Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 What is CSR? (Werther & Chandler, 2010)

 Three words, corporate, social, responsibility

 “A view of the corporation and its role in

society that assumes a responsibility among
firms to pursue goals in addition to profit
maximization & a responsibility among a firm’s
stakeholders to hold the firm accountable for its
actions.”
 Corporate philanthropy
 Philanthropy (Oxford English Dictionary): “The
practice of helping people in need”

 Corporate philanthropy: The desire of profit

making organizations to help people in need or
promote welfare of people in need.
 Strategic corporate philanthropy
(Michael Porter & Mark Kramer in Werther & Chandler, 2010)

 “The acid test of good corporate philanthropy

is whether the desired social change is so
beneficial to the company that the organization
would pursue the change even if no one ever
knew about it.”

 A balance between the “… ends of economic

viability and the means of being socially
responsible.”
 The CSR Pyramid
(Carroll, 1991, in Schwartz & Carroll, 2003)

Be a good citizen Desired

Philanthropic

Be ethical Expected
Ethical

Required
Obey the law Legal

Required
Be profitable Economic
 The CSR Hierarchy
(Carroll, 1991, in Werther & Chandler, 2010)

Discretionary
Responsibilities

Ethical
Responsibilities

Legal
Responsibilities

Economic
Responsibilities
 The CSR Hierarchy (Contd.)
(Carroll, 1991, in Werther & Chandler, 2010)

 Economic responsibility: “…to produce an

acceptable return on its owners’ investments”
 Legal responsibility: “… a duty to act within the
legal framework drawn up by the government &
judiciary”
 Ethical responsibility: “… to do no harm to its
stakeholders & within its operating environment”
 Discretionary responsibility: “… proactive, strategic
behaviors that can benefit the firm & society, or
both”
 The culture & context (Werther & Chandler, 2010)

 Rich and poor societies: Who can afford what

 Individualistic and collectivistic cultures:
Different needs, different priorities, different
agendas for CSR
 A moral argument for CSR
(Werther & Chandler, 2010)

 The existence of an organization and the

expectations of the community and wider
society it functions in.
 The iron law of social responsibility
(Davis & Blomstrom, 1966, in Werther & Chandler, 2010)

“In a democratic society, power is taken away

from those who abuse it.”
 CSR and profits (Werther & Chandler, 2010)

“While CSR does not increase profits, higher

profits lead to greater CSR.”
 Why is CSR important?
(Werther & Chandler, 2010)

 Growing affluence
 Ecological sustainability
 Globalization
 The free flow of information
 The public image of an organization
Thank You
Theories of CSR
 Legitimacy Theory
(Fernando & Lawrence 2014)

 The society gives organizations their resources.

So, the organizations are expected to fulfil the
expectations of the society they function in

 “Organizations can only continue to exist if the

society in which they are based perceives the
organization to be operating to a value system that
is commensurate with the society’s own value
system.” (Gray et al., 2010, in Fernando & Lawrence, 2014)
 How do organizations legitimize
their operations? (Fernando & Lawrence, 2014)

 “To educate relevant stakeholders about their actual

performance”: Reporting
 Change the perceptions of the relevant stakeholders
about the underlying issue without changing the
organization’s behavior”: Public impression management
 “Distract or manipulate the attention away from the
issue of concern and seek to divert the attention to a
favorable issue”: CSR Activities and advertising
 “Seek to change external expectations about the
organization’s performance”
 Limitations of Legitimacy Theory
(Gray et al., 2010, in Fernando & Lawrence, 2014)

 Legitimacy gap: Dynamic nature of the

expectations of the society versus
organizational objectives
 Legitimization threats: Unexpected occurrences
affecting the organization’s reputation, such as
a financial threat, major accident, scandal, etc.
 Vagueness regarding disclosure: If and why
and how much should organizations disclose
 Stakeholder Theory (Fernando & Lawrence, 2014)

 “… the management of an organization is

expected to perform its accountability towards
its stakeholders by undertaking activities
deemed important by its stakeholders, and by
reporting information”
 Who are stakeholders?
(Florea & Florea, 2013)

“Stakeholders are the persons, institutions,

organizations, formal & non formal groups which
are interested or can be affected or which could
influence the company decisions or actions.” (Freeman,
1980, in Florea & Florea, 2013)

20
 Types of stakeholders (Florea & Florea, 2013)

Based on involvement:
 “Internal stakeholders have a range of interests in
the different parts of the company [or organization
or community] and its activities.”

