Corporate social responsibility (CSR) is concerned with the relationship between the corporate sector and society, and focuses on particularly good corporate citizenship. The World Business Council for Sustainable Development defines Corporate Social Responsibility 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 the local community and society at large. Increased visibility of corporate actions, customers’ perceptions of companies and their consequent purchasing behaviors are fundamentally changing. Due to the significant financial impact for businesses, CSR is no longer viewed as just a regulatory or discretionary cost, but an investment that brings financial returns. There are two main views in relation to CSR that explain how a corporation should act and what they should be accountable for. The narrow view of corporate social responsibility places profit making at its forefront and the ability to deliver to its stakeholders.
This view suggests profits first then the following other responsibilities should follow: to abide by societal expectations and ethical principles, to meet legal standards and to indulge in discretionary charitable actions (Carroll, 1979). The broad view of CSR places emphasis first and foremost on the responsibility of business to support individual managers to make socially responsible decisions, followed by the imperatives of conforming to ethical behaviors and obeying the law, and lastly, making a profit. As Wood states, “It is of no importance at all whether a particular business remains competitive or not. Businesses that cannot remain competitive while fulfilling legal, ethical, and discretionary social responsibilities should not be in business at all.” The importance of a broad view approach to CSR will be argued in favor of and I will show how a sustainable future will result from such a view.
Corporate Social Responsibility
CSR is not an entirely new issue, but one that can be traced back from the turn of the century. From about the early 1930s through to the 1960s, social responsibility started to become an important issue not only for business but also in the theory and practice of law, politics and economics. In the early 1930s, Merrick Dodd of Harvard Law School and Adolf Berle of Columbia Law School debated the question “For whom are corporate managers trustees?” Dodd argued that corporations served a social purpose, as well as a profit-making function. This debate simmered for the next 50 years, according to Gary von Stange (Hopkins 2004), before it once again sprang into prominence in the1980s in the wake of the “feeding frenzy atmosphere of numerous hostile takeovers”. This concern for the social responsibility of business has even accelerated since the fall of the Berlin Wall, which symbolized the collapse of communism and the onset of rapid globalization. This broad view has found its place in today’s large corporations and is firmly integrated into the way they are run.
Narrow vs. Broad view: Which way to go?
Corporations may be seen as essentially private activity for the purpose and benefit of those private citizens who own them (Shaw 2009). Friedman forcefully argued that business has no social responsibilities other than to maximize profits. Friedman argued that social issues are not the concern of the corporate world and that these problems should be resolved by the unfettered workings of the free market system. Furthermore, this view holds that, if the free market cannot solve the social problems, it falls not upon business, but upon government and legislation to do the job (Caroll, 1979). A second objection to CSR has been that business is not equipped to handle social activities.
What are the benefits to society when business increase profits? Business has resources at their disposal to participate in responsible activities for the greater good. We are now seeing consumers avoiding what they see as socially irresponsible products or the products of companies that have not acted in society’s best interest. Corporations have noted that social responsibility is good for business. Davis argues that social responsibility arises from social power. Corporations have responsibilities beyond simply enhancing their profits because of this social power. Across the globe, business leaders are struggling to balance conflicting demands from communities, government, advocacy groups, and others about the role they play in economic advancement, environmental improvement, and social development. No longer is it acceptable simply to make good products that satisfy customers while complying with laws and regulations. Businesses are now called upon to consider and, indeed, intentionally manage the broader social requirements and the legal and regulatory settings in which they operate.
Proponents of the broader view stress that modern business is intimately integrated with the rest of society. According to the narrow view of CSR, businesses role is purely economic and corporations should not be considered moral agents (Shaw, 2009). The sale of liquor is an example, which refutes the narrow view. Liquor companies strive to make profits off consumers of alcohol but there are negative externalities as a result. Underage drinking, social violence, domestic abuse and drunk drivers are the results of alcoholic consumption. These corporations should do more to be socially responsible to prevent or at least help to curb these occurrences related to alcohol. ‘Drink Responsibly’ campaigns have been launched in recent years as well as the introduction of low alcoholic drinks. This action shows how this industry is becoming more socially aware to the demands of society as a whole and changing their strategies to become more responsible or at least create the perception that they are.
