Corporate Social Responsibility
Nearly all people today have something regarding the concept of corporate social responsibility, i.e. workers, scholars, or managers (McWilliams, Siegel & Wright 2006). They have heard it in the business population, media, or in the popular culture. A good exemplar is a 2010 Google search, which disclosed more than 10 million hits per the term. Nevertheless, in spite of CSR’s pervasiveness, its meaning, and if it is significant to the business globe, in any real way can be very diverse (Crowther 2008). Many definitions of CSR exist and many viewpoints on the correct scope, as well as the nature of a company’s social responsibilities. Prior to discussing the concept of CSR, it is crucial to reveal the nature of corporations as a legal entity, as well as how they differ from other kinds of business organizations. This begs the question if these corporations can be held ethically accountable for their deeds. May be only people employed in such corporations would be accountable. For instance, in case one holds the belief that just employees can be held accountable instead of the corporations, then, describing CSR could be impossible (Frederick 2008). It is for a reason that only people employed in the firms would be held responsible, and consequently reprimanded for socially responsible conduct instead of the companies. Therefore, it is fair that a firm and its workforce are considered as an entity without any separation to ensure equal responsibility for social conduct. Problems would arise with CSR definition even when firms are held responsible without the inclusion of employees and other stakeholders. In this regard, critical evaluation is done in an attempt to reveal how CSR is defined. Nonetheless, for the sake of this discussion, Lantos (2001) definition of CSR seems to include aspects of other definitions, hence, will be the focus. CSR has four main boundaries, such as ethical, altruistic, legal, and economic, which guide its execution. These will be discussed in detail below. In addition, the discussion will examine the background of CSR, which has a long history dating to the 1950s. Shell Company is used as the case study to show how CSR comes to be. Lastly, a description is offered of the current debates on CSR, which mostly surround the shareholder and stakeholder theories. Notably, the use of the term corporation in this discussion stands for all business types.
Critical Evaluation of How CSR Is Defined
Corporate initiative is essential in the evaluation of organization’s impacts on the external environment as well as social welfare (Fredrick 2008). CSR goes beyond compliance and philanthropy and deals with how organizations manage their social, economic and environmental impacts as well as their connectedness in all fundamental developmental areas of an organization that include the marketplace, community, public policy, and the workplace (Hks.Harvard 2008). In most cases, the term corporate social responsibility is also used to refer to social enterprise, corporate citizenship, corporate governance, or triple-bottom line. Corporate social responsibility promotes good relationship between an organization and its external environment. The external environment of an organization or business may be society and the environment. Through corporate responsibility, organizations develop sustainable relationships with all their stakeholders that are geared towards establishing long lasting benefits (Werther & Chandler 2010).
Corporate social responsibility has a number of definitions. In essence, corporate responsibility is referred to as a responsible business or corporate behavior (Fredrick 2008). Moreover, CSR is an essential component of every organization development due to its vitality in ensuring that organizations meet the required standards of operation by regulating their performance through sustainable positive relationship with the society (Investopedia 2009). CSR is also commonly referred to corporate citizenship, and it includes finding the little costs that do not give benefits to the organization. According to Lantos (2001), CSR is a firm’s compulsion to optimize its positive and reduce the negative influence in being a contributing societal member concerned about the long-run needs and wants. What is more, CSR also engages in activities beyond those of the organization, which are legally required. It aims at encouraging a good societal impact of the organization through its work with employees, customers, members of the public, and the environment at large. Therefore, many corporate experts use CSR extensively to refer to legal and moral principles that supplement an organization’s relationship and its stakeholders.
Principally, CSR experts argue that organizations end up making profits for a long time by doing their work with set objective whilst critics say it deflect businesses from their economic role. Some people reason out that it is a kind of an attempt to downgrade the work of the government to watch over the powerful companies operating over several nations. Political sociologists were interested in CSR because of globalization, late capitalism, and political views with an emphasis on economic growth (Crowther 2008). They used a critical analysis sociologist stress that corporations have changed CSR to a business model and a device that manages risks and most times whose results are deemed questionable.