 “External stakeholders are individuals, companies

or groups outside the companies which are
influenced or could influence company [or
organization or community] decisions and
activities.”
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on how they are influenced by decisions/ actions

 “Primary stakeholders are the people or groups which are directly
affected, in a positive or negative way, by a strategy, decision or
action of a company, organization [or community].”
 “Secondary stakeholders are people or groups that are indirectly
affected, either positively or negatively by a company [or
organization or community] decision or action.”
 “Key stakeholders play an important role in [the] decision making
process & also in its implementation because they are involved in
company management or financing [or management & financing of
the organization or community], [e.g.] policy makers, officials,
important professionals or community personalities having a
strong position or influence.”
22
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on the amount of power and influence they have:

 “Promoters have both great interest in the decision & the
power to help make it successful (or to fail it)”
 “Defenders have a vested interest & can voice their
support in the community, but have little actual power to
influence the decision in any way.”
 “Latents have not particular interest or involvement in
the decision, but have the power to influence it greatly if
they become interested.”
 “Apathetics have little interest & little power, & may not
even know the decision exists.”
 Perspectives of stakeholder theory
(Fernando & Lawrence, 2014)

 Ethical perspective:
 “Irrespective of the stakeholder power, all the
stakeholders have the same right to be treated
fairly by an organization.”
 “”Managers of an organization are expected to
manage the business for the benefit of all
stakeholders, regardless of whether management of
stakeholders leads to improved financial
performance.”
 Limitation: very difficult to manage different
and contradictory interests of stakeholders
 Perspectives of stakeholder theory
(Contd.) (Fernando & Lawrence, 2014)

 Managerial perspective: “ an organization is

expected to be accountable to its economically
powerful stakeholders.” The more powerful or
critical the stakeholder, the more accountable
the organization is to her or him.
 Challenge: Deciding the priority list
 Institutional theory (Fernando & Lawrence, 2014)

 Social acceptance
 “Institutional theory views organizations as
operating within a social framework of norms,
values, & taken-for-granted assumptions about
what constitutes appropriate or acceptable
economic behavior.”
 Dimensions of institutional theory
(Fernando & Lawrence, 2014)

 Isomorphism: “A constraining process that

forces one unit in a population to resemble
other units that face the same set of
environmental conditions.”
 Coercive isomorphism: Pressure from people and
institutions that matter
 Mimetic isomorphism: Copying others’ practices
when one fails to do something unique on one’s
own
 Normative isomorphism: Doing good just like
everyone else…
 Dimensions of institutional theory
(Contd.) (Fernando & Lawrence, 2014)

 Decoupling: “… situation in which the formal

organizational structure or practice is separate
and distinct from actual organizational
practice.”
 Social and environmental disclosures help construct
an image of the organization that may or may not
match the real image.
 Theoretical Framework
(Fernando & Lawrence, 2014)
Convergent predictions
Integrated of organizational
Theories behavior & motivations
1. An organization seeks
Legitimacy survivability & stability of
its business
Theory
2. An organization seeks
legitimacy of its business
3. An organization tries to be
Stakeholder accountable to its
Theory stakeholders
4. An organization tries to
conform to procedures &
structures of other
organizations which are
Institutional
within a particular
Theory
organizational field
Convergent motivations
of CSR practice
1. To legitimize the business or
organization (legitimacy
motive)
2. To perform accountability to
the organization’s
stakeholders, sometimes
based on the extent of the
stakeholders’ power
(accountability motive)
3. To conform to social norms &
beliefs those are largely
imposed on an organization,
which ultimately leads to
homogeneity in organizations
in the same field (isomorphic
motive)
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Theories of CSR
(Contd.)
(Garriga & Mele, 2004)
 Broad categories of theories
(Garriga & Mele, 2004)

 Instrumental theories
 Political theories
 Integrative theories
 Ethical theories
 Instrumental theories (Garriga & Mele, 2004)

