Corporate Social Corporate Social Responsibility - IntroductionResponsibility - Introduction

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CSR: responsibility, society and CSR: responsibility, society and corporationscorporations

- Historical originsHistorical origins- Possible definitionsPossible definitions

- Arguments for and against CSR Arguments for and against CSR - Areas of concern Areas of concern

Corporate Social Responsibility Corporate Social Responsibility – uses of term– uses of term

By businesses as a statement of By businesses as a statement of intent or marketing deviceintent or marketing device

By governments and international By governments and international organisations to exhort ‘good’ organisations to exhort ‘good’ conductconduct

By NGOs as a standard to measure By NGOs as a standard to measure business activitybusiness activity

- how meaningful is it? - how meaningful is it?

Historical pressures for CSRHistorical pressures for CSR

1930s - Economic depression and poverty1930s - Economic depression and poverty 1960s - Race and gender discrimination1960s - Race and gender discrimination 1990s - Environment and global warming1990s - Environment and global warming 2000s - Financial bubble and bust2000s - Financial bubble and bust Major companies perceived as ‘part of Major companies perceived as ‘part of

the problem’ – in US and UK, legislative the problem’ – in US and UK, legislative requirements followed in ’30s/’40s, requirements followed in ’30s/’40s, ’60s/’70s (future prospects…?)’60s/’70s (future prospects…?)

Business response to CSR Business response to CSR

Philanthropy – donations, community work Philanthropy – donations, community work (1960s)(1960s)

Responsiveness – communications, Responsiveness – communications, stakeholder engagement (1970s)stakeholder engagement (1970s)

Commitment – Codes of Conduct, Commitment – Codes of Conduct, management/reporting (1980s)management/reporting (1980s)

Embeddedness – reexamining business Embeddedness – reexamining business processes (1990s-)processes (1990s-)

Why might this development have been Why might this development have been from the top down of the ‘responsibility from the top down of the ‘responsibility pyramid’?pyramid’?

CSR: narrow or tall?CSR: narrow or tall?

Milton Friedman – “the business of Milton Friedman – “the business of business is business” (making business is business” (making maximum profit, subject to obeying maximum profit, subject to obeying the law)the law)

Archie Carroll – making a profit, Archie Carroll – making a profit, obeying the law, meeting society’s obeying the law, meeting society’s ethical expectations and contributing ethical expectations and contributing to the social goodto the social good

CSR: what and why?CSR: what and why?

voluntary decision (beyond what law voluntary decision (beyond what law requires?)requires?)

to respect and protect varied to respect and protect varied stakeholders (such as?)stakeholders (such as?)

and contribute to wider social and and contribute to wider social and environmental improvement (how far?) environmental improvement (how far?)

- is it a matter of sound business or - is it a matter of sound business or moral imperative or both?moral imperative or both?

UK GovernmentUK Government ““The [UK] Government sees CSR as the The [UK] Government sees CSR as the

business contribution to our sustainable business contribution to our sustainable development goals. Essentially it is development goals. Essentially it is about how business takes account of its about how business takes account of its economic, social and environmental economic, social and environmental impacts in the way it operates…impacts in the way it operates…Specifically, we see CSR as the voluntary Specifically, we see CSR as the voluntary actions that business can take, over and actions that business can take, over and above compliance with minimum legal above compliance with minimum legal requirements, to address both its own requirements, to address both its own competitive interests and the interests of competitive interests and the interests of wider society.”wider society.”

European Union European Union ““Being socially responsible means not Being socially responsible means not

only fulfilling legal expectations, but only fulfilling legal expectations, but also going beyond compliance and also going beyond compliance and investing ‘more’ into human capital, the investing ‘more’ into human capital, the environment and the relations with environment and the relations with stakeholders.stakeholders. The experience with The experience with investment in environmentally responsible investment in environmentally responsible technologies… suggests that going beyond technologies… suggests that going beyond legal compliance can contribute to a legal compliance can contribute to a company’s competitiveness. Going beyond company’s competitiveness. Going beyond basic legal obligations in the social area… can basic legal obligations in the social area… can also have a direct impact on productivity.”also have a direct impact on productivity.”