CSR is given the mandate to help an organization set goals and guide what it does and offers its customers. One of the types of applied ethics that guides moral and ethical principles and problems that come up in a business is the development business ethics that is a core value of CSR. The international standard that is recognized for CSR is ISO 26000 (Labspace 2014). Many public organizations follow the triple bottom line (TBL) equivalent of CSR. Technically, CSR follows same guidelines as TBL, but does not follow a schematic legislation act. Nevertheless, CSR is very crucial in businesses. When a business has set goals and a vision beyond the products or services it offers to society, it creates a good picture to its stakeholders. In addition, CSR has a component of business relationship ethics that plays crucial roles to supplement organization development. Being a way that the businesses manage environmental, social, and economic impacts, CSR is one way through which they minimize their downsides while maximizing their benefits. The spirit of CSR is driven by the fact that the government seeks to ensure positive contributions of the business to society, for example, through health and safety, environmental protection, ethics, accountability, governance, sustainability, and ultimate customer satisfaction. CSR helps build an organization’s reputation by greatly maximizing its efficiency through minimization of the business disruptions (Labspace 2014). Moreover, CSR plays a significant role in creating innovation opportunities.
To perceive the role of CSR, it is vital to understand the various types of it in organizations. One includes the corporations that give funding for social welfare, an example of donating funds and workers time to the needy. This is what many people refer to corporate responsibility. The second type of CSR requires planning to create products and provide services that help society. These services include safe materials that are used in manufacturing, creating job opportunities, and developing the economy.
CSR plays a number of significant roles in organizations, which also reveal its definition. Firstly, this includes showing a true commitment to society in caring for the environment. In respect to this role, most prosperous CSR programs incorporate the two known types of CSR. An example is an organization that gives financial help and allows its employees to work as volunteers during paid work time. This would be demonstrating dedication to the environment and society enterprise. Secondly, CSR plays a great role in the provision of public relation benefits. Public relations shape consumers awareness and build an organization’s image. A corporation that advances its social responsibility always makes it public through the media. Publicity can be built through CSR enterprises, volunteering by employees, and corporate giving to the needy. Thirdly, CSR is important in building a positive working environment. Also, creating a positive and conducive working environment for employees is important in promoting social citizenship. It is for a reason that when employees are comfortable in their workplaces, their productivity, as well as engagement in work is likely to increase.
Nevertheless, CSR has been linked to a number of negative impacts to business organization’s development. This includes the impact of the unaccounted expenses. One of the main reasons why organizations and businesses would not participate in CSR is the cost. Adoption of CSR by organization requires paying for effective waste management, employees training, and various programs involving the environment (Hunnicutt 2009). Thus, these unnecessary expenses may result in loss. Secondly, negative thinking by shareholders is another big dispute for organizations when considering taking CSR. Public corporations are historically known to have a great focus in increasing the value of shareholders. Concerning this, they are supposed to balance owners’ financial expectation, as well as the social and environmental expectations of stakeholders. This may result in conflicts concerning the CSR expenses.
Boundaries of Corporate Social Responsibility
The corporate social responsibility concept as well as its major boundaries including ethical, altruistic, legal, and economic analyze different points of view on the roles of businesses in society. This entails the goals of profit maximization, as well as providing services to communities (Lantos 2001). There is still much speculation and confusion on the failure of CSR to differentiate the strategic, ethical, and altruistic roles. This largely occurs because of an analysis and examination of the arguments of the different forms of CSR (Lantos 2001). It is proposed that ethical CSR is founded on ethical responsibilities and duty concepts. Marketers should take a major role in defining and implementing the company’s responsibility efforts. However, most marketers neglect social outcomes of their activities at the expense of society and rather focus on their markets and products. Nevertheless, this could have been caused by the CSR concept and unclear boundaries. The concept of CSR has a historical perspective, which can point out the roles CSR has on businesses in society.
