Corporate Social Responsibility (CSR) and Ethics

With the booming development of the world’s economic, the term Corporate Social responsibility (CSR) is becoming very familiar with many companies. It is a strategy that about how company can minimize the negative impacts of its operation on the stakeholders while maximizing its positive impacts (Lantos, 2001, p. 600). The meaning of stakeholders here are the employees, suppliers, consumers, society or even the environment which are indirectly or directly affected by the activities of company. In fact, the term CSR is very common in the late 1960s and early 1970s after many multinational companies formed the term stakeholders (Freeman, 1984).

However, even though CSR was started early but it is still a debatable topic because people are still questioning about whether CSR is having ethical perspectives or it is just a way for companies to attract economic through social activities. CSR has been experienced in both ways but if CSR is running totally in an ethical way, the world will become much better (Smith and Nystad, 2006). The main aim of this paper is to find out the link between CSR and Ethic and how ethical CSR could be applied globally? The paper is also illustrated by giving a typical example which is Vinamilk Company (Vietnamese Milk Company) with the “one million glasses of milk for poor kids” strategy. The aim of this CSR practice is not only helping poor kids have milk to drink but also improve the awareness of consumers in ensuring the health of families and share the responsibility with the community. Finally, at the end of this paper, there will be some similar and different point of views about CSR from many different experts and how this research was conducted.

What is CSR?
There are several definitions of CSR under different scopes and none of them are globally-accepted. Generally, CSR refers to Corporate Social Responsibility – “a set of management practices that ensure the company minimizes the negative impacts of its operations on the society while maximizing its positive impacts” (Lantos, 2001, p. 600). Chakrabarty (2008) totally agrees with him and even added that CSR also deal with stakeholder’s benefits. The “3 waves of CSR” are: * Community engagement

* Socially responsible production process
* Socially responsible employee relations
This definition is quite easy to understand since it clearly provides the three main missions of companies which are applying CSR strategy. With the similar thought, the World Business Council for Sustainable Development (cited in Kercher 2007, p.4) defined CSR as a business obligation to contribute to sustainable economic development and improve the quality of life of employees, their families, society and local community. From this point of view, we can see that CSR has to work on both of the two fundamental principles which are economic growth and improving quality of life in a sustainable way. Support this ideal, in the article of United Nation (2007), CSR was defined as the overall contribution of business to sustainable development. The article also indicates the minimum standard of CSR. That is when the business just fulfills its obligations and if the law or regulation is lacked, they do not harm the stakeholders.

For example, if there is no term or rule of law which require the companies to increase the salaries of employees, then the companies have no duty to do that. The UNI (Ente Nazionale Italiano di Unificazione) (cited in Corporate Social Responsibility: definitions and meanings, n.d) in Italy summarized the CSR strategy by two points. Firstly, CSR is totally voluntary nature. There is no constraint that forces the companies to adopt the social responsibility’s policies. The reason that induces the companies to apply CSR is because the companies want to increase social awareness which is gained from being socially responsible. Secondly, the CSR program involves the stakeholders who will be the beneficiaries of the company’s activities. These benefits are specifically analyzed in the research of Marquina (2007). Basically, customers are willing to purchase and willing to pay premium price if they are received a well-performed CSR and corporate ability from the companies selling products. This model of behavior is below:

Adapted from Gupta (2002) In order to apply CSR successfully and correctly, Caroll (1979) categories CSR into four layers and ranked the highest priority as follow: economic, legal, ethical, and philanthropic aspects respectively. The four classes reflect the result of each category. It will “helps the manager to see that the different types of obligations are in a constant tension with one another” (Caroll, 1979)

What is business ethic?
Similar to the definition of CSR, ethic has no official meaning since it comes to be different meanings for different topics and perspectives but generally, business ethic is what is right or wrong in workplace (Gibber, n.d). To be right and ethical in the workplace, it means that there are the good effects of products/services and the relationship with stakeholders. Both profit and non-profit companies in the world now consider ethic is an important aspect since it can create a good image of companies and gain supports from the society. However, in some cases, especially in case of having fundamental changes (such as economic crisis), many companies have put their business’s ethic behind the aspect of making profit for the company so it suddenly makes people feel that the ethical behavior of company is an marketing strategy. Wallace and Pekel (cited in Ginbber, n.d) suggest that attention to ethic is very critical, the leader and manager need to retain a strong moral compass even in the time of changing or crisis. Although, companies can be unsustainable in developing ethical aspects, but understand ethic and make it as a part of companies are very important because it make the life become better and change the operation method of companies – that is making profit and to be ethical. The link between CSR and business ethic

