Descriptions of Corporate Social Responsibility

Masuku briefly described the evolution of thought on the role of business in society, beginning with the observation that the traditional profit centered approach to management originated during the Industrial Age with the presumption that capital formation was the only legitimate role of business and that managers were obligated above all other things to pursue profits to enhance the wealth of their shareholders.[1]  The 1960s and 1970s saw the slow ascendency of the social responsibility approach to management which was based on the assumption that businesses were actors in a broader environment and thus had responsibilities to respond to social pressures and demands and treat their stakeholders in a manner that complied with both law and ethics.[2]  Writing in the 1970s, Davis defined CSR as “the firm’s considerations of, and response to, issues beyond the . . . economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks”.[3]  By the 1980s, the notion that corporations had a duty to behave ethically had achieved broad acceptance and attention then began to turn to what ethical behavior actually entailed, how companies should respond to business-related social issues and how “corporate social performance” should be measured.  Beginning in the 1990s, a new economic theory of the firm, the “corporate community model:, put stakeholders at the center of corporate strategy. Masuku explained: “… the organization is viewed as a socioeconomic system where stakeholders are recognized as partners who create value through collaborative problem solving. It is the role of the organization to integrate the economic resources, political support, and special knowledge each stakeholder offers ‘not to do well’, but because it provides a competitive advantage.” [4]

_______________

This article is an excerpt from Responsible Business: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is published by the Sustainable Entrepreneurship Project and available for purchase at various online booksellers.

_______________

The ISO 26000 standard for corporate responsibility, which was developed in 2010 by the International Standards Organization, defined “social responsibility as:

“the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that contributes to sustainable development, including health and the welfare of society, takes into account the expectations of stakeholders, is in compliance with applicable laws and with international norms of behavior, and is integrated throughout the organization and practiced in its relationships.”

In 2011 the European Commission provided a simple, yet expansive and important, definition of CSR as being “the responsibility of enterprises for their impacts on society” and went on to explain that “[e]nterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders.”[5]  The World Business Council for Sustainable Development (“WBCSD”), an organization established and led by chief executive officers of companies focused on sustainability, has defined 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”.[6]  This definition recognizes the traditional role of corporations in seeking economic benefits and then expands the responsibilities of corporations to include the voluntary pursuit, as a matter of ethical conduct as opposed to compliance with legal requirement, of wellbeing for a broad range of non-investor constituencies including employees and their families, the local communities in which the business is operated and society as a whole (e.g., environmental responsibility).

The World Economic Forum has identified the concerns for responsible business as follows:

“. . . To do business in a manner that obeys the law, produces safe and cost-effective products and services, creates jobs and wealth, supports training and technology cooperation and reflects international standards and values in areas such as the environment, ethics, labor and human rights. To make every effort to enhance the positive multipliers of our activities and to minimize any negative impacts on people and the environment, everywhere we invest and operate. A key element of this is recognizing that the frameworks we adopt for being a responsible business must move beyond philanthropy and be integrated into core business strategy and practice.”[7]

According to the Australian Parliamentary Joint Committee on Corporations and Financial Services, the concept of CSR should be examined from the following standpoints: (a) considering, managing and balancing the economic, social, and environmental impacts of companies’ activities; (b) assessing and managing risks, pursuing opportunities, and creating corporate value beyond the traditional core business; and (c) taking an “enlightened self-interest” approach to consider the legitimate interests of the stakeholders in corporate governance.[8]

Garriga and Mele´ suggested that it was possible and useful to create a classification of corporate social responsibility (“CSR”) theories based on the perspective of how the interaction phenomena between business and society are focused.  They argued that CSR theories could be classified into the following four groups[9]:

• Instrumental Theories: Theories placed in this group are based on the assumption that corporations are instruments for wealth creation and that this is their sole social responsibility. If this view is accepted, then CSR or any other social activity undertaken by the corporation is only a means to the end of profits and such activities should not occur unless they are consistent with wealth creation.
• Political Theories: Theories placed in this group emphasize the social power of corporations and the obligation of corporations to accept social duties and rights and/or participate in certain social cooperation.
• Integrative Theories: Theories in this group are based on fundamental argument that businesses, including corporations, depend on society for continuity, growth and survival and as such are obligated to integrate the demands of society into their operations.
• Ethical Theories: Theories in this group see the relationship between business and society as embedded with ethical values and that corporations need to accept social responsibilities, such as CSR, as ethical obligations above any other consideration.