The way people view the relationship between business and society has changed. Carroll (1979) believes that firms should be judged by their economic success, as well as their non-economic contributions. This suggests that firms have a number of responsibilities, which represent different dimensions through which their successes should follow. This implies that companies should have an obligation of fulfilling their citizen’s corporate responsibilities in legal, philanthropic, economic, and ethical domains. Also, there has to be clear lines to differentiate these domains by being able to differentiate the philanthropic and ethical dimensions of CSR (Carroll 1979). The boundaries include:
Businesses have been depended as major pillars of the economy in providing employment, income, raw materials, technological improvements, and payment of taxes. Furthermore, people have relied on businesses for generation of investment capital, which assists in economic growth. This was acceptable as long as the businesses confined their activities within law (Lantos 2001). In the article “The Wealth of Nations,” there is a framework for businesses in the current world and with society (Carroll 1979). The author suggested that while capitalism encourages the pursuit of efficiency and gains, there is the creation of greater wealth compared to any other economic system. The system maximizes the freedom of individuals to choose purchases, investments, and in employment, hence, promoting the common good. Focusing to beat one’s competitors and working to produce good work will assist anyone to earn promotion. If ethically done, there will be high personal development, and therefore, there will be greater utilization of individual’s talents, as well as the firm’s treasury. The role of manager is to act as a trustee to the shareholders or a principal being their steward in efficiently managing the assets of an organization (Litz 1996).
Businesses should be profitable to their principals, but should also offer quality product and at fair prices to their customers. There are different economic responsibilities of businesses due to their customers. Businesses should earn fair returns on the investments entrusted to the organizations by their investors; they should also satisfy their customer’s needs with commodities and amenities that are of genuine value (Lantos 2001). The businesses have to create wealth, with capabilities of accruing to non-profit organizations that have stakes of overtly held firms and assist lifting the deprived out of insufficiency when their pays rise. They should also promote innovation and diversify their economic interests in order to prevent the domination of the majority. The firms should also create and maintain new jobs.
This boundary maintains that the legal duties of businesses encompass complying with the law, as well as playing within the rules of doing business. Laws moderate the ways in which businesses conduct their operations. Moreover, the laws are passed because the businesses cannot be trusted by society to do right. Nevertheless, laws have certain disadvantages in ensuring that people do the right things, as they are limited in their scope. This means that the laws cannot cover everything that concerns society. The laws merely lay a platform for conducting businesses by dictating what ought to be done and what is likely to follow as punishment if the right thing is not done rather than being followed out of internal moral conviction (Lantos 2001).
Ethical responsibilities overwhelm the demerits of legal duties. According to Anshen (1970), these duties encompass being moral and doing the right thing in a fair and just manner. These include respecting other peoples’ moral values and avoiding social injury or harm caused by other actors. Ethical roles entail those laws, policies, decisions, institutions and activities that are deemed positive or negative by community members, although they are not necessarily entrenched into the rules. Such laws derive their power from moral traditions, religious convictions, and human rights and principles. Currently, almost all members of business systems agree that that there is a new set of responsibilities referred to the ethical CSR. Some time back, ethics in businesses was not given importance to people in business, but was left to theologians to tackle various issues, such as unfair labor prices, fair wages, and capitalism morality issues (Anshen 1970).There were teachings given by the Protestants on how to attain success through hard work. Later, business ethical issues were given great concern due to increased realization of repressive labor activities in various corporations. Businesses were portrayed as evil in the consumerist media. The result of this negative publicity was the up rise of corporate consciousness in the USA in different platforms. This has happened since the 1970’s in business ethics.
This tenet is also referred to the philanthropic responsibility. It refers to giving back money and time in the form of voluntary service. It is a crucial aspect of CSR. For a long time, businesses have been judged by their economic, moral, as well as contributions to society. This suggests that the terms of service between society and industry are transforming. Businesses are increasingly being asked to serve values that are more human and assume responsibility to members of the community even when they have no viable transactions (Lantos 2001).
Towards the end of the twentieth century, there emerged the concept of corporate social contract. This concept spells out the expectations of society over businesses, as well as the business’ expectations to society. The boundaries suggest that businesses should have altruistic or humanitarian impacts towards society in a positive way. Additionally, there have been increased calls from various stakeholders in society agitating for proper practices of businesses towards society. This will assist in promoting the welfare of all actors. If well applied, philanthropic CSR is an important marketing tool used to enhance the image of firms. It can assist in the attainment of financial obligations of any business and at the same time benefit society.