International Chamber of International Chamber of CommerceCommerce

CSR “is the voluntary CSR “is the voluntary commitment by businesses to commitment by businesses to manage their roles in society in a manage their roles in society in a responsible way”responsible way”

World Business Council for World Business Council for Sustainable DevelopmentSustainable Development

CSR “is the continuing commitment CSR “is the continuing commitment by business to contribute to by business to contribute to economic development while economic development while improving the quality of life of the improving the quality of life of the workforce and their families as well workforce and their families as well as of the community and society at as of the community and society at large” large”

Arguments for CSRArguments for CSR Corporations granted existence by society Corporations granted existence by society

through law – ‘licence to operate’ needed through law – ‘licence to operate’ needed Legal requirements are a floor for Legal requirements are a floor for

behaviour, not the whole story behaviour, not the whole story Ethical case - emerging and evolving Ethical case - emerging and evolving

global norms should concern companies global norms should concern companies Business case – improving reputation, Business case – improving reputation,

avoiding threats, seizing opportunities avoiding threats, seizing opportunities

Arguments against CSRArguments against CSR Only real human beings can sensibly be Only real human beings can sensibly be

‘responsible’ (or ‘irresponsible’) ‘responsible’ (or ‘irresponsible’) ‘‘Shareholders’ money’ – should not be Shareholders’ money’ – should not be

spent on others, except as law demandsspent on others, except as law demands Businesses should not do or try to do Businesses should not do or try to do

Governments’ job for themGovernments’ job for them Inefficient and too vague – accountable Inefficient and too vague – accountable

to all really means accountable to none to all really means accountable to none

Disasters and dilemmasDisasters and dilemmas Nike and ‘sweatshops’ – cheap Nike and ‘sweatshops’ – cheap

labour versus basic development; labour versus basic development; child labour and family survival… child labour and family survival…

Shell and Nigeria – complicity in Shell and Nigeria – complicity in oppression; engagement with oppression; engagement with governmentsgovernments

Union Carbide and BhopalUnion Carbide and Bhopal Nestle and infant formulaNestle and infant formula

Key areas of concern Key areas of concern

Labour standards and human rights Labour standards and human rights issues – especially in developing world issues – especially in developing world (ILO) (ILO)

Bribery and corruption issues (OECD)Bribery and corruption issues (OECD) Environmental protection – especially Environmental protection – especially

climate change and industrial pollutionclimate change and industrial pollution Financial risk and rewardFinancial risk and reward

Corporate Social Corporate Social Responsibility – Good Responsibility – Good

Business or Good Ethics Business or Good Ethics (or both? or neither?)(or both? or neither?)

- The ‘Business case’ for CSR The ‘Business case’ for CSR - The ‘Ethical case’ for CSR The ‘Ethical case’ for CSR

- Profits and principles, Profits and principles, compatible or conflicting? compatible or conflicting?

Business Case for CSR 1 - Business Case for CSR 1 - stakeholders stakeholders

Consumers may boycott Consumers may boycott ‘irresponsible’ companies (Nestle, ‘irresponsible’ companies (Nestle, Shell…)Shell…)

Employees may choose alternative Employees may choose alternative workplacesworkplaces

Investors may avoid companies seen Investors may avoid companies seen as short-termist/ unethical as short-termist/ unethical

Business case for CSR 2 - Business case for CSR 2 - strategystrategy

‘‘Brand premium’ may suffer as a Brand premium’ may suffer as a result of bad publicityresult of bad publicity

Prescriptive regulation may be Prescriptive regulation may be imposed if business or industry fails imposed if business or industry fails to actto act

Avoidable costs may be incurred Avoidable costs may be incurred such as compensation ot later such as compensation ot later remedial action remedial action

Proof of profits?Proof of profits?

