Corporate Social Responsibility: The Many Meanings of CSR BA 385 Corporate Social Responsibility: The Many Meanings of CSR Chapter Two: Corporate Citizenship: Social Responsibility, Responsiveness and Performance

The Pullman Story The Pullman Town Should business demonstrate concern for societal welfare?

Corporate Social Responsibility (CSR) The impact of a company’s actions on society. Requires the individual to consider his/her acts in terms of a whole social system, and holds him/her responsible for the effects of acts anywhere in that system. The Gap, Inc. Social Responsibility Page

Corporate Citizenship Concepts Corporate Social… Responsibility Performance Responsiveness Emphasizes… obligation, accountability outcomes, results action, activity McDonald’s and CSR

Business Criticism/ Social Responsibility Cycle Factors in the Societal Environment Criticism of Business Increased Concern for the Social Environment A Changed Social Contract Business Assumption of Corporate Social Responsibility Social Responsiveness, Social Performance, and Corporate Citizenship A More Satisfied Society Fewer Factors Leading to Business Criticism Increased Expectations Leading to More Criticism

Historical Perspective on CSR Legal Model Laws developed to constrain business Social Model Stakeholder expectations heightened Economic Model Society determines wants/needs through the marketplace

Modification of the Economic Model Philanthropy Community obligations Paternalism Motivation: Keep government at arm’s length

Acceptance and Broadening of Meaning From the 1950’s to the present, the concept of CSR has gained considerable acceptance and the meaning has been broadened to include specific issues, such as: product safety environmental sustainability honesty in advertising ethical behavior employee rights global CSR affirmative action Other?

CSR: Evolving Viewpoints Definitions Over Time CSR considers the impact of the company’s actions on society. --Bauer CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests. --Davis and Blomstrom

CSR: Evolving Viewpoints More Definitions Over Time CSR mandates that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations. --McGuire

CSR: Evolving Viewpoints Even More Definitions Over Time CSR relates primarily to achieving outcomes from organizational decisions concerning specific issues or problems, which by some normative standard have beneficial rather than adverse effects upon pertinent corporate stakeholders. The normative correctness of the products of corporate action have been the main focus of CSR. --Epstein

Carroll’s Four-Part Definition of CSR – The Big One, The “King” of All CSR Definitions The social responsibility of business encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time.

Carroll’s Four-Part Definition of CSR Understanding the Four Components Responsibility Societal Expectation Examples Economic Required Be profitable. Maximize sales, minimize costs Legal Obey laws and regulations Ethical Expected Do what is right, fair, and just Philanthropic Desired/ Expected Be a good corporate citizen

The Pyramid of CSR Philanthropic Responsibilities Be a good corporate citizen. Ethical Responsibilities Be ethical. Legal Responsibilities Obey the law. Economic Responsibilities Be profitable. Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons (July-August 1981). © 1991 by the Foundation for the School of Business at Indiana University. Used with permission.

Arguments Against CSR Restricts the free market goal of profit maximization Business is not equipped to handle social activities Dilutes the primary aim of business Increase business power Limits the ability to compete in a global marketplace

Arguments For CSR Limits future government intervention Addresses issues by using business resources and expertise Addresses issues by being proactive Addresses social issues business caused and allows business to be part of the solution Protects business self-interest

Ways Firms Respond to CSR Pressure Cost-benefit approach Strategic approach Innovation and learning approach Defensive approach Alleviates pain – do what it takes to avoid problems Only do things for which you identify direct benefit Recognize changing environment and engage CSR as strategy CSR involvement provides new opportunities for learning and understanding the marketplace and this brings competitive advantage. The Civil Corporation, Simon Zadek

Corporate Responsibility in the 21st Century 1000 Global Business Leaders surveyed in 2000 said the following will be necessary for 21st century companies: Demonstrate a commitment to society’s values 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.

Corporate Social Responsiveness TWO Alternative Views Frederick’s CSR1, CSR2, and CSR3 Sethi’s Three-Stage Schema

Sethi’s Three Stage Schema Three ways to classify corporate behavior: Social obligation – stage one: respond to market forces Example: McDonald’s offers apples because parents complain Social responsibility – stage two: bring behavior up to general norms of society Example: McDonald’s gives out pedometers because “fit is in” Social responsiveness – stage three: see below Example: You tell me…. Responsiveness suggests corporations be “anticipatory” and “preventive”. Obligation and responsibility alone are not enough. The final stage in CSR is business taking a long-term role in the social context in which it operates.

Frederick’s CSR1, CSR2 and CSR3 CSR1 – corporate social responsibility Example: We acknowledge many families dine regularly at McD’s. We have an obligation to offer some options that are healthier. CSR2 – corporate social responsiveness Capacity to respond to social pressures Literal act of responding or being poised to respond Example: We offer tasty sliced apples as an alternative to fries (response) because we already have apple suppliers for our pies (capacity). CSR3 – corporate social rectitude The moral correctness of the actions taken Example: You tell me….

Corporate Social Performance (CSP)

Carroll’s Corporate Social Performance Model – 3D Plane One: Social Responsibility: economic, legal, ethical and discretionary/philanthropic Plane Two: Philosophy of Social Responsiveness (or mode of responding): reaction, defense, accommodation and proaction Plane Three: Stakeholder Issues Involved: consumers, environment, community, government, employees, etc.

Corporate Citizenship …embraces all the facets of corporate social responsibility, responsiveness, and performance. …embraces the functions of business interaction with nonprofit organizations, citizen groups, and other community stakeholders.

Research-based Benefits of Good Corporate Citizenship Improved employee relations Improved customer relations Improved business performance Enhanced company’s marketing efforts

Social and Financial Performance Perspective 1: CSP Drives the Relationship Perspective 2: CFP Drives the Relationship Perspective 3: Interactive Relationship Among CSP, CFP, and CR Good Corporate Reputation Good Corporate Social Performance Good Corporate Financial Performance

A Multiple Bottom-Line Perspective economic, social, environmental, other? Consumer Stakeholders’ “Bottom Line” Employee Stakeholders’ “Bottom Line” Community Stakeholders’ “Bottom Line” Owner Stakeholders’ “Bottom Line” Other Stakeholders’ “Bottom Line” Corporate Social Performance

Socially Responsible or Ethical Investing Social Screening A technique used to screen firms for socially-responsible investment purposes Portfolio 21: Global Fund using Sustainability SRI (socially responsible investing) Principles

Reasons for Upsurge in Socially Responsible Investing More reliable research on CSP (corporate social performance) Investment firms using social criteria have solid track record The socially conscious 1960s generation is making investment decisions

For Next Class (1/28) Read chapters three and six Complete and Hand-In Best Practices Report Assignment by start of class Read online or print newspaper(s) of choice to find stories of businesses challenged by issues relating to CSR