Background of CSR
The background of the CSR concept has a long and varied history. The evidence regarding the centurial concern society has had on the business community can be traced. Nonetheless, much evidence on SCR can be traced to the 20th century. The footprints of the CSR though can be seen all over the globe, however, formal writings in the US have been evident. Although most literature dates back to 50 years, this review will concentrate on the current concepts, which begin from 1950. This will entail reviewing those who have contributed to the development of CSR definition. To begin with, CSR phrase first emerged in 1953 upon Bowen’s publication that brought up the question regarding the responsibilities to society commerce individuals can expect to assume (Bowen 1953). The 1960s’ literature expanded CSR’s definition, proposing that firms had particular responsibilities beyond legal obligations to society (Caroll & Shabana 2010). Peter Drucker, a management consultant, wrote concerning the importance of turning social hardships into economic opportunities in 1984. Academic discussions regarding the CSR concept grew all through the 70s to 80s, although Ben and Jerry’s was the first firm to issue an actual social report in 1989 (Werther & Chandler 2010).
During the late 1970’s, the United Nations Centre on Transnational Corporations (UNCTC) in collaboration with the Organization of Economic Co-operation and Development (OECD) started creating conduct codes in a bid to regulate varied facets of corporate globalization (Banergee 2009). The OECD made up of a team of 30 industrialized nations that came up with set rules in 1976 to ease globalization workings after recognizing the complexity related to firms doing business across borders (Valor 2005; Banergee 2009). They established guidelines to govern overseas direct investment. They also created confidence as well as predictability atmosphere in foreign corporations. Their rules for multinational entities encompassed areas like tax payments, dealing per the guidelines of the local laws, and accounting. The rules were targeted at nations rather than firms. Their compliance is vital in obtaining a listing in a particular stock exchanges and export credits. Nonetheless, the code of conduct set by UNCTC aimed at controlling corporate abuse instead of facilitating firms’ access to emerging markets. Its success was limited probably because it placed excess pressure on firms. Consequently, UNCTC was dismantled and later merged with the UN Conference on Trade and Development (Banergee 2009).
Corporate attitudes shifted to social and environmental issues due an increase in anti-corporate activism upon ecological and human rights matters. During the 1970s and 1980s, there were distinctive global boycotts of firms making investments in South Africa, especially Barclays Bank (Banergee 2009). Additionally, Nestle boycott due to the hostile marketing strategies the firm was using in the global south. The period was characterized by confrontational campaigns, which forced transformation from firms through attacking the brand. The 1990s saw effective lobby against any trials to control corporate activities at an international level (Vogel 2005). Logistically, this saw the extension of their power through enhanced communications and transport, and lawfully, through global agreements, for instance, the “General Agreement on Trade in Services” (GATS). Such agreements expanded corporations’ rights.
Another significant time in CSR evolution was the Rio’s Earth Summit held in 1992 (Williams 2010). During that time, the involvement of corporate was successful in impeding the ambitious task of the Summit, which was to search for methods of stopping the harm of planet pollution, as well as irreplaceable natural reserves. Sweden and Norway forwarded their proposals for multinationals regulation based on UNCTC work (Clapp & Dauvergne 2008). However, these proposals failed and instead, the congregation favored charitable corporate environmentalism. The corporate level of engagement was extraordinary since they had formed a coalition with 48 firms, especially to manipulate its outcomes. The coalition “Business Council for Sustainable Development (BCSD) was afterwards to be the World Business Council on Sustainable Development (WBCSD)” (Tassiopoulos 2008). According to the Corporate Watch Report (2006), Stephan Schmidehiny, a millionaire from Sweden established WBCSD after being invited to the Summit by Maurice Strong. This coalition in collaboration with the commerce chamber (ICC) employed a tandem outlook that moved the debate effectively. The latter checked corporate regulation matters, whereas the former voiced the transforming industry course to voluntary self-control. This approach has emerged to characterize corporate campaigning against progressive control.
