UNDERSTANDING CORPORATE SOCIAL RESPONSIBILITY Chapter 1

Understanding corporate social responsibility Learning objectives Offer an explanation of the emergence of corporate social responsibility in relation to the evolving role of business in the society. Reflect on the concept of corporate social responsibility, taking account of different definitions of the term. Describe and assess a model of corporate social responsibility. Identify and evaluate the key arguments for and against the concept of corporate social responsibility. Critically discuss the concept of corporate citizenship.

Understanding corporate social responsibility TOPICS Emergence of corporate social responsibility Defining corporate social responsibility Carroll’s pyramid of corporate social responsibility Arguments for and against corporate social responsibility Social responsiveness and performance Corporate citizenship

EMERGENCE OF CORPORATE SOCIAL RESPONSIBILITY Understanding corporate social responsibility EMERGENCE OF CORPORATE SOCIAL RESPONSIBILITY Corporate social responsibility becomes a general concern for businesses Legislation of many of the CSR issues that were considered in the 1960s Renewed interest due to stakeholder pressure. CSR becomes a strategic issue Modest attention to CSR in the 1980s and early 1990s The first substantial publications on the role of business and society 1930s 1960s 1980s 1990s 2000-

Understanding corporate social responsibility DEFINING CORPORATE SOCIAL RESPONSIBILITY Has been defined as: CSR refers to corporate behaviour that extent beyond the economic motives and legal requirements The firm’s consideration of, and response, to, issues beyond the narrow economic, technical and legal requirements of the firm Accommodation of corporate behaviour to society’s values and expectations However, corporate social responsibility is context dependent and is generally agreed to be an ambiguous concept.

Understanding corporate social responsibility DEFINING CORPORATE SOCIAL RESPONSIBILITY Boundaries of corporate social responsibility: How far can expectation of corporate social responsibility go? Where should one draw the line between what is a reasonable requirement of corporate social responsibility and what is not? Is corporate social responsibility a voluntary concept or is it a requirement for businesses to obtain a ‘licence to operate’?

Understanding corporate social responsibility CARROLL’S PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

Understanding corporate social responsibility CARROLL’S PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY Economic responsibilities: The primary responsibilities of companies is to produce goods and services in a way that is profitable to their owners. Legal responsibilities: While assuming their fundamental economic role, companies are expected to comply with the laws and regulation that reflect society’s values and norms. Ethical responsibilities: Businesses are also expected to abide by the ethical norms of society. They are more ambiguous than legal requirements and therefore more difficult for companies to anticipate and follow. Philanthropic responsibilities: Business may engage in activities that go beyond the expectations of society, including volunteer work, sponsorship, and donations.

Lack of accountability The ‘Iron Law of Responsibility Understanding corporate social responsibility ARGUMENTS FOR AND AGAINST CORPORATE SOCIAL RESPONSIBILITY Main areas of disagreement about the effects of corporate social responsibility on individual companies and society at large: Profit maximisation Resource fit Lack of accountability The ‘Iron Law of Responsibility

Understanding corporate social responsibility ARGUMENTS FOR AND AGAINST CORPORATE SOCIAL RESPONSIBILITY Arguments for CSR CSR improves a firm’s performance, through goodwill, reputation, customer and employee satisfaction Businesses has valuable resources to tackle societal problems, e.g. management talent and innovation “Iron Law of Responsibility”. Businesses will lose their power if they do not act responsibly. Arguments against CSR CSR is a waste of resources Businesses lack the specific knowledge to deal with societal problems Businesses are accountable to shareholders not the public

Understanding corporate social responsibility SOCIAL RESPONSIVENESS AND PERFORMANCE SOCIAL RESPONSIVENESS Re-active Defensive Accommodative Proactive McDonalds only started offering vegetarian burgers as a results of the “mad cow” health scare in mid-1990, which affected customer demand Many tobacco companies have aggressively attempted to undermine the link between smoking and cancer Many firms have ensured that there employment policies conform to the various protections required by EU legislation Toyota’s hybrid fuel car “Prius” was not initially successful and hardly met its cost, but Toyota persisted in the belief that this was the future

Understanding corporate social responsibility SOCIAL RESPONSIVENESS AND PERFORMANCE Corporate social policies are formal statements or informal practices and ways of behaving that reflect organizational values and principles. Social programmes concerns the allocation of corporate resources to some activity that the company view as social desirable Social impact refer to the effects of corporate behaviour on society

Understanding corporate social responsibility CORPORATE CITIZENSHIP Two school of thoughts Companies as individuals citizens Companies as state-like providers The individual citizen The universal citizen The corporate citizen The business citizen Social rights Civil rights Political rights

Understanding corporate social responsibility CORPORATE CITIZENSHIP Companies as individuals citizens

Understanding corporate social responsibility CORPORATE CITIZENSHIP Companies as state-like providers, and increasingly performing roles traditionally linked to governments Social rights provide individuals with the freedom to realize their human potential and aims in life Civil rights protect the individual against interference that makes them unable to enjoy their rights Political rights enable people to participate in the political process and governance of society

Understanding corporate social responsibility SUMMARY CSR has developed in cycles CSR may be defined at the attuning of corporate behaviour to societal norms and values Carroll’s Pyramid model of responsibilities, highlights the four responsibilities of a firm, starting with economic, legal, philanthropy and ethical The argument against CSR related to business competence to deal with societal problems and their primary responsibility to shareholders. The arguments for CSR is that such practices creates an “licence to operate” and improve performance through reputation, goodwill, customer and employee satisfaction. The development of the concept Corporate Citizenship has two schools of thoughts: Companies as individuals; and Companies lie state-like providers

Resources and examples within organisational context Cisco systems Tesco Report