Difficult to find comparable ‘responsible’ Difficult to find comparable ‘responsible’ and ‘irresponsible’ companiesand ‘irresponsible’ companies

Not easy to establish a connection between Not easy to establish a connection between ‘responsibility’ and results‘responsibility’ and results

JC Collins and JI Porras, ‘Built to Last’, JC Collins and JI Porras, ‘Built to Last’, Century, 1998 – ‘visionary companies’ Century, 1998 – ‘visionary companies’ outperform competitors: about ‘more than outperform competitors: about ‘more than profits’profits’

M Goyder, ‘Living Tomorrow’s Company’, M Goyder, ‘Living Tomorrow’s Company’, Gower 1998 – having clear values, building Gower 1998 – having clear values, building strong relationships key to lasting success strong relationships key to lasting success

Building a brandBuilding a brand

Marks & Spencer: Marks & Spencer: fair tradefair trade ‘‘Plan A’ on sustainabilityPlan A’ on sustainability HealthHealth

What is the market?What is the market? What is the benefit?What is the benefit?

Limits of the business caseLimits of the business case

Not all businesses are directly Not all businesses are directly consumer-facingconsumer-facing

Businesses may operate in different Businesses may operate in different markets e.g. value/ middle/ premium markets e.g. value/ middle/ premium

Without regulation the ‘irresponsible’ Without regulation the ‘irresponsible’ may undercut the responsiblemay undercut the responsible

CSR: Ethical case – social CSR: Ethical case – social

Companies are powerful actors in Companies are powerful actors in society whose resources can have society whose resources can have major effectsmajor effects

Companies rely on many stakeholder Companies rely on many stakeholder groups, not only shareholders groups, not only shareholders

CSR: Ethical caseCSR: Ethical case- responsible - responsible

Corporate systems and structures Corporate systems and structures (rather than individual will) can result (rather than individual will) can result in harmin harm

Is it ethically justifiable to ‘exploit’ Is it ethically justifiable to ‘exploit’ other stakeholders to benefit the other stakeholders to benefit the shareholders? shareholders?

Ethics and effects Ethics and effects

Stakeholder treatment – maximising Stakeholder treatment – maximising utility (Mill); treating people as ‘ends utility (Mill); treating people as ‘ends in themselves’ (Kant); basic virtues - in themselves’ (Kant); basic virtues - justice, benevolence (Adam Smith)justice, benevolence (Adam Smith)

Social context – how much is relative Social context – how much is relative to a particular place and culture? to a particular place and culture? Does the role of business vary Does the role of business vary depending on its location? depending on its location?

Engagement and Engagement and withdrawalwithdrawal

Burma boycott – companies that Burma boycott – companies that have withdrawnhave withdrawn

Should some regimes/locations be Should some regimes/locations be excluded from investment?excluded from investment?

Are boycotts right?Are boycotts right? Why? Why?

Objections to ethical caseObjections to ethical case

Lack of focus on profit reduces Lack of focus on profit reduces business effectiveness (general business effectiveness (general disutility) disutility)

Managers should not make socio-Managers should not make socio-political judgments beyond obeying political judgments beyond obeying the law the law

Whose morals count here, e.g. high Whose morals count here, e.g. high labour standards or more jobs?labour standards or more jobs?

Profit and PrinciplesProfit and Principles

Often, the two may support each other Often, the two may support each other (at least over the long term): e.g. (at least over the long term): e.g. using less energy saves money; better-using less energy saves money; better-trained workers are more productive;trained workers are more productive;

Sometimes, however, cutting costs may Sometimes, however, cutting costs may be at the expense of, e.g., labour and be at the expense of, e.g., labour and environmental standards. environmental standards. What should be the bottom line?What should be the bottom line?

Summing up…Summing up…

Business case important and often Business case important and often persuasive but not always solid;persuasive but not always solid;

Ethical case tenable but increasingly Ethical case tenable but increasingly complex to elaborate;complex to elaborate;

Link to next point: to what extent is Link to next point: to what extent is there a need for more regulation? there a need for more regulation?