The climax of anti-corporate criticism was reached in 1995 when Shell was put on the limelight. The firm had been accused of involvement in Ken Saro Wiwa implementation in collaboration of eight Nigerian activists (Starr 2005; Banergee 2009). Additionally, the firm had been accused of being pestered by Greenpeace over its resolution to sinking the oil platform at Brent Spar. Consequently, they lost investors’ and public’s confidence. This encounter was a wakeup call to other firms to safeguard their public image. It sensitized many firms about how campaigners can damage them. Shell required a convincing strategy to make the public understand the crucial role corporations play in society using the license they had obtained to work on the line (Barth & Wolff 2009). Consequently, capitalism received a human face, and the Shell’s PR disaster marked the shift to CSR. The firm used ?20 million to reconstruct its reputation. It contracted PR firms to manage its reputation strategy. It issued a statement of commerce principles highlighting the firm’s core values of uprightness, respect for individuals, and honesty. This strategy was attentive to directness and dialogue groundbreaking the practice of preparing CSR reports. In 1998, the firm produced a CSR report and an international advertising lobby attentive to environmental matters in addition to a new website persuading stakeholder to “Tell Shell”. Therefore, this made the firm seem as if it was engaging the community in its formulation of decisions, whereas making no explicit promises. This strategy managed to reconstruct Shell’s image among decision makers and major opinion formers.
Therefore, CSR emerged as a direct reaction to anti-corporate activism by corporations. In addition, the image of destruction campaigns instigated the reaction (Corporate Watch Report 2006). This was a victory for firms in reviving their public reputation and inhabiting the issue space surrounding the social and environmental influence of business. According to Tom Delfgaauw who was a past vice president of Shell, the image issue during the mid-1990s was the best thing, which ever happened to the firm (Corporate Watch Report 2006; Henderson & Institute of Economic Affairs 2001). It is for a reason that the company is already out of it, being a stronger firm. The situation also hastened other needed developments which were beneficial to the firm. Doubtfully, Ken Saro Wiwa would unlikely share this outlook, especially with the progressive environmental destruction, abuse of human rights, and poverty in the Nigerian Delta.
From the above, McWilliams, Siegel and Wright (2006) posit that business managers plus academics have realized how CSR has changed from an inappropriate idea to an important research topic. According to Caroll and Shabana (2010), it has become a vastly adopted the concept in the current business world, especially in recent years.
Elements of Current Debate Surrounding CSR
There have been several debates being propagated over the Corporate Social Responsibility. The two sides of this debate comprise the shareholder and stakeholder theories. Advocates of the stakeholder concept agitate for providing unrestricted societal expectations. On the other end, the proponents of the shareholder theory consider that firms should obey laws and capitalize on the wealth of shareholders. The inference of these theories is that businesses should emphasize on maximizing the wealth of shareholders based on ethical considerations (Banerjee 2008). Thus, CSR should be pursued if it only attains this function. The debate over the issue based on the stakeholder theory means that firms should deliberate the outcomes of their actions over the suppliers, customers, employees, and the public. The legitimacy theory maintains that firms have implicit agreements with stakeholders to offer their needs and wants. By catering for the desires of investors, CSR legitimizes its presence (Banerjee 2008).
The notion that firms bear an obligation, which stretches past of their shareholders has been in existence for some time now. Among the three widely defined sustainability pillars are environmental, economic, and social imperatives. There have risen great concerns over the long-term sustenance of the natural resources on earth as the current burner issues (Banerjee 2008).
Efforts have been witnessed by organizations all over the globe to go ‘green.’ Governments and corporations are increasingly responding to pressure from outside groups making them demonstrate measurable progress and leadership in their stewardship towards the environment (Wartick & Philip 2010). Nevertheless, the question remains as to whether this movement will last or if it is a ‘matter or routine’ phenomenon. Pessimists argue that organizational-driven programs on sustainability are mere marketing stunts while others consider this trend as a de rigueur and conventional part of the worldwide business landscape. The current debates around corporate social responsibility continue focusing on three main parts including the environment, exploitation, and corruption.