One of the most important byproducts of their extensive survey of the approaches to CSR was the conclusion of Garriga and Mele´ that most of the current theories focus on four main aspects: “(1) meeting objectives that produce long-term profits, (2) using business power in a responsible way, (3) integrating social demands and (4) contributing to a good society by doing what is ethically correct”.[10]  Embedded in all of this are a number of duties and ideas that are finding their way into a new kind of corporate governance framework including long-termism, stakeholder engagement, transparency and disclosure, responsible consumption of natural resources, fair dealings with workers and consumers and attention to the needs of local communities and society as a whole.  In addition, many of the emerging approaches to CSR, particularly those falling within the ethical theories identified by Garriga and Mele´, argue, as referenced in the Caux Roundtable Principles for Business discussed below, that legal and market forces are necessary but insufficient guides for conduct, and that it is also incumbent upon businesses to take ethical and moral values into consideration in their decision making.

Another way to look at CSR was suggested by Jamali et al., who observed that many scholars had conceived of CSR as encompassing two dimensions: internal and external.[11]  On the internal level, companies “revise their in-house priorities and accord due diligence to their responsibility to internal stakeholders, namely employees, addressing issues relating to skills and education, workplace safety, working conditions, human rights, equity considerations, equal opportunity, health and safety, and labor rights”.[12]  On the external level, which has generally received the most attention, companies focus on assumption of their extended duties as “corporate citizens” and afford “due diligence to their external–economic and social–stakeholders and the natural environment”[13] Through initiatives to ensure that the corporate operations have a positive impact on the environment and initiatives to address community issues and foster social justice.[14]   Jamali et al. explained that “[t]he environmental component addresses primarily the impacts of processes, products, and service on the environment, biodiversity, and human health, while the social bottom line incorporates community issues, social justice, public problems, and public controversies”.[15]  Jamali et al. observed that “[a]ddressing these two CSR dimensions often implies difficult adjustments and willingness to consider multiple bottom lines … [and] … requires good communication of CSR objectives and actions, new standards, control and performance metrics, and the successful integration of CSR into the culture of the organization”.[16]

Hopkins argued that treating the stakeholders of the firm ethically or in a socially responsible manner is an economic responsibility of companies.[17]  Similarly, Marsden emphasized that “CSR is not an optional add-on nor is it an act of philanthropy. A socially responsible corporation is one that runs a profitable business that takes account of all the positive and negative environmental, social and economic effects it has on society.”[18]  Andersen’s definition of CSR was also based on a broader societal approach that called for firms to extend “the immediate interest from oneself to include one’s fellow citizens and the society one is living in and is a part of today, acting with respect for the future generation and nature”.[19]  Ward also had a broad understanding of CSR as a commitment by companies to “contribute to sustainable economic development—working with employees, their families, the local community and society at large to improve the quality of life, in way that [is] also good for business.”[20]  In 2013, Rahim summed up the results of a survey of definitions and conceptions with the following:

“. . . [T]here is no conclusive definition of CSR and that it can have different meanings to different people and different organizations as an ever-growing, multifaceted concept. Nevertheless, it may be said that the concept of CSR is consistent and converges on certain common characteristics and elements. More precisely, if CSR as defined above is examined from a practical and operational point of view, it converges on two points. CSR requires companies (a) to consider the social, environmental, and economic impacts of their operations and (b) to be responsive to the needs and expectations of their stakeholders.  These two points are also embedded in the meaning of the three words (i.e., ‘corporate’, ‘social’, and ‘responsibility’) of the phrase ‘corporate social responsibility’. The word ‘corporate’ generally denotes business operations, ‘social’ covers all the stakeholders of business operations, and the word ‘responsibility’  generally refers to the relationship between business corporations and the societies within which they act together. It also encompasses the innate responsibilities on both sides of this relationship. Accordingly, CSR is an integral element of business strategy: it is the way that a company should follow to deliver its products or services to the market; it is a way of maintaining the legitimacy of corporate actions in wider society by bringing stakeholder concerns to the foreground; and a way to emphasize business concern for social needs and actions that go beyond philanthropy.”[21]