 “The corporation is an instrument for wealth

creation & this is its sole social responsibility
 “Any supposed social activity is accepted if, and
only if, it is consistent with wealth creation:
 “CSR is a mere means to the end of profits.”
 Groups of instrumental theories
(Garriga & Mele, 2004)

 Maximising the shareholder value:

 “Any investment in social demands that would
produce an increase of the shareholder value
should be made, acting without deception & fraud”
 “In contrast, if the social demands only impose a
cost on the company, they should be rejected.”
 “… the socio-economic objectives are completely
separate from the economic objectives”
 Groups of instrumental theories
(Contd.) (Garriga & Mele, 2004)

 Strategies for achieving competitive advantage:

 “… focussed on how to allocate resources in order
to achieve long-term social objectives & create a
competitive advantage”
 Approaches:
 “Social investments in competitive contexts
 Natural resource-based view of the firm & its dynamic
capabilities
 Strategies for the bottom of the economic pyramid”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Social investments in a competitive context:

Philanthropic investments are perceived as having
better social value than any other investment (Porter &
Kramer, 2002, in Garriga & Mele, 2004)

 “When philanthropic activities are closer to a

company’s mission, they create greater wealth
than other kinds of donations.” (Burke & Lodgson, 1996, in Garriga &
Mele, 2004)

 “… philanthropic investments by members of

cluster, either individually or collectively, can have
a powerful effect on the cluster competitiveness &
the performance of all its constituents’
companies.” (Porter & Kramer, 2002, in Garriga & Mele, 2004)
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Natural resource based view of the firm (RBV)

& dynamic capabilities:
 RBV:
 “… the ability of a firm to perform better than its
competitors depends on the unique interplay of human,
organizational, & physical resources over time.”
 Resources for competitive advantage “… should be
valuable, rare, and inimitable, and the organization must
be organized to deploy these resources effectively”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)

 ‘Dynamic capabilities’ approach:

 “drivers behind the creation, evolution, &
recombination of the resources into new sources of
competitive advantage”
 “organizational & strategic routines by which managers
acquire resources, modify them, integrate them, &
recombine them to generate new value-creating
strategies”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)
 Social & ethical capabilities include,
 “process of moral decision making
 process of perception, deliberation & responsiveness or
capacity of adaptation
 development of proper relationships with the primary
stakeholders: employees, customers, suppliers, &
communities”
 Hart (1995): Strategic capabilities model:
 Interconnected capabilities: “pollution prevention, product
stewardship, sustainable development”
 Critical resources: “Continuous improvement, stakeholder
integration, & shared vision”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Strategies for the bottom of the economic

pyramid:
 Strategies that can “serve the poor & simultaneously
make profits”
 Disruptive innovations: “Products & services that do not
have the same capabilities& conditions as those being
used by customers in mainstream markets; as a result
they can be introduced only for new or less demanding
applications among non-traditional customers, with a
low-cost production & adapted to the necessities of the
population.” (Christensen & Overdorf, 2000; Christensen et al., 2001, in Garriga &
Mele, 2004) e.g. a low cost basic cell phone
 Groups of instrumental
theories (Contd.) (Garriga & Mele, 2004)

 Cause related marketing :

 “… the process of formulating & implementing marketing
activities that are characterized by an offer from the firm to
contribute a specified amount to a designated cause when
customers engage in revenue-providing exchanges that
satisfy organizational & individual objectives.” (Varadarajan & Menon,
1988, in Garriga & Mele, 2004)

 Goal: “… to enhance company revenues & sales or customer

relationship by building the brand through the acquisition of,
& association with the ethical dimension or social
responsibility dimension”
 “… seeks product differentiation by creating socially
responsible attributes that affect company reputation.”
 Political theories (Garriga & Mele, 2004)

 “… the social power of the corporation is

emphasized, specifically in its relationship with
society & its responsibility in the political arena
associated with this power. This leads the
corporation to accept social duties & rights or
participate in certain social cooperation.”
 Political theories (Contd.) (Garriga & Mele, 2004)

 Principles for managing social power (Davis, 1967, in

Garriga & Mele, 2004):

 Social power equation: “… the social responsibilities

of businessmen arise from the amount of social
power that they have”
 Iron law of responsibility: “Whoever does not use
his social power responsibly shall lose it.”
 Corporate constitutionalism
(Davis, 1967, in Garriga & Mele, 2004)

