinely guided by moral values or whether they are driven by more strategic concerns such as protecting profitability or preserving organizational legitimacy within the context of changing institutional norms.

Strategic Perspective

Numerous studies have demonstrated that managers in countries around the globe do perceive a strong strategic business case for engaging in social initiatives. There are two key motivational themes implied in analysis, Instrumental Motives and Institutional Motives

Instrumental Motives

Instrumental motives revolve fundamentally around managerial beliefs that engaging in social initiatives can have a direct impact on profitability, improving revenue or protecting existing profit levels. Several studies have shown that companies develop a social portfolio because managers believe that these activities can build competitive advantage, provide new business opportunities, insulate the firm from costly regulation or help the company meet shareholder demands.

Institutional Motives

The increasingly positive reputational impact of engaging in social initiatives can be seen as a function of changes in the institutional environment. The changing social values have created new legitimacy criteria for economic institutions. In addition many businesses now believe a social agenda is necessary to maintain public support for their activities. This perspective provides a foundation for the notion of Institutional Motives for social initiatives, suggesting that companies engage in social initiatives primarily due to institutional pressures. Studies have identified a range of institutional forces that compel companies to strengthen their social agendas such as growing customer intolerance for corporate practices that damage the environment or neglect human rights, increasing public scrutiny of corporate governance practices that lack transparency, and stakeholder insistence that companies to impose meaningful sanctions on executives who engage in misconduct.

Moral Perspective

Moral motives for social initiative are anchored in the idea that business has an ethical duty to repay society. Although many researchers contend that strategic reasons have replaced philanthropic motives for corporate social engagement others have found that in some business personal moral values and the desire to make a positive contribution to society’s future continue to be powerful drivers of the corporate social agenda.

Some studies have documented instances in which doing the right thing appears to be stronger motive for social initiative than the practical benefits these activities can generate for the firm. This kind of firm advocates that social initiatives could improve profitability, enhance reputation and strengthen employee commitment to the firm but it is necessary to make a world better place to live. This notion of “sustainability” – wherein business seeks to fulfill demands of current generations without compromising the ability of future generations to meet their needs and aspirations is emerging as a strong motive for corporations to engage in public-private partnerships on both a local and global scale. By sharing resources with non-profit organizations, sponsoring social initiatives in less developed countries, or taking pro-active steps to protect the natural environment, business can not only advance specific social causes but also insure a better future for society.

CSR is defined as the responsibility of enterprises for their impacts on society. It encourages that enterprises should have in place a process to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders. This process requires some codes and principles to be followed depending on nature of business. Below listed are general principles commonly followed by the corporations:

• All organisations must follow multiple bodies of law including corporation, the civil and criminal laws of nations, government regulations, and international laws.
• The companies should support the inclusion of the principles of the United Nations Global Compact, as well as other international instruments, especially in the areas of human rights, labour practices, the environment, and the fight against corruption.
• Companies should indulge in free market practices, rejecting any illegal or fraudulent practice, implementing effective mechanisms for prevention, surveillance, and punishment of irregular acts.
• Mangers are responsible to follow and encourage ethical business practices.
• Companies should adopt good corporate governance practices accepted in international markets, based upon business transparency and mutual trust with the stakeholders.
• Companies should encourage and facilitate communication and dialogue with its shareholders, investors, employees, customers and suppliers.
• Corporations should accept a measure of accountability toward society and publicly report on their market, mandated, and voluntary actions.
• Companies should strengthen the social dimension and contribute to sustainable development through awareness-raising among the stakeholders on the efficient consumption of products and services.

The main principles involving corporate social responsibility involve economic, legal, ethical and discretionary aspects. A corporation needs to generate profits, while operating within the laws of the state. The corporation also needs to be ethical, but has the right to be discretional about the decisions it makes. Levels of corporate social responsiveness to an issue include being reactive, defensive, responsive and interactive. All terms are useful in issues management. Selecting when and how to act can make a difference in the outcome of the action taken.

Ethical consumerism

The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization, in many developing countries, is booming as a result of both technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day to day consumer decisions and are therefore beginning to make purchasing decisions related to their environmental and ethical concerns. However, this practice is far from consistent or universal.

Globalization and market forces

As corporations pursue growth through globalization, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariffs, environmental restrictions and varying standards of what constitutes “labor exploitation” are problems that can cost organizations millions of dollars. Some view ethical issues as 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. (Fry, Keim, Meiners 1986, 105) Global competition places a particular pressure on multinational corporations to examine not only their own labor practices, but those of their entire supply chain, from a CSR perspective. That all government is controlling.

Ethics training

The rise of ethics training inside corporations, some of it required by government regulation, is another driver credited with changing the behavior and culture of corporations. The aim of such training is to help employees make ethical decisions when the answers are unclear. Tullberg believes that humans are built with the capacity to cheat and manipulate, a view taken from Trivers (1971, 1985), hence the need for learning normative values and rules in human behavior. The most direct benefit is reducing the likelihood of “dirty hands” (Grace and Cohen 2005), 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.

Increasingly, companies are becoming interested in processes that can add visibility to their CSR policies and activities. One method that is gaining increasing popularity is the use of well-grounded training programs, where CSR is a major issue, and business simulations can play a part in this.

One relevant documentary is The Corporation, the history of organizations and their growth in power is discussed. Corporate social responsibility, what a company does in trying to benefit society, versus corporate moral responsibility (CMR), what a company should morally do, are both important topics to consider when looking at ethics in CSR. For example, Ray Anderson, in The Corporation, takes a CMR perspective in order to do what is moral and he begins to shift his company’s focus towards the biosphere by utilizing carpets in sections so that they will sustain for longer periods. This is Anderson thinking in terms of Garret Hardin’s “The Tragedy of the Commons,” where if people do not pay attention to the private ways in which we use public resources, people will eventually lose those public resources.

Geography

In a geographical context, CSR is fundamentally an intangible populist idea without a conclusive definition. Corporations who employ CSR behaviors are empirically dissimilar in various parts of the world. The issue of CSR diversity is produced through the perpetual differences embedded in the social, political, cultural, and economic structures within individual countries. The immense geographical separations feasibly contribute to the loosely defined concept of CSR and difficulty for corporate regulation.

Public policies

CSR has inspired national governments to include CSR issues into their national public policy agendas. The increased importance driven by CSR, has prompted governments to promote socially and environmentally responsible corporate practices. Over the past decade governments have considered CSR as a public issue that requires national governmental involvement to address the very issues relevant to CSR. The heightened role of government in CSR has facilitated the development of numerous CSR programs and policies. Specifically, various European governments have implemented public policies on CSR enhancing their competence to develop sustainable corporate practices. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly. Actors engaged in CSR:

• Governments
• Corporations
• Civil Societies

Recently, 15 European Union countries have actively engaged in CSR regulation and public policy development. Recognizably, the CSR efforts and policies are vastly different amongst countries resultant to the complexity and diversity of governments‘, corporations‘, and civil societies‘ roles. Scholars have analyzed each body that promotes CSR based policies and programs concluding that the role and effectiveness of these actors are case-specific. Global issues so broadly defined such as CSR generate numerous relationships between the different socio-geographic players.

A key debate in CSR is determining what actors are responsible to ensure that corporation‘s are behaving in a socio-economic and environmentally sustainable manner.