Corporate Social Responsibility (CSR)

Definition of CSR
“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”

What is CSR?
 Ethical behaviour of a company towards society
 Avoiding exploitation of workers and destructive environmental practice
 Consideration of stakeholders (as well as shareholders)
 “actions that appear to further some social good, beyond the interests of the firm and that which is
required by law” (McWilliams and Siegel, 2001)

Blowfield and Frynas (2005)

 CSR is an umbrella term for a range of concepts and practices including:
o companies have a responsibility for their impact on society and the natural environment,
which may go beyond legal compliance and the liability of individuals
 The idea and practice of corporate social responsibility is based on this statement
o companies have a responsibility for the behaviour of other trading partners in their supply
chain network
o business needs to manage its relationship with wider society, whether for reasons of
commercial advantage or societal development

Specific issues addressed by CSR

 Human rights (universal declaration of human rights, International Labour Organisation core
conventions)
 Workplace and employee issues including occupational health and safety
 Unfair business practices including bribery, corruption and anti-competitive practices
 Organisational governance
 Environmental aspects
 Marketplace and consumer issues
 Stakeholder involvement
 Social development

5 dimensions of CSR definitions

 Environmental
 Social
 Economic
 Shareholder
 Voluntariness

Social issues = labour issues

 Wages
 Working hours
 Working conditions
 Freedom of association
 Discrimination
 Forced labour
 Child labour
Popularisation of CSR
In response to the arguments of Nobel Prize winner Milton Friedman, who stated:
 Only human being have moral responsibilities for their actions
 Managers’ responsibility is to act solely in the interest of shareholders
 Social issues are province of the state

Pyramid of Social Responsibility

The firm’s responsibility to society is underpinned by economic responsibility to make a profit, but it also has
responsibilities that go beyond the firm’s immediate interest e.g. ethical and philanthropic.

Antecedents of CSR
Stakeholder view of a corporation or firm
 The normative case: ethical theory / moral philosophy
o ‘It’s the right thing to do’
o Utilitarianism (outcome favoured over process, greatest good for greatest number,
cost/benefit analysis)
o Deontology – Kant’s Categorical Imperative (favours process over outcome: inviolable
human rights, means to end cannot be justified)

 The business case: competitive advantage

o ‘It’s good for the business’
o Enlightened self-interest
o Strategic CSR

 Sustainable development

Business Benefits of CSR

 Employee recruitment, motivation and retention
 Reputation management – brand value – Potential for ethical/eco-marketing
 Investor relations and access to capital
 Competitiveness and market positioning
 Licence to operate – Social contract between business and society
 Operational efficiency – Less waste, higher productivity
 Effect of CSR on firm profitability is undecided…
  Strategic CSR – Competitive advantage – added value

High Profile CSR Fails

 Apple owing $14.5 Billion in Back Taxes to Ireland
 Volkswagen cheated emissions tests by using special software and now facing €8.2bn in damages
claims
 Rana Plaza Bangladesh
 Chevron's having to pay $9bn to Ecuador for contaminating the rainforest

TOMS
TOMS is known for their business model of providing one pair of shoes to a person in need for every pair of
shoes they sell. They also partner up with a number of NGOs (non-governmental organizations) and other
non-profit organizations to help restore vision to visually-impaired individuals, provide clean drinking water,
build businesses in developing countries and fight bullying.

Sustainable development
 Definition: “Development that meets the needs of the present without compromising the ability of
future generations to meet their own needs” World Commission on Environment and Development,
1987 (The Bruntland Report)
 Meaning? We must not rape and pillage the environment and our peoples but instead must act as
custodians of our planet and communities for future generations
 Greek proverb: – “A society grows great when old men plant trees whose shade they know they shall
never sit in”

The Three Pillars of Sustainable Development

 Social
 Environmental
 Economic

Recent trends leading to CSR

 Globalisation of industries – lack of universal standards across countries, uneven power distribution
in global production networks e.g. MNCs can be more powerful than individual governments
therefore the latter have limited ability to regulate global trade
 Advances in global communications technology → increased awareness by media and consumers
 Changes in consumer values → backlash against negative impacts of globalisation
 Shareholder pressure for accountability in terms of ethical as well as financial performance (risk
management)

Emerging trends over the next 10 years

 The environment & climate change – Carbon auditing
 Labour rights as human rights – Move from utilitarianism to Kantian ethics – Workers are not merely
factors of production
 Transparency & accountability
 Supply chain management – Rationalisation, consolidation, partnerships based on trust
 Institutionalisation of CSR – ISO26000 in 2010

What are Human Rights?

 Entitlements held by virtue of being a human being, which are essential for the dignity and worth of
human beings
 “All human beings, irrespective of race, creed or sex, have the right to pursue both their material
well-being and their spiritual development in conditions of freedom and dignity, of economic
security and equal opportunity”. Declaration of Philadelphia, 1944
Human Rights
 Human rights are set out via:
o Universal Declaration of Human Rights (30 Articles)
o The Global Compact (10 Principles)
o OECD Guidelines for Multinational Enterprises
o ILO Tripartite Declaration of Principles Concerning Multinational Enterprises

UN World Commission on Economic Development

 Early 1970s: Greenpeace and other NGOs are established in response to perceived dangers such as
nuclear testing
 1972: a conference on the issues of pollution originally called for by a Swedish UN ambassador and
held in Stockholm: outcomes – Stockholm Declaration on Human Environment and Action Plan for
the Human Environment
 1983: The World Commission is established by UN. Trigger events:
o Famine in Ethiopia
o Discovery of ‘holes’ in ozone layer
o Chemical leak in Bhopal, India and River Rhine in Basel, Switzerland
o Chernobyl nuclear disaster in USSR (now Ukraine)

Human development and its measurement

 Single economic measures such as GDP and GNI do not provide a holistic picture of human
development
 “Human rights ought to be perceived in terms of expanding human freedoms such as facilities for
education and health care, as well as civil and political rights (i.e. quality of life), rather than a narrow
view of GDP or individual economic growth”. (Sen, 1999)

Human development index

HDI : includes life expectancy, education, and per capita income indicators