CORPORATE SOCIAL RESPONSIBILITY (CSR):

THE ROLE OF BUSINESS IN SOCIETY

Johan Bruneel - IÉSEG School of Management,

Lille

CLASS 1
 Take a pen.
Take a sheet of paper.
Write down your name.
Answer.
(you have 5 minutes – no good/bad answer)

According to you…

1. … what is the role/purpose of business in society?

2. …do firms have more than economic responsibilities?

PROGRAM

■ Introduction
■ The role of business in society
■ Distinguishing various concepts of CSR
■ CSR & Sustainable Development Goals (SDGs)
Corporations have faced numerous scandals
linked to business ethics
Deepwater Horizon
(environmental Sub-prime mortgages
catastrophe) (global financial crisis)
Cross-selling

Bribery
2002-06: €1.3bn of
questionable payments
(fined $1.6bn)
2012 - Fined $3bn for bribing
doctors to increase sales

4
Some business people have become famous for their
(un)ethical behavior

5
 The Issue: The Myth of Business as Amoral
adapted from de George 1999 and Ed Freeman speech at Epegon Foundation, 2009

Business and ethics don’t mix. Moralizing is out of place in business!

 “The only business of business is business”
 “Moralizing is out of place in business”

Þ Given the opportunity, business people and individuals will cheat or cut
corners
Þ Business works because people are competitive and greedy
LEARNING GOALS

At the end of the course, you will be able to:

1. Identify possible paths through which business organizations can
generate positive social and environmental impact
2. Develop a vision for business organizations that emphasizes
sustainable business value creation, innovation, and responsible
leadership
3. Use concepts, models and analytical tools to address responsibility-
and sustainability-related questions at different levels of the business
organization
4. Understand how perspectives and challenges linked to ethics,
responsibility and sustainability can influence managers' behavior
inside organizations and in their interaction with their stakeholders
 Course outline: session 1-5

• The changing role of business in society

1 Introduction • Sustainable Development / SDGs

• Setting priorities / materiality analysis

Stakeholders &
2 Materiality • Stakeholder management

Social • Creating sustainable value

3
innovation • Social innovation and business

4 Alternative • Designing CSR programs and strategies

business models • Alternative business models

Responsible • Ethical leadership

5 Leadership • The role of middle managers
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 CSR Module: Format

• A mix between theory and practice

• It requires your participation

- Class & group discussions
- In part based on (real) case-studies

• => Active participation is essential

• Could offer useful ideas for your thesis

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 The module requirements (1/3)

• Active participation
- Critical thinking
Class • Preparation
Participation
1 - Readings
- Cases
(25%) • Responsible engagement
- Professionalism

• One conversation at a time (=> no chatting)

• No use of phones or laptops
• Punctuality (no entrance as soon as the door is closed)

10
 The module requirements (2/3)

• Before Session 5 an individual essay has to be

Individual Essay handed in
2 Assignment - 2 pgs on how CSR and sustainability influence
(25%) your professional perspective in your
anticipated career
- Components are
o Professional ambition of the student
o The role CSR & Sust can play in that
ambition
o A reflection on the CSR skills you require in
your career
ÞYou need to use insights from this course in
the assignment

11
 The module requirements (2/3)

• Groups of 4-5 (see IOL for groups) analyzing the CSR

and Sustainability efforts of one company, actively
using the required readings for the course
Group Project • Analysis covers 5 sections, related to themes of the
3 (50%) 5 classes
• 2 intermediary updates required in Session 2 and 4
(see IOL for details)
• Written assignment – needs to be handed in at the
beginning of Session 6 [online and in hardcopy]
- 10 pgs max
• Poster (A0-paper format) needs to be presented in
Session 6
- 7,5 min presentation
- 7,5 min Q&A

12
 Final assignment: group poster + report

http://www.supi.manchester.ac.uk/forteachers/academicposterg
uidance/
13
PROGRAM

■ Introduction
■ The role of business in society
■ Distinguishing various concepts of CSR
■ CSR & Sustainable Development Goals (SDGs)
WHAT IS THE PURPOSE OF THE FIRM?

■ Text Pfarrer (2011)

■ 2 competing theories:
shareholder theory vs. stakeholder theory
■ Pfarrer suggests ways to bridge the gap
A narrow view on Corporate Social
Responsibility (CSR)

(= “Corporate Shareholder Responsibility”)

 Can a corporation have “social” responsibilities?
A narrow view…

Modern cooperation: separation of ownership and

control
 MILTON FRIEDMAN: ONE AND ONLY ONE SOCIAL
RESPONSIBILITY OF BUSINESS

• to use its resources and engage in

activities designed to increase its profits
so long as it stays within the rules of the
game, which is to say, engages in open
and free competition without deception or
fraud

• Only individuals can have social

responsibilities

• Social progress (e.g. health, longevity,

etc.) is a consequence of free enterprise
and free trade

• “the business of business is business”

20
 Provide arguments against the narrow view

 Provide arguments to support the narrow view

22
 Can a corporation have “social” responsibilities?
The narrow view…

In this paradigm: Question

Business needs to… Is this enough for a «humane and sustainable
society »?
 obey the law
 respect moral minima, In other words: are markets always
 respond to market demands, the right tools for setting public policy?
 satisfy shareholders

Source: Birgit Kleymann, adapted from Joseph R. DesJardins, Business, Ethics, and the Environment:
(c)Imagining a Sustainable
2010 Dr. Birgit Kleymann Future. Pearson Education, 2007
 Can a corporation have “social” responsibilities?
The narrow view…

In this paradigm: Question

Business needs to… Is this enough for a «humane and sustainable
society »?
 obey the law
 respect moral minima, In other words: are markets always
 respond to market demands, the right tools for setting public policy?
 satisfy shareholders

1) Do perfect market exist?

2) What about market failures?
Source: Birgit Kleymann, adapted from Joseph R. DesJardins, Business, Ethics, and the Environment:
(c)Imagining a Sustainable
2010 Dr. Birgit Kleymann Future. Pearson Education, 2007
The Shareholder Value Maximization (SVM) “Myth”

The Principal-Agent Lynn Stout (2012)

Model

Corporation Shareholders The corporation itself

owners
Residual Shareholders The corporation (except in
claimants case of bankruptcy)
Fiduciary Shareholders (Principals) Directors/executives own a
duty hire directors/executives to fiduciary duty to the
act as their Agents corporation

SVM is a managerial choice,

not an obligation

* 28
30
 Can a corporation have “social” responsibilities?
The Ford Pinto Case

• Because of strong competition Ford condensed the incubating time for car
from 3 ½ year down to 2 years.
• During crash testing Ford discovered that the Pinto’s fuel tank could rupture
during a rear-end impact. !But it respect legislation standards.
• To make changes: cost Ford $11 per vehicle, with 12.5 million vehicles
needing to be recalled thus the total cost = $137.5 million.
• 180 people could die, 180 people could suffer serious burns, and 2,100
vehicles could be destroyed by fire.
• figures from the US National Highway Traffic Safety Administration:
- cost of a life to society = $200,000
- serious burn, the cost estimate was $67,000
Þ total cost to society of not recalling the Pinto is $49.5 million

Should Ford recall and fix the Pinto?

a) What would Milton Friedman say?
b) What would you say?
 Can a corporation
Utilitarian have “social”
Defense responsibilities?
of Classical Model
The narrow view…

“…Ford allegedly was aware of the design flaw, refused to pay for a redesign, and
decided it would be cheaper to pay off possible lawsuits. The magazine obtained
a cost-benefit analysis that it said Ford had used to compare the cost of repairs
(Ford estimated the cost to be $11 per car) against the cost of settlements for
deaths, injuries, and vehicle burnouts. The document became known as the Ford
Pinto Memo”
A broader view on Corporate Social
Responsibility (CSR)

(= “Corporate Stakeholder Responsibility”)

CSR today: a hot topic…
 What is CSR ?
…CSR has become an umbrella concept
Sustainable
Principle of Public Development
Corpor Responsibility Co
Sustain ate rpo
ability Pe rat

St gag
rfo e S

a k em
En
rm o c
CSR

eh
GLOBAL an ial

ol ent
ce

de
CITIZENSHIP Cor

r
ship
Int C itize n Acc pora
egr rate G oun te
Con ativ Cor
p o Res lob ta b
p a ility
tra e S
ct T oci ons l
heo al Creating Shared Value ibil
ry ity
te S o c ial
Corpora eness
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R
 Definition(s) of CSR: Complexity…

“The term [CSR] is a brilliant one; it means something, Numerous

but not always the same thing, to everybody” (Votaw, meanings of
1973)
CSR

“The corporate social responsibility field is not only a

landscape of theories but also a proliferation of Numerous
approaches, which are controversial, complex and
unclear” (Garriga and Melé, 2005) theoretical
approaches

“CSP, together with CSR 1 and CSR 2, carry no clear

meaning and remain elusive constructs. They have Lack of
defied definition […]” Clarkson (1995: 92)
theoretical
foundations

37
 Definition(s) of CSR: Let’s agree on this (1-2/4)

The social responsibility of business encompasses the economic,

Answering voluntarily
legal, ethical and discretionary expectations that society has of
society expectations
organizations at a given point in time (Carroll, 1979)

Acting beyond “Corporate responsibility is the notion that corporations

economic and legal have an obligation to constituent groups in society other
responsibilities than stockholders and beyond that prescribed by law or
union contract” (Jones, 1980, p. 59)
Definition(s) of CSR

“CSR encompasses the

economic, legal, ethical, and
discretionary (philanthropic)
expectations that society has of
organizations at a given point in
time”
(Carroll, 1979: 500)

The Essence
of CSR
 Definition(s) of CSR: Let’s agree on this (3/4)

The social responsibility of business encompasses the economic,

Answering voluntarily
legal, ethical and discretionary expectations that society has of
society expectations
organizations at a given point in time (Carroll, 1979)

Acting beyond “Corporate responsibility is the notion that corporations

economic and legal have an obligation to constituent groups in society other
responsibilities than stockholders and beyond that prescribed by law or
union contract” (Jones, 1980, p. 59)

CSR is related to the company’s ability to manage and to satisfy CSR as a way to
the concerns of its different stakeholders (Clarkson, 1995) satisfy stakeholders
 Stakeholder theory

A stakeholder of an organization is:

• …any group or individual who can affect, or is affected by,
the achievement of the organization’s objectives (Freeman
1984:46)

More precise definition of ‘affects’ and ‘affected by’ (Evan

and Freeman 1993)
• Principle of corporate rights - the corporation has the
obligation not to violate the rights of others
• Principle of corporate effect – companies are
responsible for the effects of their actions on others
Freeman’s view on why stakeholders matter

https://www.youtube.com/watch?v=bIRUaLcvPe8
 Definition(s) of CSR: Let’s agree on this (/4)

The social responsibility of business encompasses the economic,

Answering voluntarily
legal, ethical and discretionary expectations that society has of
society expectations
organizations at a given point in time (Carroll, 1979)

Acting beyond “Corporate responsibility is the notion that corporations

economic and legal have an obligation to constituent groups in society other
responsibilities than stockholders and beyond that prescribed by law or
union contract” (Jones, 1980, p. 59)

CSR is related to the company’s ability to manage and to satisfy CSR as a way to
the concerns of its different stakeholders (Clarkson, 1995) satisfy stakeholders

“the way in which a company manages and improves its social and
Social, ecological and environmental impact to generate value for both its shareholders
strategic innovation and its stakeholders by innovating its strategy, organisation and
operations” (CSR Europe)
BRIDGING THE GAP BETWEEN SHAREHOLDER
AND STAKEHOLDER THEORY

Pfarrer:
■ Both consider value creation but stakeholder theory looks at a
wider set of constituents
■ No “separation thesis” between ‘business’ and ‘responsibility’
■ Stakeholder theory as an extension of shareholder theory
■ Or, vice versa, shareholder theory as an early version of
stakeholder theory?
PROGRAM

■ Introduction
■ The role of business in society
■ Distinguishing various concepts of CSR
■ CSR & SDGs
 Carbon footprint

Calcultate your carbon footprint:

https://footprint.wwf.org.uk/carbon/footprint

https://www.youtube.com/watch?v=5G0ndS3uRdo
 Sustainable Development Goals

https://www.youtube.com/watch?v=5G0ndS3uRdo
 SDGs & corporate strategy (Kiron et al, 2017)
Importance

CEO’s view: having a sustainable strategy is

necessary to be competitive (90%)
+ investors: sustainability performance
matters for investment decisions!

But only 60% have a sustainable strategy and only

25% have a business case for sustainability
 Your turn

Select a company for the group assignment (you

may want to use www.orse.org)
+ provide an argumentation why this
company
Identify its key challenges with respect to CSR and
sustainability
ÞSearch for evidence (press releases, annual reports,
news letters, public press…) + save/document!

Present at the end of the class in 1 min/1 slide the

company and the argumentation why you selected
this company
NEXT CLASS

■ Read the articles from session 1 AND session 2. Read AT least

the required readings (if you can read some of the
recommended readings that interest you, that is great also!)

■ Be prepared to disucss about the readings in class!

■ Concerning the group assignment 1, per group prepare a one

page overview of: group members, selected company,
motivation for the selection and a first analysis of the
stakeholders, interests and CSR issues concerned
Þ Hand in before class 2 at 16u00, email to
j.bruneel@ieseg.fr