Consider a large food outlet like Woolworths located within a community that is at a point of starvation as a result of a dire shortage of foodstuffs. Woolworths is financially sound and has, since its formation, been making large amounts of profits. Friedman would say that it is not the prerogative of that corporate organization to provide for the well being of the community because its objective of engaging in business is production and distribution of goods and services, not social welfare. This narrow view undermines what is socially acceptable by today’s standards. Helping society out of their free choices might even, in return, help the concerned corporate organizations to gain a good reputation within their communities and consequently enhance their business fortunes if a broad view is followed (Dentchev & Heinze, 2005). In this broad view, therefore, corporate organizations tend to enhance their fortunes in a situation where the community has confidence and trust in their operations. Since the narrow view of CSR is primarily driven by self-interested motives, and not out of concern for the welfare of society, Kant (2002) would morally condemn corporate philanthropy that takes the acts of helping out society as a mere means to the enhancement of business fortunes.
Continuing the argument for the broad view of CSR leads us to a survey by IBM of over 250 company executives. The survey found that businesses are wasting no time in interpreting the implications of CSR and acting on them. When companies talk about CSR publicly, they tend to describe it in terms of philanthropy. The survey, however, found that businesses have actually assimilated a much more strategic view; 68 percent are now utilizing CSR as an opportunity and a platform for growth. When aligned with business objectives, companies are beginning to see that CSR can bring competitive differentiation, permission to enter new markets, and favorable positioning in the talent wars (Pohle & Hittner 2008). The survey suggests that companies are finding that many CSR initiatives, including those that reduce energy consumption or benefit the environment, help reduce overall cost structures or increase productivity. For example, Catalyst Paper Corporation, a Canadian pulp and paper company, uses its own by-products to power its operations. It also regains heat from effluence to warm process water and thereby further reduce its carbon emissions (Pohle & Hittner 2008).
Arguments in favor of CSR typically begin with the belief that it is in business’s long-term self-interest – enlightened self-interest – to be socially responsible. This view holds that, if business is to have a healthy environment in which to operate in the future, it must take actions now that will ensure its long-term sustainability. A second argument in favor of CSR is that it will fly under the radar when it comes to government regulation. Two additional arguments in favor of CSR include ‘business has the resources’ and ‘let business try’ (Davis 1973). These two views maintain that, because business has a wealth of management talent, practical expertise and capital, and because so many others have tried and failed to solve social problems, business should be given the chance to do as its within their capability. Another justification for CSR holds that being proactive is better than being reactive.
Being proactive is more practical and less costly than simply reacting to social problems once they have surfaced (Carroll & Buchholtz 2009). Finally, it has been argued that business should engage in CSR because the public strongly supports it. Today, the public believes that, in addition to its pursuits of profits, business should be responsible to their workers, communities and other stakeholders, even if making things better for them requires companies to sacrifice some profits (Bernstein 2000). Many of these arguments for and against CSR have been around for decades and published in many journals. They certainly present the legitimate perspective that there are, indeed, two sides of the argument with respect to almost any concept.
CSR for a Sustainable future
Organizations are fast learning that CSR is viewed favorably in the markets in which they operate. Businesses have responsibilities beyond just profit making and good CSR often increases profits. Organizations now pursue CSR strategies to defend their reputations, justify benefits over costs, integrate with their broader strategies and learn, innovate and manage risk (Zadek 2000). CSR has evolved over time and we can look at it from two different viewpoints. The social viewpoint is one where society has become more aware of the consequences and negative externalities associated with business activity. The second viewpoint is from an economic standpoint. Berger suggests organizations adopt CSR initiatives for ‘rational’ reasons and that CSR initiatives are assessed in a purely economic manner (Berger et al. 2007, p. 140). The Organizations have become involved in more socially accepted practices that are viewed more favorably and participate in events deemed necessary or important. We see and hear about this everyday on television in magazines etc.
