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A Guide to Corporate Social Responsibility (CSR) 1 Corporate Social Responsibil

A Guide to Corporate Social Responsibility (CSR) 1 Corporate Social Responsibility (CSR) Starting point Why do businesses exist? What is the purpose of a business, or, in the bigger picture, any economic system? The derivation of the word company? Two Latin words, cum and panis, which mean breaking bread together.1 How does this origin translate in today’s business environment? What are or should be the goals of the modern corporation? Opinions differ and cover a wide spectrum: Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. Milton Friedman, 19622 I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being. As we investigate this, we inevitably come to the conclusion that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separately – they make a contribution to society, a phrase which sounds trite but is fundamental. Dave Packard3 Co-founder of Hewlett Packard Company in 1939 Corporate Social Responsibility (CSR) represents an attempt to address these questions. What is CSR? The entirety of CSR can be discerned from the three words contained within its title phrase: ‘corporate,’ ‘social,’ and ‘responsibility.’ Therefore, in broad terms, CSR covers the responsibilities corporations (or other for-profit organizations) have to the societies within which they are based and operate. More specifically, CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process. 1 Michael Arndt, ‘An Ode to ‘The Money-Spinner,’’ BusinessWeek, March 24, 2003, pp22-23; review of ‘The Company: A Short History of a Revolutionary Idea,’ by John Micklethwait & Adrian Wooldridge, Modern Library, 2003. 2 Milton Friedman, Capitalism and Freedom, Chicago: University of Chicago Press, 1962. 3 Charles Handy, ‘What’s a Business For?’ Harvard Business Review, December 2002, p54. A Guide to Corporate Social Responsibility (CSR) 2 Therefore, a business’ ‘society’ within which it operates, which defines the number of stakeholders to which the organization has a ‘responsibility,’ may be broad or narrow depending on the industry in which the firm operates and its perspective. Other definitions of CSR: The notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR)….It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development.4 South China Morning Post, 2002 The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.5 Archie B. Carroll, 1979 CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment.6 The Institute of Directors, UK, 2002 CSR is a means of analyzing the inter-dependent relationships that exist between businesses and economic systems, and the communities within which they are based. CSR is a means of discussing the extent of any obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified. What business areas does CSR cover? CSR covers all aspects of an organization’s operations and can be divided into the subsections identified in Figure 1. Example issues from these subsections are given in more detail in the ‘Example Issues’ section: 4 Michael McComb, ‘Profit to be found in companies that care,’ South China Morning Post, April 14, 2002, p. 5. 5 Archie B. Carroll, ‘A Three-Dimensional Conceptual Model of Corporate Performance,’ Academy of Management Review, 1979, Vol. 4, No. 4, p. 500. 6 Ruth Lea, ‘Corporate Social Responsibility: IoD Member Opinion Survey,’ The Institute of Directors, UK, November, 2002, p10. A Guide to Corporate Social Responsibility (CSR) 3 Figure 1: What is CSR? Ethics Personal and legal obligations, as opposed to discretionary actions. Strategic philanthropy Strategic brand management • Brand building • ‘Brand insurance’ Stakeholder relations: 9 Internal (employees, suppliers, distributors) 9 External (investors, NGOs, government, media, consumers) Crisis management Community engagement Community Relations Day-to-day operations: • environmental sustainability • workplace issues Moral righteousness Corporate activism External PR/ad.: o Meet consumer expectations o Cause-related marketing Corporate governance ¾ transparency ¾ social audits SRI Diversity Legislation & litigation Cynicism Patriotism Cultural conflict Profit Why relevant today? • Increasing affluence • Growing social expectations • Globalization/free flow of information Result = empowered stakeholders. Vital element of corporate strategy in a global environment. A Guide to Corporate Social Responsibility (CSR) 4 CSR vocabulary CSR is also referred to as: • ‘corporate’ or ‘business responsibility’ • ‘corporate’ or ‘business citizenship’ • ‘community relations’ • ‘social responsibility.’ Closely related concepts that are all contained with the total CSR perspective are: • social and environmental auditing • stakeholder theory • business ethics • environmental sustainability • strategic philanthropy (cause-related marketing) • corporate governance Consistent definitions, labels and vocabulary have yet to be solidly established in the field. What CSR is not It is important to stress that the study of CSR focuses largely on the margins of a business’ discretionary actions and obligations. This is rather than any legal or regulatory obligations individuals and corporations face in the day-to-day management of operations within any specific industry. To break these rules and regulations is to break the law. Such infractions are simply actions that are illegal. Of course, adhering to the law is an important component of an ethical organization’s ethos, but it is not the primary concern of CSR, which primarily deals with decisions incorporating discretionary actions. CSR is a business strategy and, therefore, represents actions that need to be positively selected, or avoided. CSR advocates believe there is strategic advantage to a company that makes these choices. It is also important that CSR focuses on areas of immediate relevance to an organization’s sphere of operations. CSR is not about pursuing the CEO’s pet interest and ‘saving the whales.’ CSR should be distinguished from concepts such as ‘strategic philosophy’ and ‘cause-related marketing,’ which are valid business strategies and form an element of an organization’s CSR policy, but are not a central component of CSR. CSR is a much more holistic approach to business, which is designed to enhance corporate success because of its relevance, rather than represent something unconnected to an organization’s core business. The origins of CSR CSR as an issue has been around since commerce began: A Guide to Corporate Social Responsibility (CSR) 5 The history of CSR is almost as long as that of companies. Concerns about the excesses of the East India Company were commonly expressed in the seventeenth century. There has been a tradition of benevolent capitalism in the UK for over 150 years. Quakers, such as Barclays and Cadbury, as well as socialists, such as Engels and Morris, experimented with socially responsible and values-based forms of business. And Victorian philanthropy could be said to be responsible for considerable portions of the urban landscape of older town centres today.7 In terms of activism aimed at companies perceived as acting against the general interest: The first large-scale consumer boycott? England in the 1790s over slave-harvested sugar. (It succeeded in forcing the importer to switch to free-labor sources.)….In 1612, English jurist Edward Coke complained that corporations “cannot commit treason, nor be outlawed or excommunicated, for they have no souls.”8 Arguments underpinning CSR Arguments offered in favor of CSR can be broadly split into two camps—moral and economic. 1. A moral argument for CSR While recognizing that profits are necessary for any business entity to exist, all groups in society should strive to add value and make life better. Businesses rely on the society within which they operate and could not exist or prosper in isolation. They need the infrastructure that society provides, its source of employees, not to mention its consumer base. CSR is recognition of that inter-dependence and a means of delivering on that obligation, to the mutual benefit of businesses and the societies within which they are based: CSR broadly represents the relationship between a company and the wider community within which the company operates. It is recognition on the part of the business that ‘for profit’ entities do not exist in a vacuum, and that a large part of any success they enjoy is uploads/Industriel/ csr-guide.pdf