1. Ethics and the Conduct of Business
Eighth edition
Chapter 12
Corporate Social Responsibility
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

2. Modules Introduction: Corporate Social Responsibility
12.1: The CSR Debate
12.2: Normative Case for CSR
12.3: Business Case for CSR
12.4: Implementing CSR
12.5: Business with a Mission
12.6: Case Studies
Conclusion: Corporate Social Responsibility
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

3. Learning Objectives (1 of 2)
12.1: Recognize the significance and implications of corporate social responsibility for businesses, how CSR is commonly demonstrated, and its related concepts
12.2: Describe the dominant moral arguments against the concept of CSR and the counterarguments and justifications for CSR as a requirement of companies
12.3: Analyze the arguments that a market for virtue makes CSR a profitable strategy and a source of competitive advantage
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

4. Learning Objectives (2 of 2)
12.4: Summarize the important aspects of successful CSR programs, the difficulties with measuring the social performance of companies, and various attempts at measurement
12.5: Compare how nonprofit and for-profit social enterprises operate and can compete successfully in the marketplace
12.6: Compare how nonprofit and for-profit social enterprises operate and can compete successfully in the marketplace
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

5. Introduction: Corporate Social Responsibility
Basis for social responsibility
Requirements to implement CSR programs
Benefits of CSR programs
Social enterprises
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

6. 12.1: The CSR Debate (1 of 2) 12.1.1: Meaning of CSR Concept of CSR
Objective: Recognize the significance and implications of corporate social responsibility for businesses, how CSR is commonly demonstrated, and its related concepts
12.1.1: Meaning of CSR
Concept of CSR
12.1.1: Meaning of CSR
Point 1- Concept of CSR
Voluntary contribution to community
Not legally required
Selection of corporate goals and evaluation of outcomes by ethical standards
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

7. Figure 12.1 Inner circle represents economic responsibilities
Intermediate circle represents social responsibilities arising from business activities
Outer circle represents responsibility to address larger social problems
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8. 12.1: The CSR Debate (2 of 2) 12.1.2: Examples of CSR
Objective: Recognize the significance and implications of corporate social responsibility for businesses, how CSR is commonly demonstrated, and its related concepts
12.1.2: Examples of CSR
General agreements
12.1.3: Related Concepts
Corporate social responsiveness
Elements of corporate social performance
Corporate citizens
12.1.2: Examples of CSR
Point 1- General agreements
Operating on ethical level higher than law requires
Corporate philanthropy
Employee benefits
Improving quality of life in workplace
Taking advantage of economic opportunity more socially desirable
Using resources to address major social problems
Benefits of corporate philanthropy
Best CSR reputation: BMW, Google, Disney
12.1.3: Related Concepts
Point 1- Corporate social responsiveness
Capacity of corporation to respond to social pressure
Uses resources to deal with social issues
Point 2- Elements of corporate social performance
Principle
Process
Outcome
Corporate citizens
Point 3- Corporate citizens
Integration of social concerns into company policies
Company owes something to society
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

9. 12.2: Normative Case for CSR
Objective: Describe the dominant moral arguments against the concept of CSR and the counterarguments and justifications for CSR as a requirement of companies
12.2.1: Classical View
Expression of classical view
12.2.2: Friedman on CSR
Fiduciary argument
Taxation argument
12.2.1: Classical View
Point 1- Expression of classical view
Corporations should engage in economic activity
Social concerns should be left to other institutions
Justifying classical view
12.2.2: Friedman on CSR
Point 1- Fiduciary argument
Rules of the game
Indirect benefit from contribution
Point 2- Taxation argument
Managers act as unelected civil servants
Lack expertise
Criticism of taxation argument
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

10. 12.3: Business Case for CSR (1 of 2)
Objective: Analyze the arguments that a market for virtue makes CSR a profitable strategy and a source of competitive advantage
12.3.1: The Market for Virtue
Factors that induce managers to take on CSR activities
Power of virtue
12.3.1: The Market for Virtue
Point 1- Factors that induce managers to take on CSR activities
Market demand
Social forces
Point 2- Power of virtue
Activists are powerful in influencing corporate decisions
Constrained managers engage in some socially responsive behavior
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

11. Table 12.2: A Watch List of Industries and Companies
Issue(s)
Companies
Consumer goods: shoes, apparel, and household products
Goods are manufactured in contract factories overseas.
Nike, Gap, Walmart
Petroleum, timber, and mining
Environment issues
Shell, Home Depot, Rio Tinto
Food and beverage
Raw materials are sourced from less-developed countries.
Starbucks, Nestlé, Coca-Cola
Tobacco and fast foods
Tobacco-related deaths and obesity
Altria (Philip Morris), Kraft, McDonald’s
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

12. 12.3: Business Case for CSR (2 of 2)
Objective: Analyze the arguments that a market for virtue makes CSR a profitable strategy and a source of competitive advantage
12.3.2: Competitive Advantage
Strategic CSR
12.3.2: Competitive Advantage
Point 1- Strategic CSR
Win-win opportunity
Source of opportunity, innovation, and competitive advantage
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