CSR is clearly a global phenomenon.  Rahim surveyed steps that had been taken around the globe to integrate the core principles of CSR into the policy objectives of different economies and global companies.  Global companies in Europe have been guided by the EU Commission’s Green Paper on Promoting a Framework for CSR and the European Code of Conduct Regarding the Activities of Transnational Corporations Operating in Developing Economies.  A number of individual countries in Europe have also taken action driven, at least in part, by a series of resolutions adopted by the European Parliament to facilitate the development of the incorporation of CSR principles in its member economies: the UK established a post of CSR Minister to encourage greater social responsibility in UK companies and the UK’s Companies Act of 2006 included specific reporting requirements on environmental and social issues; Belgium passed legislation requiring pension fund managers to disclose the extent to which they consider ethical, social and environmental criteria in their investment policies; France required listed companies to disclose their impact on social and environmental issues in their annual reports and accounts; and each of the Scandinavian countries mandated environmental disclosures.  There have also been a number of important quasi-legal initiatives for the promotion of CSR at the national level throughout Europe including the International Business Leaders Forum, the Ethical Trading Initiative and Partnership for Global Responsibility.[22]

Rahim noted that, in contrast to Europe, the US has been slower in using formal regulation to incorporate CSR into the business strategies and operations of corporations, an approach that is consistent with the preference in the US for minimal legislative control of business.  According to Rahim, the US has emphasized developing specialized organizations that set rules and standards, and provide enforcement regimes, for certain aspects of CSR including the Occupational Safety and Health Administration, Equal Employment Opportunity Commission, Consumer Product Safety Commission and the Environmental Protection Agency.  A variety of industry and other non-governmental organizations have also contributed guidelines that can be referenced for the self-regulatory initiatives of individual companies including the US Model Business Principles and the work of the Center for Corporate Ethics and the Fair Labor Association.  Trade associations in specific sectors, such as automobile manufacturing and paper products, have promulgated guidelines for their members on environmental management practices for themselves and their suppliers.[23]

Principles of CSR have been important in Japan since the post-war reconstruction period, during which the resolution “Awareness and Practice of the Social Responsibility of Business” was adopted and stated the fundamental principal that businesses should not simply pursue corporate profit, but must seek harmony between the economy and society, combining factors of products and services, and that social responsibility is a better way to pursue this goal.[24]  Various cabinet ministries have undertaken initiatives to promote and achieve CSR including the Cabinet Office;, the Ministry of Agriculture, Forestry, and Fisheries; the Ministry of Health, Labor, and Welfare; and the Ministry of Environment.  For example, the Cabinet Office issued its “Corporate Code of Conduct” in 2002 to build consumer confidence in businesses and set guidelines to promote the establishment and implementation of corporate codes of conduct.[25]  The influential Ministry of Economy, Trade and Industry collaborated with the Japanese Standards Association on the creation of a working group to develop CSR standards in Japan and Japan has been an active participant in the development of intergovernmental initiatives relating to CSR.  The result of all this activity has been that Japanese companies have been global leaders in disclosures of CSR activities, investment in internal resources to oversee CSR commitments and adoption of codes of conduct based on international standards.[26]

A 2017 article in The Economist succinctly described the evolution of CSR up to that time as follows:

“Between the 1950s and 1970s, CSR took shape in the form of pre-corporate philanthropy, a largely disparate approach involving support for domestic nonprofits at the discretion of CEOs with little transparency or oversight. In the 1980s, intense foreign competition and a greater focus on shareholders led many publicly traded corporations to adopt more stringent quality and cost controls. This created greater demands to tie corporate philanthropy to financial performance through efforts like cause-related marketing and practices more aligned with a company’s business. Throughout the 1990s, CSR became more international in scope, but was typically reactive in nature and often a response to negative publicity. During this time, a holistic, triple-bottom-line accounting framework of sustainability also began to emerge. Since the 2000s, CSR has grown increasingly strategic, and a broader concept of sustainability has gained ground.  Public pressure to address negative corporate externalities, and pressing social, economic, and environmental issues drove the evolution of these practices. Over time, they have blurred the lines between the public, private, and civil sectors, and redefined traditional roles and structures in the process.”[27]

_______________

This article is an excerpt from Responsible Business: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is published by the Sustainable Entrepreneurship Project and available for purchase at various online booksellers.

_______________

[1] C. Masuku, Corporate Social Responsibility Literature Review and Theoretical Framework, available at https://www.academia.edu/2172462/CORPORATE_SOCIAL_RESPONSIBILITY_LITERATURE_REVIEW_AND_THEORETICAL_FRAMEWORK

[2] For further discussion of the evolution of corporate social responsibility and the various definitions and descriptions of the concept that have been suggested, see “Introduction to Corporate Social Responsibility” in “Corporate Social Responsibility: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).

[3] K. Davis, “The Case For and Against Business Assumption of Social Responsibilities”, American Management Journal, 16 (1973), 312.