Possible synthesisPossible synthesis

Instrumental (profit-driven) view of Instrumental (profit-driven) view of business is too narrow? business is too narrow?

Putting all stakeholders on same footing is Putting all stakeholders on same footing is too broad? too broad?

Special (fiduciary) duty to shareholders?Special (fiduciary) duty to shareholders? Different responsibilities to other groups?Different responsibilities to other groups?

CSR: crossover with lawCSR: crossover with law

Labour issuesLabour issues Environmental concerns Environmental concerns Consumer protectionConsumer protection Finance and accounting policiesFinance and accounting policies What rules should apply What rules should apply - to all businesses?- to all businesses? - in all locations? - in all locations? Further action a matter for CSR?Further action a matter for CSR?

Government: balancing varied Government: balancing varied demandsdemands

Is business too powerful (at the Is business too powerful (at the expense of the less expense of the less wealthy/organised)?wealthy/organised)?

Are NGOs given an appropriate Are NGOs given an appropriate hearing (considering their specific hearing (considering their specific agendas and expertise)? agendas and expertise)?

In favour of legislationIn favour of legislation

Democratic political concerns should Democratic political concerns should come before business profitcome before business profit

Some issues are simply too serious to Some issues are simply too serious to be left to voluntary action be left to voluntary action

Business has too often failed to live Business has too often failed to live up to standards it proclaimedup to standards it proclaimed

Law creates a level playing field for all Law creates a level playing field for all businesses in a sector businesses in a sector

In favour of voluntarismIn favour of voluntarism

Major companies are the real leaders Major companies are the real leaders in good CSR practicein good CSR practice

Legislation restricts beneficial Legislation restricts beneficial innovationinnovation

Different sectors and sizes of business Different sectors and sizes of business will vary in approach will vary in approach

Market forces will lead companies to Market forces will lead companies to ‘do the right thing’‘do the right thing’

What can governments do?What can governments do?

Spreading message on CSRSpreading message on CSR Rewarding ‘champions’Rewarding ‘champions’ Facilitating transparencyFacilitating transparency Co-ordinating practice between cos.Co-ordinating practice between cos. Building relationships with NGOsBuilding relationships with NGOs Linking CSR to wider public policy Linking CSR to wider public policy

Regulatory techniquesRegulatory techniques

Supporting compliance with Codes of Supporting compliance with Codes of ConductConduct

Requiring publication of social and Requiring publication of social and environmental performance environmental performance informationinformation

Incentives for ‘good’ behaviourIncentives for ‘good’ behaviour Possibility of criminal action - last Possibility of criminal action - last

resort?resort?

Issues for individual Issues for individual governments governments

Pressures to deregulatePressures to deregulate Developed world – avoidance of additional Developed world – avoidance of additional

costs (maintaining competitiveness) costs (maintaining competitiveness) Developing world – concern about Developing world – concern about

imposing costs (attracting investment) imposing costs (attracting investment) Power of business (Naomi Klein, Power of business (Naomi Klein, No LogoNo Logo, ,

2000; Noreena Hertz, 2000; Noreena Hertz, The Silent The Silent TakeoverTakeover, 2001) , 2001)

European Commission European Commission Communication March 2006Communication March 2006

The Commission… wishes to give greater political The Commission… wishes to give greater political visibility to CSR, to visibility to CSR, to acknowledgeacknowledge what European what European enterprises already do in this field and to enterprises already do in this field and to encourageencourage them to do more. them to do more.

Because CSR is fundamentally about Because CSR is fundamentally about voluntaryvoluntary business behaviour, an approach involving additional business behaviour, an approach involving additional obligationsobligations and administrative requirements for and administrative requirements for business risks being business risks being counter-productivecounter-productive and would and would be contrary to the principles of better regulation. be contrary to the principles of better regulation.

