Business Responsibility and Sustainability BHS0032 Dr Eshani Beddewela Week 02

Lecture Outline Defining Corporate Responsibility The Economic and the Stakeholder Views of CSR Core characteristics of CSR

Defining CSR Davis (1973):- “the firm’s consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm” Carroll (1979):- “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organisations at a given point of time’ (Carroll, 1979: 500)

Carroll’s typology of corporate responsibilities Blowfield and Murray (2011)

Defining CSR Chinese Ministry of Commerce Organisation Definition Chinese Ministry of Commerce A concrete action taken by Chinese companies to implement the political aspiration of the new Communist Party collective leadership – putting people first to create a harmonious society. Department for Business Innovation and Skills The voluntary actions that business can take over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society. European Commission The responsibility of enterprises for their impacts on society. CSR concerns actions by companies over and above their legal obligations towards society and the environment. Certain regulatory measures create an environment more conducive to enterprises voluntarily meeting their social responsibilities

The Stakeholder View of CSR Stakeholders can be seen as those individuals and institutions that are influenced by the firms’ actions or inactions (Freeman 1984). The stakeholder view – as business practices of companies are influenced by a variety of stakeholders, it is important to act ‘responsibly’ towards all of them. Shareholders - Economic and legal responsibilities Employees, community residents, consumers and various interest groups - social returns fulfilling a company’s ethical and discretionary responsibilities Business organisations face a conflicting dilemma - when taking business decisions The outcomes could either harm or benefit different stakeholders

The Economic View of Social Responsibility “A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense” (Friedman, 1970). Based on the view that efficient competition would result in ultimate benefits for the society. The need to ensure the long-term maximisation of the firm’s value and of its social welfare, would result in sustained organisational competitiveness and enhance shareholder wealth.

The ‘paradox’ of CSR

Core Characteristics of CSR Voluntary Managing Externalities Beyond Philanthropy CSR Multiple Stakeholder orientation Practices and values Social and Economic alignment Source: Crane et al (2014)

Core Characteristics of CSR : Voluntary CSR is generally accepted as being about voluntary activities which go beyond those required by law. As such, businesses are allowed to self-regulate themselves in relation to CSR. Critics of CSR consider the ‘volunteerism’ attached to CSR to be a major problem The commitment of companies towards the voluntary adoption of CSR could be deficient and CSR should therefore be legally mandated

Core Characteristics of CSR Internalising / managing externalities Regulations can force firms to internalise the cost of externalities CSR represents a more voluntary approach by which companies engage in ethical behaviour aimed towards minimising externalities in the first place. Such externalities are:- Human rights of workers Minimising carbon emissions Preventing pollution

Core Characteristics of CSR Multiple stakeholder orientation CSR involves taking into consideration the various interests and impacts among a variety of different stakeholders other than shareholders. Since companies are reliant upon various stakeholders such as consumers, employees, suppliers and local communities to survive – companies do not only have responsibilities to shareholders.

Core Characteristics of CSR Alignment of social and economic responsibilities CSR should not be against profitability CSR should be about enlightened self-interest where social and economic responsibilities are aligned

Core Characteristics of CSR Practices and values Companies have to manage business practices and strategies which deal with social issues when they engage in CSR But CSR is also about the values of the company !

Core Characteristics of CSR Beyond Philanthropy In most countries of the world CSR is considered to be philanthropy or charity But Real CSR is about more than juts philanthropy but about the entire operations of the firm – i.e. CORE BUSINESS FUNCTIONS’ and their impact upon society Strategic CSR

References Crane, A., Matten, D., & Spencer, L. (Eds.). (2014). Corporate Social Responsibility: Readings and cases in a global context (2nd ed.). London: Routledge. Chapter 02 Garriga, E., & Mele, D. N. (2004). Corporate Social Responsibility theories: Mapping the territory. Journal of Business Ethics, 53(1-2), 51-71.