[4] C. Masuku, Corporate Social Responsibility Literature Review and Theoretical Framework, available at https://www.academia.edu/2172462/CORPORATE_SOCIAL_RESPONSIBILITY_LITERATURE_REVIEW_AND_THEORETICAL_FRAMEWORK (citing W. Halal, “Corporate community: a theory of the firm uniting profitability and responsibility”, Strategy & Leadership, 28(2) (2000), 10).

[5] European Commission, A Renewed European Union Strategy 2011-14 for Corporate Social Responsibility, COM (2011) 681, ¶ 3.1.

[6] World Business Council for Sustainable Development, Corporate Social Responsibility: Meeting Changing Expectations, 3, available at wbcsd.org.

[7] World Economic Forum, Global Corporate Citizen: The Leadership Challenge for CEOs and Boards (2002) http://www.weforum.org/pdf/GCCI/GCC_CEOstatement.pdf at 21 February 2009.

[8] Australian Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Corporate Responsibility and Triple-Bottom-Line reporting for incorporated entities in Australia (2005). http://www.philanthropy.org.au/pdfs/advocacy/pa_jpicr_0905.pdf at 31 October 2013.

[9] E. Garriga and D. Mele´, “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53 (2004), 51, 52.

[10] E. Garriga and D. Mele´, “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53 (2004), 51, 65.  The various CSR approaches are described, including key references, in Table 1 (“Corporate social responsibilities theories and related approaches”) included in the article at 63-64.

[11] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 446.

[12] Id. (citing P. Jones, D. Comfort and D. Hillier, “Corporate social responsibility and the UK’s top ten retailers”, International Journal of Retail and Distribution Management, 33 (2005), 882).

[13] Id. (citing L. Munilla and M. Miles, “The corporate social responsibility continuum as a component of stakeholder theory”, Business and Society Review, 110 (2005), 371).

[14] S. Deakin and R. Hobbs, “False dawn for CSR: Shifts in regulatory policy and the response of the corporate and financial sectors in Britain”, Corporate Governance: An International Review, 15 (2007), 68.

[15] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 446.

[16] Id. (citing D. Jamali, “Insights into triple bottom line integration from a learning organization perspective”,   Business Process Management Journal, 12 (2006), 809; J. Hancock (Ed.), Investing in Corporate Social Responsibility: A Guide to Best Practice, Business Planning & the UK’s Leading Companies (London:,Kogan Page, 2005); G. Lantos, “The boundaries of strategic corporate social responsibility”, Journal of Consumer Marketing, 18 (2001), 595; and J. Elkington, “Governance for sustainability”, Corporate Governance: An International Review, 14 (2006), 522).

[17] M. Hopkins, Corporate Social Responsibility: An Issue Paper (Working Paper No. 27, Policy Integration Department, World Commission on Social Dimension of Globalization, 2004).

[18] C. Marsden, “The Role of Public Authorities in Corporate Social Responsibility” (2001) in A. Dahlsrud, “How Corporate Social Responsibility Is Defined: An Analysis of 37 Definitions”, Corporate Social Responsibility and Environmental Management, 15(1) (2008), 1, 9.

[19] K. Andersen, The Project (2003) in A. Dahlsrud, “How Corporate Social Responsibility Is Defined: An Analysis of 37 Definitions”, Corporate Social Responsibility and Environmental Management, 15(1) (2008), 1, 11.

[20] H. Ward, Public Sector Roles in Strengthening Corporate Social Responsibility: Taking Stock (2004), 3.

[21] M. Rahim, Legal Regulation of Corporate Social Responsibility: A Meta-Regulation Approach of Law for Raising CSR in a Weak Economy (Berlin: Springer, 2013), 13, 24 (citing A. Gill, “Corporate Governance as Social Responsibility: A Research Agenda” (2008), 464).

[22] Id. at 34-38.

[23] Id. at 38-39.

[24] Id. at 40 (citing M. Kawamura, The Evolution of Corporate Social Responsibility in Japan (Part 1)—Parallels with the History of Corporate Reform (NLI Research institute, 2004), 156).

[25] Id. (citing Asian Productivity Organisation, Policies to Promote Corporate Social Responsibility (Report of the Asian Productivity Organisation Top Management Forum, 2006)).

[26] Id. at 41-42.

[27] J. Cramer-Montes, “Sustainability: A New Path to Corporate and NGO Collaborations”, The Economist (March 24, 2017), http://www.economist.com/node/10491124