Acknowledging that Acknowledging that enterprisesenterprises are the are the primary primary actorsactors in CSR, the Commission has decided that it in CSR, the Commission has decided that it can best achieve its objectives by can best achieve its objectives by workingworking more more closely closely withwith European European businessbusiness……

European Parliament European Parliament Resolution of 13 March 2007 Resolution of 13 March 2007

on CSRon CSR Concern about genuineness of Concern about genuineness of

dialogue including employeesdialogue including employees Concern about competitiveness and Concern about competitiveness and

sustainability sustainability Concern about reporting Concern about reporting Concern about global supply chains Concern about global supply chains

EU FocusEU Focus

Business contribution to delivering Business contribution to delivering sustainable growth both sustainable growth both environmentally and sociallyenvironmentally and socially

CSR defined as being about dealings CSR defined as being about dealings with stakeholders and wider society with stakeholders and wider society (corporate governance about (corporate governance about relations between management and relations between management and shareholders) shareholders)

OECD Guidelines for OECD Guidelines for Multinational Enterprises Multinational Enterprises

(revised 2000) (revised 2000) Guidelines cover:Guidelines cover: General policiesGeneral policies DisclosureDisclosure Employment and Industrial RelationsEmployment and Industrial Relations EnvironmentEnvironment Combating Bribery Combating Bribery Consumer Interests Consumer Interests Science and TechnologyScience and Technology Competition Competition TaxationTaxation

OECD approachOECD approach

Voluntary and non-bindingVoluntary and non-binding Addressed to companies Addressed to companies

operating from OR in OECD operating from OR in OECD countriescountries

National Contact Points are National Contact Points are established for informationestablished for information

OECD impactOECD impact

Encouragement to spread jobs Encouragement to spread jobs and technologyand technology

Reference to national laws – Reference to national laws – diversity persistsdiversity persists

On complaints, name and shame On complaints, name and shame onlyonly

United Nations Global Compact United Nations Global Compact (launched 2000, as amended) (launched 2000, as amended)

Human RightsHuman Rights Labour standardsLabour standards Environmental protectionEnvironmental protection Combating BriberyCombating Bribery

- embedded in corporate operations- embedded in corporate operations - subject to regular reporting- subject to regular reporting

UN GC advantages UN GC advantages

Grounded in established provisions Grounded in established provisions known from international lawknown from international law

Strong involvement of NGOs as well Strong involvement of NGOs as well as business as business

UN criticsUN critics

Problems with possible ‘bluewash’ – Problems with possible ‘bluewash’ – good public relations without real good public relations without real responsibilityresponsibility

‘‘Naming and shaming’ participants Naming and shaming’ participants whose reporting is inadequate too whose reporting is inadequate too slowslow

A ‘third way’? A ‘third way’?

Codes of Conduct as ‘soft law’, self-Codes of Conduct as ‘soft law’, self-generated by business but with generated by business but with consequences for non-compliance consequences for non-compliance

Transparency requirements – Transparency requirements – requiring reporting to enable requiring reporting to enable informed choiceinformed choice

Stakeholder participation with Stakeholder participation with business and government business and government

Responsible conduct Responsible conduct ‘required’?‘required’?

Linked in to stock exchange listing Linked in to stock exchange listing via reportingvia reporting

Linked in to obtaining of licences and Linked in to obtaining of licences and permissionspermissions

Defence to legal challenge if key CSR Defence to legal challenge if key CSR standards were followed? standards were followed?

A Market for Virtue?A Market for Virtue?

How concerned are customers about How concerned are customers about e.g. labour standards and e.g. labour standards and environmental issues?environmental issues?

How concerned are employees?How concerned are employees? Crucially today, how concerned are Crucially today, how concerned are

shareholders?shareholders? Are they well informed to choose?Are they well informed to choose?

Management ViewpointManagement Viewpoint

Charitable donations are no longer Charitable donations are no longer enough?enough?

What are the values and mission of What are the values and mission of the company?the company?

Obedience to laws of host state not Obedience to laws of host state not enough? enough?

Can the company ultimately be Can the company ultimately be profitable? profitable?