 “The constituency groups of corporations

define conditions of the responsible use of
power by corporations, “… and channel
organizational power in a supportive way and
to protect other interests against unreasonable
organizational power.”
 Groups of political theories
(Garriga & Mele, 2004)

 Integrative social contract theory

 Corporate citizenship
 Integrative social contract theory
(Garriga & Mele, 2004)

 Donaldson & Dunfee (1994, 1999):

 Assumption of a social contract between the society and
business
 “Social responsibilities come from consent”
 Macrosocial contract: “provides rules for any social contracting.
These rules are called the ‘hyper-norms’; they ought to take
precedence over other contracts.”
 Microsocial contract:
 “… show explicit or implicit agreements that are binding within an
identified community, industry, companies or economic systems.”
 “generate ‘authentic norms’.”
 “… based on the attitudes & behaviors of the members of the norm-
generating community and, in order to be legitimate, have to accord
with the hyper-norms.”
 Groups of political theories (Contd)
(Garriga & Mele, 2004)

 Corporate citizenship: Profit making

organizations are responsible citizens of the
community they flourish in
 Integrative theories (Garriga & Mele, 2004)

 “… consider that business ought to integrate

social demands.”
 “… argue that business depends on society for
its continuity & growth & even for the existence
of business itself.”
 “… focused on the detection & scanning of, &
response to, the social demands that achieve
social legitimacy, greater social acceptance &
prestige”
 Groups of integrative theories
(Garriga & Mele, 2004)

 Issues management
 The principle of public responsibility
 Stakeholder management
 Corporate social performance
 Issues management (Garriga & Mele, 2004)

 “… the process by which the corporation can

identify, evaluate & respond to those social &
political issues which may impact significantly
upon it.”
 Social responsiveness: action, the how of CSR
 The principle of public responsibility
(Garriga & Mele, 2004)

 “… public policy includes not only the literal text of law

& regulation but also the broad pattern of social
direction reflected in public opinion, emerging issues,
formal legal requirements, & enforcement or
implementation practices.” (Preson & Post, 1981, in Garriga & Mele, 2004)
 Scope of managerial responsibility:
 Primary: “… essential task of the firm, such as locating &
establishing its facilities, procuring suppliers, engaging
employees, carrying out its production functions, &
marketing products.”
 Secondary: “… come as a consequence of the primary. e.g.
career & earning opportunities for some individuals, etc.”
 Ethical theories (Garriga & Mele, 2004)

 “… the relationship between business & society

is embedded with ethical values.”
 “… firms ought to accept social responsibilities
as an ethical obligation above any other
consideration”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Why CSR?
 Approaches to CSR (Lee, 2011)

 Obstructionist strategy: Ignorance of social

demands for greater responsibility: We do not
care!
 Defensive strategy: Legal compliance only. We will
do only as much as is required.
 Accommodative strategy: Legal compliance and
stakeholder interests. We will do what is required
and try to keep stakeholders happy.
 Proactive strategy: We will actively work for the
welfare of the community whether or not we get
noticed.
 Approaches to CSR (Contd.) (Lee, 2011)

Institutional pressure
Stakeholder Weak Intense
pressure
Weak Obstructionist: Absence of Defensive: Institutional pressure
external pressures without stakeholder support

Intense Accommodative: Stakeholder Proactive: Synchrony in external

pressure without institutional pressures
legitimacy
 Antecedents of CSR (Depending
on conditions) (Campbell, 2007)

 Economic conditions
 Institutional conditions
 Economic antecedents of CSR
(Campbell, 2007)

 Corporations will be less likely to act in socially

responsible ways when
 “they are experiencing relatively weak financial
performance”
 “when they are operating in a relatively unhealthy
economic environment where the possibility for
near-term profitability is limited.”
 if there is either too much or too little competition.”
 Institutional antecedents of CSR
(Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 The regulations and laws mandate it and the
punishment for non-compliance is tangibly
severe, especially if these compliance measures
have been developed collaboratively
 “There is a system of well-organized & effective
industrial self-regulation in place to ensure such
behavior”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 “There are private, independent organizations, including
NGOs, social movement organizations, institutional
investors, & the press, in their environment, who
monitor their behavior, & when necessary, mobilize to
change it.”
 “They operate in an environment where normative calls
for such behavior are institutionalized in important
business publications, business school curricula, & other
educational venues in which corporate managers
participate.”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 “They belong to trade or employer associations
[that] are organized in ways that promote
socially responsible behavior.”
 “They are engaged in institutionalized dialogue
with unions, employees, community groups,
investors, & other stakeholders.”
 Antecedents of CSR based on level of
involvement (Aguilera et al., 2007)