13. 12.4: Implementing CSR 12.4.1: Program Selection and Design
Objective: Summarize the important aspects of successful CSR programs, the difficulties with measuring the social performance of companies, and various attempts at measurement
12.4.1: Program Selection and Design
Guidelines
12.4.2: Reporting and Accountability
Social reporting
12.4.1: Program Selection and Design
Point 1- Guidelines
Management of reputation risk
Closely linked to employment needs or sales yields
Make use of company’s mission and core competencies
Identifies opportunities that fit with company’s strategy
Incorporate stakeholder engagement
12.4.2: Reporting and Accountability
Point 1- Social reporting 
SEAAR
3BL
Sources that force accountability
Increases social performance
Transparency of CSR activities
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

14. 12.5: Business with a Mission
Objective: Compare how nonprofit and for-profit social enterprises operate and can compete successfully in the marketplace
12.5.1: Social Enterprise
Definition
Forms
12.5.2: Competing Successfully
Overview
12.5.3: Mission and Trust
For-profit organization
12.5.1: Social Enterprise
Point 1- Definition
Business for social purpose
Reduce social problem
Generate social value
Point 2- Forms
Nonprofit social enterprise
For-profit social enterprise
12.5.2: Competing Successfully
Point 1- Overview 
Generating enough revenue
Nonprofit organization – Philanthropy, donations, sales
For-profit organization – Access to equity capital, innovation, impact investment
12.5.3: Mission and Trust
Point 1- For-profit organization 
Difficulty in maintaining social benefit mission
Equity capital has significant liability
Profit-minded shareholders
Loss of trust
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

15. Table 12.3: Nonprofit versus For-Profit Social Enterprises
Categories
Nonprofit SE
For-Profit SE
Definition
A nonprofit whose main source of revenue is earned income, not donations
A business created for a social purpose, that operates in a socially-beneficial manner
AKA
Enterprising nonprofits, commercial nonprofits
Possible forms:
subsidiary of a hybrid nonprofit
benefit corporation (community interest company)
Certified B Corporation
Example(s)
Benetech (technology to aid global literacy)
Patagonia (environmentally-sustainable clothing)
Toms Shoes (donates shoes to the needy)
Available funding
Sales, donations, loans
Sales, equity capital, impact investment
Advantages
Tax benefits
Income from donations
People have more confidence in nonprofit causes
Equity capital allows faster growth, more effective use of resources
Ability to make a profit
Challenges
Need for innovation
Pressure to use donations for given purposes
Limits on spending
Pressure to give some control to outside investors
Difficulty keeping focus on social mission over profit
Loss of public trust
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

16. 12.6: Case Studies (1 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can compete successfully in the marketplace
12.6.1: Case: Starbucks and Fair Trade Coffee
Mission
Issue
Fair trade coffee
Starbucks response
12.6.1: Case: Starbucks and Fair Trade Coffee
Point 1- Mission
Benefit community
Protect environment
Point 2- Issue
Starbucks confronted to buy fair trade coffee
NGO threatened national boycott if the company refused to buy fair trade coffee
Point 3- Fair trade coffee 
Addresses disadvantages faced by small growers
Fair trade certification requirements
Point 4- Starbucks response 
Demand fits mission
Customer demand for shade-grown and organic coffee
Worked with NGOs on social projects
Challenge to company strategy of offering high quality coffee
Executives’ thoughts
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

17. Table 12.4: Requirements for Fair Trade Certification
Condition
Description
Fair prices
Democratically organized farmer groups receive a guaranteed minimum floor price and an additional premium for certified organic products. Farmer organizations are also eligible for pre-harvest credit.
Fair labor conditions
Workers on Fair Trade farms enjoy freedom of association, safe working conditions, and living wages. Forced child labor is strictly prohibited.
Direct trade
Importers purchase from Fair Trade producer groups as directly as possible, eliminating unnecessary middlemen and empowering farmers to develop the business capacity necessary to compete in the global marketplace.
Democratic and transparent organizations
Fair Trade farmers and farmworkers decide democratically how to invest Fair Trade revenues.
Community development
Fair Trade farmers and farmworkers invest Fair Trade premiums in social and business development projects such as scholarship programs, quality-improvement training, and organic certification.
Environmental sustainability
Harmful agrochemicals and GMOs are strictly prohibited in favor of environmentally sustainable farming methods that protect farmers’ health and preserve valuable ecosystems for future generations.
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

18. 12.6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can compete successfully in the marketplace
12.6.2: Case: Timberland and Community Service
Commerce and justice
City Year nonprofit organization
Community service program
Change in economic situation
12.6.3: Case: Coca-Cola’s Water Use in India
Groundwater depletion case
12.6.2: Case: Timberland and Community Service
Point 1- Commerce and justice
Employees must devote time to community service
Create solution for community needs
Point 2- City Year nonprofit organization
Timberland gave donations to City Year
Joint community service program
Point 3- Community service program
Expanded collaboration with nonprofit organizations
Provided voluntary training to people
Point 4- Change in economic situation
Economic downturn
Change in ownership
Community service that was a part of the company’s culture was continued
12.6.3: Case: Coca-Cola’s Water Use in India
Point 1- Groundwater depletion case 
Depletion of groundwater around Coke plants
Overexploitation of ground water
Improvement in water efficiency
Efficacy in returning water was questioned
Fair share of water
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

19. Conclusion: Corporate Social Responsibility
Meaning of CSR
Arguments for CSR
Normative case for CSR
Virtual industry
Strategic CSR
Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved