Corporate Social Responsibility 1

Who do we trust?

GlobeScan CSR Survey (2004) (see updated 2009)

¡  Non-Governmental organizations                           68%

¡  United Nations                                                                 65%

¡  National governments                                                   52%

¡  Labour Unions                                                                   50%

¡  Domestic companies                                                      49%

¡  Global companies                                                            38%

Edelman 2009: Only NGOs >50% trust

From GlobeScan Radar 2010:  Corporate Social Responsibility is increasingly being defined by ethics and transparency.

Edelman 2010

¡  NGO’s remain most trusted (+25% in China over 4 years)

¡  Trust in government somewhat stable.

¡  Trust in business rising (slightly) over past years, except for Russia.

¡  Banking suffering credibility collapse (-39% in US over 3 years)

¡  C. 70% expects business and financial companies to revert to “business as usual” once recession is over.

¡  Transparency and honesty most important to trust.

¡  Financial returns least important to trust.

¡  Treatment of employees and frequent communication increase significantly as affecting trust levels.

¡  Corporate communications more trusted than company or product advertising.

Defining Corporate Ethical Identity

¡  Corporate Identity: organizational philosophy, values, history, strategy, business scope, communication, and ethical stance.

¡  “the reality and uniqueness of an organization which is integrally related to its external and internal image and reputation through corporate communication” (Berrone et al 2007)


¡  CEI (Corporate Ethical Identity): “the set of behaviours, communications, and stances that are representative of an organization’s ethical attitudes and beliefs.” 

¡  CRE (Corporate Revealed Ethics):  communication of beliefs

¡  CAE (Corporate Applied Ethics): behaviours and actions within the perspective of ethics.

¡  Connection between CEI and Stakeholder Satisfaction (SS).  Strong CEI results in higher SS and therefore improved financial performance. 

¡  CEI made up of component parts. CRE: things like mission statements. CAE: actions.  CRE may influence SS, but CAE has far more significant influence.

¡  CEI IS A NEGOTIATED IDENTITY, subject to cultural conditions, like any other.

Corporate Ethical Identity

¡  CEI influenced by interaction between firm and stakeholders’ ethical claim.  

¡  Ethics is in the eyes of the stakeholders. 

¡  Corporate communication plays a pivotal role in the process through which stakeholders perceive that the company’s identity and reputation is formed.” (Berrone et al 2007)

¡  – in other words, the stakeholders determine right/wrong/ethical/unethical. Revealed ethical standards (mission statements, CofE, etc) must be reflected in applied ethical behaviour in order to be effective.  RES on their own not influential or effective (Berrone et al, 2007)

A Brief History of CSR

¡  Stohl et al mention Magna Carta: “The Great Charter of English liberty granted (under considerable duress) by King John at Runnymede on June 15, 1215”

¡  Enshrine legal protection for individual against undue state/sovereign intervention  (i.e.,  using legal measures to protect stakeholders from the activities of an organization)

¡  Basis for developing English juridico-legal system

¡  1st generation rights: individualist basis for legal rights and “economic man” (the basis of liberty)

¡  Carta de Foresta of 1217 (England)

¡  A charter  enshrining forests as public goods, accessible to commoners, serfs, and vassals not enjoying the social and economic privilege of aristocratic right

¡  Like 2nd generation rights: acknowledging the conditions of an organization’s operations, and compelling the organization to actively allow for practices and concessions

§  Here, those accommodations and concessions are access to forest-base resources to carve out a living

¡  In 1622,  disgruntled shareholders in the Dutch East India Company issue pamphlets complaining about management secrecy and “self enrichment.” (Asongu 2007)

¡  Let  us not forget Adam Smith and his CSR-like system of local economies (late 18th century Scotland)

¡  Traditional indigenous knowledge: implicate interconnected ecology of relations prior to any Eurocentric system of material and nominal value

What is an economy?

¡  A market-based system of exchange?

¡  A deregulated system of competition allocating  and organizing scarce resources?

¡  A system for private property and profit, primitive accumulation, the creation of commodities, and ongoing speculation in rounds of successive capitalization?

¡  Political economy?

¡  Political economy: generally, the study of conditions of economic production emphasizing the intersection of economics with other domains of activity, i.e., social relations, legal systems, cultural practices. In a sense, political economy recognizes the properties or characters attributed strictly to the environment of “economics” are not simply natural, pure, or self-evident processes but politically-determined and socially-specific.

¡  From monopolies to industrial oligarchies…

¡  Push: the system we have today, neoliberal capitalism or deregulated markets open to competition, are by no means unregulated but require a whole set of state and supra-state regimes and legal agreements to maintain the status quo.

Who participates in an economy?

¡  Commonwealth and private wealth: contemporary and historical anxieties about the tension between individual and collective/common social good

A Brief History of CSR

¡  Goodwill and its treatment in accounts” (Accountant, January 1897)         ( Sarbutts, JCM, 2003)

¡  Corporation as an incorporated trust with a narrow legal mandate growing out of the industrial age: an organized body entrusted with completing a specific activity or task, beyond  the scope of an agreement or partnership

¡  A dominant social institution designed for economic activity

¡  Corporations: legal persons (U.S.) (individual rights)

§  Ecuador: legislate rights for natural systems

§  Enshrinement only way to litigate against corporate-based resource extraction

Andrew Carnegie, founder of U.S. Steel: the notion of social responsibility linked to economic fortune.

