Corporate Social Responsibility

in the developing world

•MICHAEL BLOWFIELD •JEDRZEJ GEORGE FRYNAS

Group MembersMuhammad UmairAzhar SarwarAlishba SaeedMaryam ShabirAroosa Munir

Need a Critical Perspectives

To understand what CSR does….

And could mean for the poor and marginalized in developing countries.

Need a Critical Perspectives

However, the contributors to this issue have reached the conclusion that current CSR approaches do not warrant such claims.

Their work shows the need for a critical approach to the strengths and limitations of CSR

Numerous claims about CSR

The contribution to make Poverty alleviation

Other development goals

Why Critical Agenda Many policy-makers see business as

important in meeting development challenges:

Not just those of economic growth, but also in areas such as combating HIV/AIDS, reducing poverty and building human capital.

Why Critical Agenda (cont)

Moreover, government, civil society and business all to some extent see CSR as a bridge connecting the arenas of business and development, and increasingly discuss CSR programmes in terms of their contribution to development.

Implicit in this view is that developing economies are different from developed ones, and require particular attention.

There are unique aspects to issues such as poverty and sustainability in the developing world that demand different solutions from those that might be implemented in developed economies.

To understand the potential and limitation of CSR Contribution.

What is CSR. (we provide a short overview of how CSR is defined.)

Various criticisms made of CSR.(and consider whether they are valid in a developing-country context)

Explore several ways in which CSR affects international development.

What we know and need to know about how the ideas, norms and values that underpin CSR theory and practice relate to developmental goals.

What is CSR? ‘Corporate social responsibility’ is a recent term, a

preoccupation with business ethics and the social dimensions of business activity has been around for a very long time.

Business practices based on moral principles and ‘controlled greed’ were advocated by pre-Christian western thinkers.

Islam and the medieval Christian Church publicly condemned certain business practices, notably usury.

What is CSR? (cont)

Nineteenth-century boycotts of food stuffs produced with slave labour.

Nuremberg war crimes trials after the Second World War.

the moral vision of entrepreneurs such as Cadbury and Mars.

Directors of the German firm I. G. Farben found guilty of mass murder and using slave labour.

What is CSR? (cont)

From a historical perspective, then, CSR is simply the latest manifestation of earlier debates on the role of business in society.

What is new, according to Fabig and Boele, is that ‘today’s debates are conducted at the intersection of development, environment and human rights, and are more global in outlook than earlier in this [the twentieth] century or even in the 1960s.

What is CSR? (cont)

Why the concept of CSR has risen to prominence in recent history, or on the definition of what companies should be responsible for and how.

1. As Michael Blowfield argues in this issue, there are common elements to managing CSR, and discernible these significantly influence how companies view their responsibilities.

What is CSR? (cont)

2. Mean different things to practitioners seeking to implement CSR inside companies and to researchers trying to establish CSR as a discipline.

3. It can also mean different things to NGOs and to companies.

What is CSR? (cont)

Although these differences are an inevitable and potentially fruitful element of the innovation process.

They can be frustrating.

Not least to company managers who might prefer a bounded concept similar to quality control or financial accounting.

Instead, managers find themselves wrestling with issues as diverse as animal rights, corporate governance, environmental management, corporate philanthropy, stakeholder management, labour rights and community development.

What is CSR? (cont)

New terms such as corporate accountability, socially responsible investment and sustainable development, aimed variously at replacing, redefining or complementing the CSR concept.

What is CSR? (cont)

Institutions and individuals can also change their interpretations of CSR.

World Business Council for Sustainable Development (WBCSD) has changed its definition over time.

(WBCSD) CSR definition. Initially (1998), it referred

to CSR 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

of the local community and society at large’.

But that definition was later changed (2002) to ‘the commitment of business to contribute

to sustainable economic development,

working with employees, their families,

the local community and society at large to improve their quality of life’.

Aroosa

CSR as a CultureCulture affects capitalism.Notions of corporate responsibility are not

unique to the West,More rigid division between ‘social’ and

‘economic’ affairs and the stress on individualistic—rather than communitarian— values.

CSR as a Culture Continental European, Asian or African

societies may not have the term CSR in their vocabularies, yet some of these societies may have had a longstanding social contract whereby business has social obligations to employees or wider society, such as exists in Japan.

Meaning of CSR can differ from one society to another.

CSR as a Culture When asked by the WBCSD what CSR means to them,

people from different countries emphasized different issues:

Environmental issues were stressed in Thailand, While Ghanaians stressed empowering local communities Ethical concerns of business managers differ among

nations. Managers in multinational companies can find themselves

juggling the perhaps contrary expectations of their local and head offices.

These differences render any common or comprehensive definition of what constitutes corporate responsibility elusive, especially when new initiatives seem to be continually emerging.

Azhar

CSR as an alternative to government For many proponents and critics, a key

distinguishing feature of CSR is the voluntary nature of the initiatives companies undertake in its name, in contrast to the formal regulatory mechanisms historically used to govern business.

Few hold that business should not be legally accountable, but in certain circumstances a voluntary approach to regulating business behavior might be beneficial.

CSR as an alternative to government (cont….)

For instance, where there is a strong system of governance, voluntary approaches might be a way of extending company accountability without the need for new legislation.

A complementary approach encouraging business to act responsibly but not an alternative to the rule of law.

Equally, where the rule of law is weak, voluntary approaches can encourage multinational companies to introduce higher levels of performance than those required for local legal compliance.

CSR as an alternative to government (cont….)

Many ‘voluntary’ initiatives also have a ‘mandatory’ aspect, and there are already many intersections between CSR and the law.

Including actual new legislation. (example of logging companies)

As well as legal aspects to some CSR initiatives

CSR as an alternative to government (cont….)

‘Voluntary CSR’ can also be interpreted as part of a wider revisiting of the role of government, and an increasing focus on enabling legislation that encourages certain behaviours rather than simply attempting to codify every detail of compliance.

The broad idea of ‘voluntary’ mechanisms to regulate business behaviour is winning support from policy-makers.

Firms are capable of policing themselves in the absence of binding international and national law to regulate corporate behaviour.

CSR as an alternative to government (cont….)

The European Commission’s Green Paper of July 2001 defined CSR as ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’.

Alishba Saeed

CSR as an umbrella term1. Companies have a responsibility for their impact on

society and the natural environment, sometimes beyond legal compliance and the liability of individuals;

2. Companies have a responsibility for the behaviour of others with whom they do business (e.g. within supply chains); and

3. Business needs to manage its relationship with wider society, whether for reasons of commercial viability or to add value to society.

CSR as an umbrella termSome of the ambiguity about CSR arises

because the term has been used to refer both to a research agenda and to corporate practice.

In this special issue we are concerned with both, but we primarily hope to advance a new research agenda and a debate on the business–society relationship.

Maryam Shabira

CSR as an umbrella term We feel that the current research agenda on CSR lacks

systematic rigour and fails to tackle key questions.

For example, in business schools much of the research on CSR focuses on issues related to the stakeholder view of the firm and the potential contribution of CSR to profitability.

vital questions are not being asked. For example, while dozens of studies have investigated the correlation between firms’ social commitment and profitability, a key causal question remains unanswered: does social commitment drive a firm’s profitability, or does profitability allow the firm to invest in social initiatives?

Criticisms of CSR In the context of international development and

poverty alleviation, CSR is recommended as beneficial to both the North and the South, contributing simultaneously to universal human rights, equity and economic growth.

In addition to the many companies still resistant to CSR, and the politicians and academics who see it as a barrier to trade, civil society advocates are increasingly questioning its benefits.

Criticisms of CSRBroadly speaking, most criticism

falls into two camps.

1. ‘CSR is bad capitalism’ school.

2. ‘Weak CSR is bad development

Criticisms of CSR CSR is bad capitalism’ school.

Associated with traditional business management theory,

Echoes Milton Friedman’s famous statement that there is

“only one social responsibility of businessto use its resources and

engage in activities designed to increase

its profits”

Criticisms of CSR According to this view, CSR is inherently

misguided in principle.

By pursuing social and environmental objectives, firms may ultimately hurt shareholders by generating lower profits

Furthermore, firms are said to lack the expertise to engage in solving social problems.

Criticisms of CSR Nonetheless, business scholars have tried to reconcile profit-

maximizing objectives with social objectives by suggesting that CSR can lead to higher longterm profitability.

Margolis and Walsh found that, between 1972 and 2002, at least 127 published empirical studies examined

“the relationship between socially responsible behaviour on the part of companies and their financial performance,

the majority of them pointing to a positive relationship between the two variables”

Criticisms of CSR Weak CSR is bad development’ school

Associated with civil society organizations and critics of business behaviour.

Argues that companies should take responsibility for the broader impacts of business activity.

but that current CSR practice is simply inadequate for this purpose.

Criticisms of CSR According to this view, the planning and implementation of

social programmes by firms is generally deficient,

Many of these critics consider the provision of social justice the domain of state regulation or argue that, at a minimum, the state has an obligation to monitor corporate social programmes.

They point out that—in the absence of state involvement and proper monitoring—CSR initiatives such as corporate codes of conduct tend to lack precision and uniformity across firms and industries, and that there are few, if any, sanctions for non-compliance.

Criticisms of CSR Two other critical schools should be

acknowledged:

One that disputes that capitalism can make any contribution to social and environmental justice.

CSR as nothing more than good capitalism and therefore not worth thinking about in its own right

Criticisms of CSRThese questions can be broadly divided

into four areas:1. the meaning of CSR for developing

countries,2. its relationship to international

governance, 3. its analytical limitations, and 4. the consequences of thinking in terms of

the business case for CSR.