There are many studies about the relationship between CSR and business ethic. Are there any differences between them? Are they compatible or mutually exclusive? According to Smith and Nystad (2006), business ethic tends to be internal in its operation while CSR is more external. It means that business ethic is normally understood and practiced within the company and CSR is more to deal with the society’s issues and environment. For example, employees of a company act in an acceptable manner when completing business functions whereas a factory is producing without pollution is a way to save the environment. In addition, Ethic is usually deal with individual level while CSR is concerned with the organization (Smith and Nystad, 2006). Even though, there are some differences between the meaning of CSR and business ethic but in general, this two concepts are believed go hand in hand for companies in business environment (Vitez, n.d). The business ethic will match and support CSR when the companies have a written code of ethic which is used to prove the company is acting on its best to fulfill social responsibility (Vitez, n.d). For example, one typical code of ethic is honesty, the company need to be honest from the leaders to the employees in order to perform good CSR campaign without any purpose of making profit. Examples of companies that fail to apply CSR

There are many evidence shows that companies in the world have fail to applied CSR strategy. One of the main reasons is that they did not fully understand the important role of CSR so they did not seriously put it in practice or even totally disregard it. Here are some of the cases that companies were failed because of the lack of CSR strategy or use it in an unethical way. * Nearly half of UK biggest companies fail to act on carbon emission (Harvey, 2011). This is the result of a survey conducted by Carbon Trust. The numbers or statistics about carbon emission of these companies (called FTSE 100) are already expired without being renewed. Most of them set the carbon reduction for short term and one-fifth set it for long term (2018 or later). * Corporate scandal in Japan in 2002.

Former Mitsubishi Motors executives were arrested on suspicion of professional negligence: producing defective car’s parts. (Kyodo News International, 2004) * The issue is within Foxconn Company – one of the main suppliers to Apple. Many workers committed suicide due to high pressure of working condition. The company has promised to increase 20% of wage but not yet to deliver. Moreover, because of the low wage ($140 per month) so it induces workers to perform many extra hours overtimes so they feel stressful and tired and want to commit suicide. (Ivanou, 2010). * Enron group (America energy, commodities and services Company) even ran the CSR program and became the champion of community involvement. However, this company did it in an unethical way. As a result, in 2002, the scandal was explored. The company was found out to use off-balance-sheet partnership to bilk investors and eventually ruined the company. (BBC news, 2002). Reasons to activate CSR

There are many reasons for companies to apply CSR and personally, sooner or later many companies in the world will be forced to do that due to the benefits to the society. In this part of the report, three main reasons will be explained in detail. CSR activities are important and even expected by the public Along with the development of the world economic, many issues has been occurred and quickly become the world‘s concern topics. Some of them are: global warming, environment issues, poverty, starvation, unemployment, etc. The question is: who will be responsible for these problems? The answer is no one in fact it is the world’s concern so everyone have to act on it.

Therefore, companies, organizations, groups and even government are the main characters to act on these issues because they can make large effects and solutions through CSR strategies. Although, the development of CSR now is unsustainable because making profit and helping society sometime is conflict with each other, the society and public still needs the activities of CSR because it helps to change the situation (Frynas, 2006). CSR activities help and organizations hire and retain the people they want Many firms believe that CSR helps them to hire and retain people they want (Gup, 2008). Therefore, it provides them a competitive advantage of having intellectual and talent employees. According to Macleod (2003), CSR can help companies to attract, motivate, and retain employees. Moreover, Lewin and Sabater (1996) support that employee’s morale is higher in organization which is involved in their community. CSR contribute to business performance

It would raise a concern among people that how CSR can improve business performance since it mainly contributes to the society. The true is CSR can definitely improve the business performance. According to a study conducted by Luo, Xueming, & Bhattacharya (2006) as long as the firms are innovative and have good product quality, CSR will help them to increase customer’s satisfaction and financial return. Agree with this ideal, Perrini et.al (2009) even make it clearer by explain in detail the aspects of companies that CSR can improve. They are organization, customers, society, natural environment, innovation and government. For example, about society driver, CSR help to create a competitive advantage through reputation and trust which also strengthen the firm’s “license to operate”. How to Intergrade CSR globally