¡  The charity principle.

¡  The stewardship principle.

¡  The wealthy as trustees.

¡  The function of business.  (Asongu 2007)

¡  Redress for a career of exploitation or moral act of paying-it-forward? Or more complicated

¡  In 1929, the Dean of Harvard Business School, Wallace B. Donham:

¡  Business started long centuries before the dawn of history, but business as we now       know it is new – new in its broadening scope, new in its social significance. Business has not learned how to handle these changes, nor does it recognize the magnitude of its responsibilities for the future of civilization (Asongu 2007).

Why CSR? Four traditional arguments

¡   Moral: “the right thing”

¡  Reputation: Image and credibility

¡  License to operate: Community goodwill

¡  Sustainability: long-term business sense

§  i.e., how to maintain and conduct business over time, before or alongside social and environmental sustainability

CSR: Business as Stewards

¡  Executives as “stewards of the valuable resources as well as their own enlightened self-interest.”

¡  The current political and economic situation suggests “that stakeholder interests will remain at the top of the list” longer than in the past. (Pfeffer, HBR, June 2009)

¡  Entrusted with steering society’s well-being

¡  Remember Strauss: making the stewardship argument, but in a deceptive, secretive, and esoteric manner – no knowledge transfer – knowledge as an economic resource to leverage

¡  Leo Strauss, Neoconservative philosopher, 1899-1973.

Why has CSR become important?

¡  Globalization

¡  Evolving understanding of stakeholders

¡  Governments, intergovernmental bodies, and NGOS

¡  Advances in communications technology

¡  Consumer and investor interest

¡  Serious and high-profile breaches of corporate ethics

¡  International citizenry awareness

¡  Awareness of the limits of legislation and regulation        

¡  Business awareness

¡  Globalization — with its attendant focus on cross-border trade, multinational

¡  enterprises and global supply chains — is increasingly raising CSR concerns related to human resource management practices, environmental protection, and health and safety, among other things.

¡  Governments, intergovernmental bodies, and NGOS such as the United Nations, the Organization for Economic Co-operation and Development and the International Labour Organization have developed compacts, declarations, guidelines, principles and other instruments that outline social norms for acceptable conduct. Advances in communications technology, such as the Internet, cellular phones and personal digital assistants, are making it easier to track corporate activities and disseminate information about them. Nongovernmental organizations now regularly draw attention through their websites to business practices they view as problematic.

¡  Consumer and investor interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues.

¡  Numerous serious and high-profile breaches of corporate ethics have contributed to elevated public mistrust of corporations and highlighted the need for improved corporate governance, transparency, accountability and ethical standards.

¡  Citizens in many countries are making it clear that corporations should meet standards of social and environmental care, no matter where they operate.

¡  Awareness of the limits of legislation and regulation

¡  and regulatory initiatives to effectively capture all the issues that corporate social responsibility addresses.

¡  Businesses are recognizing that adopting an effective approach to CSR can reduce risk of business disruptions, open up new opportunities, and enhance brand and company reputation.

Pause: Globalization & Complexity

¡  What has been globalized, and with what level of ease?

§  Capital, economies, culture, communications, social practices, commodities, people?

¡  What are the implications regarding the globalization of business in terms or responsibility?

¡  Not uniformity or sameness but networks of interaction and engagement:

¡  From Global Transformations (Polity Books):

§  “Globalization can best be understood as a process or set of processes rather than a singular condition. It does not reflect a simple linear developmental logic, nor does it prefigure a world society or a world community. Rather, it refers to the emergence of interregional networks and systems of interaction and exchange. In this respect, the enmeshment of national and societal systems in wider global processes has to be distinguished from any notion of global integration.”

CSR: Why now?

¡  Decreasing trust after economic “meltdown.”

¡  Consumers continue to expect sustainability.

¡  57% have “punished” companies for lack of CSR.

¡  52% have “rewarded” companies for CSR.

¡  Shrewd decisions: optics

CSR and Consumer Behaviour

Consumer expectations and awareness:

¡  Growing complexity of understanding and expectations of CSR

¡  Willingness to change behavior

¡  Willingness to pay premium for CSR

Defining CSR: Beyond Ethics

¡  The World Business Council for Sustainable Development defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large” (Asongu 2007)

Defining CSR: Beyond the Company

¡  Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society.

Triple Bottom Line

¡  Triple bottom line is a business philosophy that focuses on economic prosperity, environmental quality, and social justice. (CBSR 2002)

¡  Reconceptualize wealth & value

¡  Nominate new indicators

Defining CSR

¡  “Corporate Social Responsibility (CSR) encompasses a company’s commitment to operate in an economically and environmentally sustainable manner, while acknowledging the interests of all of its stakeholders.” (CBSR 2002)


¡  “A stakeholder is any person, group, or entity that is impacted directly or indirectly by a business’ activities or that directly or indirectly impacts the business’ activities.” (CBSR 2002)

Stakeholder Involvement, Accountability, and Transparency

¡  Stakeholder involvement involves actively seeking and responding to stakeholder input on a company’s policies and programs.