Rainforest alliance certification is one of the best examples, which highlights this. The Rainforest Alliance launched the world’s first sustainable certification program in 1989 to encourage market-driven and environmentally and socially responsible management of forests, tree farms and forest resources. The Rainforest Alliance also works to connect certified communities and businesses to buyers of forest products. They work to build sustainable livelihoods by helping certified communities and businesses to market their products effectively and increase technical ability. By promoting green building and helping companies that purchase forest products to incorporate sustainability into their sourcing policies, they are also working to increase the demand for certified products. Many organizations such as Gloria Jeans have obtained certification with the aim of demonstrating CSR and increasing coffee consumption through its outlets.
Organizations that adapt and implement CSR practices are securing their futures and maintaining competitive advantage. They are responding to market demands in a bid to increase their profile and the rationale for CSR may be categorized under four arguments: (1) reducing cost and risk; (2) strengthening legitimacy and reputation; (3) building competitive advantage; and (4) creating win–win situations through synergistic value creation (Kurucz et al. 2008).
There is growing support for the broad view of CSR amongst academics and practitioners. The broad view for CSR illustrates that CSR has a positive economic impact on an organizations financial performance. Organizations should understand the circumstances of the different CSR activities and pursue those activities that demonstrate an alignment between the firm’s economic objectives and the social objectives of society. Only when firms are able to pursue CSR activities with the support of their stakeholders can there be a market for virtue. Proponents of the narrow view argue that the only social responsibility of corporate organizations is to make profit. However, the adherents of the broader view have come up with a rival position that argues that corporate organizations have social responsibilities in addition to their economic responsibilities both of which are supposed to treated as ends in themselves. The broad view is argued in favor of if organizations are to have a sustainable future and are to remain competitive moving forward. The narrow view does not take into account the changing attitude of consumers and society as a whole. Profit maximization is achieved through good CSR, one that the broad view supports and illustrates.
Berger, I.E., Cunningham, P. and Drumwright, M.E. (2007). Mainstreaming corporate social responsibility: developing markets for virtue. California Management Review, 49, pp. 140 Bernstein, A. (2000). Too much corporate power. Business Week, 11 September, p. 149. Buchholtz, A.K., Amason, A.C. and Rutherford, M.A. (1999). Beyond resources: the mediating effect of top management discretion and values on corporate philanthropy. Business and Society, 38, pp. 167–187. Corporate Social Responsibility: Meeting expectations p. 3 (n.d.). Retrieved from http://www.wbcsd.org/work-program/business-role/previous-work/corporate-social-responsibility.aspx Carroll, A.B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4, pp. 497–505. Davis, K. (1983), An expanded view of the Social Responsibility of Business, Ethical Theory and Business, Prentice-Hall, pp. 94-97. Dentchev, N. (2005/284), Integrating Corporate Social Responsibility in Business Models, Hoveniersberg, Ghent University. Friedman, M. (1962). The social responsibility of business is to increase its profits. New York Times, September, 126. Heinze, K.L. (2005), In the Mood to Give: How and Why Positive Affect Increases the Importance of CSR to Prospective Employees, Northwestern University.
Hopkins, M. (2004). Corporate social responsibility: An issues paper. Retrieved from http://220.127.116.11:8080/dspace/bitstream/123456789/1193/1/Corporate%20social%20responsibility%20an%20issues%20paper.pdf
Kant, I. (2002), “Grounding for the Metaphysics of Morals”, in Hartman, L.P. (Ed.), Perspectives in Business Ethics (Second Edition), Tata MacGraw-Hill Publishing Company Limited, New Delhi, pp. 16-21. Kurucz, E., Colbert, B. and Wheeler, D. (2008). The business case for corporate social responsibility. In Crane, A., McWilliams, A., Matten, D., Moon, J. and Siegel, D. (eds), The Oxford Handbook of Corporate Social Responsibility.