This issue has extended beyond the modest demand that firms stop eructing smoke from the chimneys of their factories to a mandate that they manage their desire for natural resources; for instance, the exploitation of skins of endangered species. The organized aggression to such conduct has compelled firms to change. For instance, banning of ivory products and trading of animal products amongst companies all over the world.
This debate addresses worker’s exploitation. This particularly applies to women in the developed countries and children within the developing countries. There has been a feeling that globalization has augmented the power of most multinationals exploiting the poor by underpaying them (Wartick & Philip 2010). This has also weakened the effect of trade unions and other organizations meant to protect them.
Bribery and Corruption
This strand emphasizes on corruption issues. It applies on the query of what constitutes a bribe or when a generous corporate hospitality oversteps that line. It also looks at the protection which should be accorded to whistleblowers. This includes the insiders or other employees who report companies’ wrongdoings. In this case, there is a powerful cultural element to puzzle the issue. It is fo a reason that what may be considered as bribery in the Middle East may not be considered as such in the Western countries (Wartick & Philip 2010).
From the discussion, it is clear that the notion of social responsibilities assumes that the corporation has economic, legal, and social obligations. The three obligations differ, but the societal aspect carries the most weight. Decision makers have an obligation to social responsibility because they have to act in a manner that will protect and promote societal wellbeing and other individual interests. Therefore, it is correct to define CSR as the progressive obligation by business to act ethically and promote economic growth while enhancing the workforce’s quality of life in addition to that of their families, local population, and society. From the critical evaluation of CSR definition, five major elements seem to recur. First, corporations are bestowed the duties of going past goods and services production at a profit. Secondly, these duties entail assisting to solve crucial social issues, particularly those they have a hand in creating. Thirdly, corporations possess a wider constituency contrast to stockholders alone. Fourthly, corporations’ influence exceeds simple transactions in the marketplace. Fifth, they serve many human values contrarily to what a sole outlook on economic values can offer. Similarly, the definitions seem to include the idea that business corporations’ obligations to society exceed their economic duty to shareholders. Others have not shared the same position, but belief that business holds two obligations. First is to abide by the daily elementary canons, and second, to seek material benefit. In essence, CSR definitions seem to fall in two general perspectives, such as business has a responsibility only to make profits in the confines of little legal, as well as ethical compliance, and second are those who believe in the existence of broader responsibilities.
The concept of CSR brings out the role of businesses on society, which includes the objective of maximizing profits and service providence to the community through the guidance of its boundaries including ethical, altruistic, legal, and economic. Clearly, corporate social responsibility is significant in the positive development of an organization. Through CSR, business organizations establish a mutually benefiting relationship essential in creating a positive societal and environmental organization’s image.
CSR’s background has revealed that the concept evolved through multiple facets and contributions of many writers. The major attention during the 1950s was on the responsibility businesses had to society, however, discussions connecting CSR to business gains were minimal. During the major occurrences in the 1960s, individuals and notions in these movements were helpful in featuring the social transformations, which were introduced in this era. Businesses thought that companies would handle the anticipations the stakeholders were communicating, and CSR study had an open ethical responsibility. Individuals also discussed the association of CSR with the performance of corporate finance. During the 1970s, managers employed customary management functions to handle CSR matters, mostly using the informed self-interest framework. Nonetheless, business, as well as social interests became close in the 80s and companies increased their responsiveness to their stakeholders. Additionally, studies on the matter paid attention to creating new CSR definitions, thereby developing substitute concepts. In the 90s, the notion of CSR was nearly universally sanctioned. It was combined with strategy literature. The peak of anti-corporate disapproval was reached in 1995 when Shell was put on the public eye. Shell strategized on improving its image and in the process adopted CSR, which saw the restoration of its good image. CSR became definitively significant during the 2000s when firms began making social transformations, as well as appreciating the importance of environmental sustainability. Henceforth, CSR is an important notion in any excelling corporation.