¡  Accountability and transparency involves formal and informal reporting to stakeholders on its policies and programs, describing clearly, accurately, and truthfully its successes and setbacks. (CBSR 2002)

¡  Stakeholder involvement can range from informing stakeholders of company activities to engaging them in dialogue. Accountability and transparency involves formal and informal reporting to stakeholders on its policies and programs, describing clearly, accurately, and truthfully its successes and setbacks.

What is Sustainability?

¡  “the ability to maintain the business success over the long term

¡  “rates of use of renewable resources should not exceed the rates of regeneration

¡  “rates of use of non-renewable resources should not exceed the rate at which sustainable renewable substitutes are developed”

¡  “rates of pollution emissions should not exceed the assimilative capacity of the environment(CBSR 2002)

CSR as Opportunity

¡  “Corporations are also social institutions. What they do and how they act and the role they play in the community they operate in is important. ... We can build better communities, stronger communities and, frankly, better places to operate business. The opportunity we have is compelling.”

CSR as Necessity

¡  “Every activity in a firm’s value chain overlaps in some way with social factors . . . The goal is to leverage your company’s unique capabilities in supporting social causes, and improve your competitive context at the same time. The job of today’s leaders is to stop being defensive and start thinking systematically about corporate responsibility.”

CSR: Beyond the Law

The World Business Council for Sustainable Development:

¡   corporate governance and ethics

§  health and safety

§   environmental stewardship

§   human rights (including core labour rights)

§   human resource management

§   community involvement, development and investment

§   involvement of and respect for Aboriginal peoples

§   corporate philanthropy and employee volunteering

§   customer satisfaction and adherence to principles of fair competition

§   anti-bribery and anti-corruption measures

§   accountability, transparency and performance reporting

§   supplier relations, for both domestic and international supply chains.

2010 Edelman Trust Barometer

¡  Trust is connected to a company’s license to operate.

§  (What band of activity will we tolerate?)

¡  Trust one of most important factors in reputation.

CSR as Mandate

¡  “Corporate social responsibility is a mandate that companies have today. They don’t have any choice.”

¡  “We want you to earn a return, but we want you to do it right. And we want you to do it in a responsible manner.  We don’t want you to abuse the environment. We don’t want you to abuse ethics. We don’t want you to abuse people’s rights. We want you to do it properly, and we’re going to hold you accountable for it.”

Facets of CSR

¡  Traditional corporate philanthropy

¡  Risk management

¡  Competitive advantage. 

¡  Traditional (ie. Writing a cheque – “the right thing to do.”).  about 1% pre-tax profits.  But shareholders and employees want more involvement.

¡  Risk management: in the wake of Bhopal and the Exxon Valdez, Big pharma (retroviral drugs for HIV/AIDS, child labour (Nike and the Gap).  Companies talk with NGOs and governments, create codes of conduct, sets rules across industries, and so forth.

¡  CSR as helping to create value.  CSR as part of a company’s  competitive advantage.

Drivers of CSR (Thorton 2008)

¡  “While ‘saving the planet’ is a concern, by far and away the main drivers for action on corporate social responsibility are recruitment and retention issues followed closely by cost management. This highlights the power of the individual.”

CSR: Types of Activity

¡  Works internally and externally.

¡  Internal issues take priority.

¡  Employees, customers, suppliers, environment, shareholders, international operations.

CSR for Employees (CBSR 2002)

¡  Compensation, health, and safety.

¡  Hire/train locally.

¡  Effective internal communications          

¡  Fair employment and promotion.

¡  Investment in growth and profitability.

¡  Transparent and sensitive outsourcing and downsizing decision making.

¡  Life/work balance (health & wellness)

¡  Solicit and respond to employee complaints.

¡  Involve in program definition and performance evaluation

CSR for Customers

¡  Open and truthful marketing/communication

¡  Commitment to customer satisfaction

¡  Monitoring quality and impacts

¡  Soliciting and promptly responding to complaints

¡  Involving in product and service development

CSR for Suppliers

¡  Uphold social and environmental values

¡  Follow fair payment practices

¡  Prioritize local suppliers

¡  Avoid agreements with unethical companies

¡  Uphold procurement standards

¡  Solicit and promptly respond to complaints

¡  Involve suppliers in contract development.

CSR for Environment

¡  Comply with environment laws and regulations

¡  Commit to minimizing negative impacts and optimizing benefits

¡  Perform full life-cycle analysis on all products/service

¡  Incorporate environment values into purchasing decisions.

¡  Involve environmental experts and NGOs in program definition and evaluation.

CSR for Shareholders

¡  Implement fiscal policies, financial management systems, and accounting controls

¡  Report on financial and non-financial success

¡  Affirm and support a mission that includes non-financial objective

¡  Involve shareholders in definition and evaluation of business direction

CSR Internationally

¡  Do not displace existing communities

¡  Follow fair labour practices

¡  Show sensitivity to local cultures and customs

¡  Comply with human rights standards.