 Individual level
 Organizational level
 National level
 Transnational level
 Individual level Antecedents of CSR
(Aguilera et al., 2007)

Based on a sense of perceived fairness by

employees
 Instrumental motives: If the organization cares
for the environment, it will care for them. So,
they feel more in control.
 Relational motives: Belongingness: CSR fosters
positive social relationships, which in turn lead
to a feeling of belongingness
 Morality based motives: A need to do what is
right
 Individual antecedents of CSR
(Contd.) (Aguilera et al., 2007)

 “Individual employees’ needs for control, for

belongingness, and for a meaningful existence
will lead them to push firms to engage in social
change through CSR”
 Organizational Level antecedents
of CSR (Aguilera et al., 2007)

 “Internal and external organizational actors’ (Shareholders’,

managers’, consumers’) shareholder interests, stakeholder
interests, & stewardship interests will lead them to push
firms to engage in social change through CSR.”

 “A downward hierarchical ordering of motives among insider

organizational actors (i.e., Top Management Teams) will lead
to stronger pressure on firms to engage in social change
through CSR.”

 “An upward hierarchical ordering of motives among outsider

organizational actors (i.e. consumers) will lead to stronger
pressure on firms to engage in social change through CSR.”
 Antecedents of CSR at the
national level (Aguilera et al., 2007)

 Instrumental motives: Promotion of

international competitiveness
 Relational motives: Promotion of social
cohesion and social partnership between
different strata of society and marginalized
groups
 Moral motives: Collective responsibility to the
betterment of society
 Antecedents of CSR at the
national level (Contd.) (Aguilera et al., 2007)

 “Governments’ interests in establishing

competitive business environments, promoting
social cohesion, & fostering collective
responsibility for the betterment of society will
lead them to push firms to engage in social
change through CSR.”

 “A compensatory relationship of motives in

governments will lead to stronger pressure on
firms to engage in social change through CSR.”
 Antecedents of CSR at the
transnational level (Aguilera et al., 2007)

 Instrumental motives:
 Power to facilitate NGOs and social welfare groups
 Promotion of competitiveness among businesses
 Relational motives:
 Collaborative relationships among Inter Government
Organizations (IGOs)
 Moral motives: Altruism: “…trying to make the
world a better place to live in”
 Antecedents of CSR at the
transnational level (Contd.) (Aguilera et al., 2007)

 “NGOs need for power for alignments/ collaborations, &

for altruism will lead them to push firms to engage in
social change through CSR”

 “IGOs interests in promoting competition, social

cohesion, & collective responsibility will lead them to
push firms to engage in social change through CSR.”

 “The existence of a multiplicative relationship of motives

among transnational actors will lead to stronger firm
pressure to engage in social change through CSR,
depending on the density & intensity of positive NGO,
governmental, & intergovernmental action.”
 CSR Motives at multiple levels
of analysis (Aguilera et al., 2007)

Transnational
Motives Individual Organizational National Intergovernment Corporate
al entities interest groups &
NGOs
Instrumental Need for control Shareholder interests Competitiveness Competitiveness Power (obtain
(Short Term) scarce
resources)
Relational Need for •Stakeholder interests Social cohesion Social cohesion Interest
belongingness •Legitimation/ alignment,
collective identity collaboration &
(long term) quasi-regulation
Moral Need for •Stewardship interests Collective Collective Altruism
meaningful •Higher-order values responsibility responsibility
existence
Interactions Upward •Insider downward Compensatory Compensatory Multiplicative
hierarchical hierarchical
•Outsider upward
hierarchical
 Why CSR? (Carroll & Shabana, 2010)

 “Reducing cost & risk

 Strengthening legitimacy & reputation
 Building competitive advantage
 Creating win-win situations through synergistic
value creation”
Thank You