It is extremely important for companies (especially for large companies, multinational companies) to intergrade CSR globally. The reason is people and environment from different countries (poor countries) can benefit from CSR strategy of global companies. They can help to solve the issues which are seemed to be difficult for the governments and people. More importantly, it also support greatly to the globalization process which help countries in the world to be more connected with each other (Scherer, Palazzo 2007). There are some major ways for multinational companies to do worldwide CSR. Incorporate values to make it part of an articulated belief system Value is an essential part of belief system.

They are highly-perceptible ingredients that bind people in social group and culture together in their common belief systems (Ackey, 1995). Therefore, in certain situations, it provides fast and simplified judgment. This will help to reduce time consuming and the consideration of alternative choices (Ackey, 1995). However, it is never an easy job for global companies (even huge companies) because values of companies also can receive bad judgment, if the companies have wrong strategy (Ackey, 1995). McDonald’s corporation is typical example that successfully added their values into the belief system by applying CSR. Their belief statement is:” What we’re made of: nutrition and well-being, sustainable supply chain, environment responsibility, employee experience, community” (Mc Donald, 2010). They have proved their statement in the many countries in the world and gain a lot of supports and reputation. Act worldwide on the values of CSR

Again, the companies have to prove what they have planned in the CSR strategies are turned into actions (like Mc Donald). In addition, the CSR plan must be transparency and companies have to walk the walk (not just talking the walk) or else the exposure will be the ultimate price (Macleod, 2008). (Like Enron Company) Engage with stakeholders

Companies need to identify primary stakeholders and secondary stakeholders. According to Clarkson (1995), primary stakeholders are those “without whose continuing participation, the corporation cannot survive as a going concern” such as owners, employees, labor unions, customers and suppliers. The CEOs or managers of the firm need to pay substantial attention to the development of the primary stakeholder’s relationships which are defined as mutually interdependent in the company (Clarkson 1995). Therefore, they will contribute and support greatly to the implementation of CSR strategy. The secondary stakeholders operate external to the firm such as nongovernment organization, community group and social activist. They are the secondary concern of companies to engage when the firms plan to integrate CSR globally. How to perform ethical CSR

There are two types of CSR which are economic focus and ethical focus (Smith and Nystad, 2006). Economic focus is understood that CSR is a measure to the end of profits whereas ethical focus argues that the relationship between business and society is embedded with ethical value (Smith and Nystad, 2006). Although, both ways of CSR still have the positive impacts on the society, ethical CSR is preferable than economic CSR because it focuses upon ethical perspectives. However, it is quite difficult for companies to differentiate themselves with economic CSR companies if the ethic CSR is not well-implemented. There are some ways for companies to integrate CSR with ethics: Top management commitment in word and deed

The CEOs or managers of firms must put really high effort and commitment into the CSR activities especially for ethical CSR. The reason is that if the CSR is not implemented correctly; it would be misunderstood by people and the society. They might think that the companies are trying to get benefit from being good to the society. For example, CSR can be easily view as a good advertising if lack of control (Coor, Winegarden 2005). Moreover, the CEOs, managers, leaders are those who can make influences on employees and followers so if they are not good then of course the followers will be affected negatively (Jong, Hartog 2007) and it resulted in the failure of CSR implementation. Company codes of ethics

Code of ethics is a set of guidelines which are designed to set out acceptable behavior for members of organizations or firms (FreeDictionary.Com, 2010). It requires members to discharge their responsibilities, at all time, in all manners which are professionally, ethically and morally (OT Australia, 2001). Codes of ethic are very common in some fields which are sensitive such as investment, healthcare, or interaction with other culture. Therefore, it is very important for ethical companies to set up professional codes of ethics in order to increase the confidence in an organization by showing the outsiders that they are following the ethical guideline in the course of doing their work (wisegeek, n.d). The case of Vinamilk

Vinamilk Company (a Vietnamese Milk Company) has successfully implemented their CSR strategy in an ethical way. The campaign is named “One million glasses of milk for poor children in Vietnam” initiated by Vinamilk corporation and “The national fund for Vietnamese children”. Basically, when customer buys a pack of Vinamilk then they actually contribute 60 dong into Vinamilk fund also Vinamilk donate one million packs of milk for free (Vinamilk, 2012). The results of this campaign were tremendous since the planning target was broken. Three millions of glasses of milk were delivered to poor kid equivalent to 9.6 billion VND (Vinamilk, 2012). Moreover, at the Charity Music Event, the company has received generous contributions from customers, suppliers, business partners and employees. The amount of money was collected after that night was 13.5 billion VND – equivalent to 4.3 million glasses of milk. The persistence of this CSR campaigns somehow has helped a lot of poor children that is poor children have a chance to drink milk and contribute to reduce the rate of child malnutrition in Vietnam. Similarities and Differences

In this paper, several documents were collected in order to discuss the relationship between CSR and ethic, why should companies activate CSR, how to apply CSR globally and in the ethical way. Vitez (n.d) stated that CSR and ethics should go together when they are implemented. Agree with this ideal, Mofid (2003) explains that market place is not only an economic sphere but also a region of human spirit. That mean people need to help each other in every situations even in doing business. Although, self-interest is an important sources of human’s motivation, influencing on the decision we make in the marketplace every day, but these decisions have a moral, ethical and spiritual content because the decisions are not only affected to ourselves but also others (Modfid, 2003). This is very true in case of Vinamilk, at the first time the ideal of make “one millions glasses of milk for poor children” is not really supported. However, with the motivation of the CEO, managers of company and the truly compassion to the Vietnamese poor children, the campaign was extremely successful. Should the company’s apply CSR? It is actually a debatable question (Kerche, 2007).

Many experts think that CSR is not only good for business (Smith and Nystad, 2006) but also good for society, environment, employees (Lewin and Sabater, 1996). However, it has been argued that CSR is often misguided, or worse and few big companies in the world now try to ignore it after seeing the failures of other companies (Economist, 2008). One typical example is Mark & Spencer – one of Britain’s leading retailer (M&S Company). The company has launched CSR in 2007 and the result is terrible (Economist, 2008). There are three main reasons of this failure. First, the company said a lot of good things about their CSR plan and suddenly people did not like it. Customers said that the company is meaning (or seeming) to be good (Economist, 2008). Secondly, M&S actually failed because of a vast range of activates. Therefore, the company felt confused about what they need to focus (Economist, 2008). Thirdly, M&C demonstrated that CSR is a booming. It means that company has to work harder to protect reputation also the scandals from Enron and WorldCom make people question about the purpose of CSR campaign. It takes the attention from society; a minor mistake can lead to a huge trouble (such as being shot by camera and published to internet). (Economist, 2008) Research Method

The research method of this paper is that reviewing, finding and collecting relevant information from various papers, credible internet sources and books. The method was used in the research of Smith and Nysad (2006) is using books, journal articles, and was used as a paper to be presented at The Corporate Responsibility Research Conference 2006 in Ireland. In the part “How to apply CSR globally”, it contains the experience of Sandra Macleod – CEO of Echo Research – a credible organization. To support the theory and illustrate the failures of CSR strategy, this literature review also uses the survey of Harvey (2011) based on 100 biggest companies in UK (FTSE 100). In addition, many books has been used in order to increase the credibility of this paper such as “Handbook for directors of financial institutions” by Gup (2008) and “The false developmental promise of Corporate Social Responsibility: evidence from multinational oil companies” by Frynas (2006). Conclusion

The research has covered some important aspects of Corporate Social Responsibility (CSR). They are: The link between CSR and Ethic, Benefits of applying CSR, How to apply CSR globally and ethically also different opinions of authors about CSR’s benefits. The reason is CSR now is a controversial topic. Many companies against but many companies support it. Nevertheless, it is a two-side topic, but it cannot be argued that there is an increasing number of companies in the world are planning and applying CSR. It also cannot be argued that CSR does have good impacts on people, society, and the environment. A good business is not only good at creating wealth but also have good influence on the society and environment (Mofid, 2003). It is worth to remember the centuries-old wisdom of Persian poet (cited in Mofid, 2003): “Human beings are like parts of body

Create from the same essence.
When one part is hurt and in pain,
The others cannot remain in peace and be quiet.
If the misery of others leaves you indifferent
And with no feelings and sorrow,
You cannot be called a human being. “

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