Garriga and melé

Corporate Social ResponsibilityTheories: Mapping the Territory

EUsahet Ganiga,Domenec Mele

ABSTRACT. The Corporate Social Responsibility(CSR) field presents not only a landscape of theories butalso a proliferation of approaches, which are controversial,complex and unclear. This article tries to clarify the sit-uation, "mapping the territory" by classifying the mainCSR theories and related approaches in four groups: (1)instrumental theories, in which the corporation is seen asonly an instrument for wealth creation, and its socialactivities are only a means to achieve economic results; (2)political theories, which concern them.selves with thepower of corporations in society and a responsible use ofthis power in the political arena; (3) integrative theories,in which the corporation is focused on the satisfaction ofsocial demands; and (4) ethical theories, based on ethicalresponsibilities of corporations to society. In practice,each CSR theory presents four dimensions related to

Elisabet Garriga is a PhD student in Management at IESEBusine.<:s School. University of Navarra, Spain. She holds adegree in Philosophy and another in Economics from theUniversity of Barcelona, Spain. She has taught BusitiessEthics at the University Pompcu Fabra, Barcelona, for theIntemational Education of Students (IES), a consortiumcomprised of more than 120 leading US colleges and uni-versities. Her current research focuses on the concept andimplementation of Corporate Social Responsibilities. She alsohas interest in organizational learning, entrepreneurship andinnovation.

Donteucc Mcle is Professor and Director of the Department ofBusiness Ethics at IESE Business School, University ofNavarra, Spain and chairs the bi-annual "InternationalSymposhun on Ethia, Business and Society'' held by IESE.He has a Doctorate in Industrial Engineering from thePolytechnic University of Catalonia, Spain (1974) andanother ill TIteology from the University of Navarra (1983).He has been working in the business ethia Jield since 1986and has been a member of EBEN from its beginnings. He isauthor of three books on economic and bu.<iness ethics (inSpanish) and has edited eight books (in Spanish), whichinclude different topics on business ethics. In addition, he haswritten 20 study cases (IESE Publishing) and 60 articles andchapters in this field.

profits, political performance, social demands and ethicalvalues. The findings suggest the necessity to develop anew theory on the business and society relationship,which should integrate these four dimensions.

KEY WORDS; corporate social responsibility, corporateresponsiveness, corporate citizenship, stakeholder management, corporate social performance, issues management,sustainable development, the common good

Introduction

Since the second half of the 20th century a longdebate on corporate social responsibility (CSR) hasbeen taking place. In 1953, Bowen (1953) wrote theseminal book Social Responsibilities of the Businessman.Since then there has been a shift in terminology fromthe social responsibility of business to CSR. Addi-tionally, this field has grown significantly and todaycontains a great proliferation of theories, approachesand tenninologies. Society and business, social issuesmanagement, public policy and business, stakeholdermanagement, corporate accountabihty are just someof the terms used to describe the phenomena relatedto corporate responsibility in society. Recently, re-newed interest for corporate social responsibihtiesand new alternative concepts have been proposed,including corporate citizenship and corporate sus-tainability. Some scholars have compared these newconcepts with the classic notion of CSR (see vanMarrewijk, 2003 for corporate sustainability; andMatten et al., 2003 and Wood and Lodgson, 2002for corporate citizenship).

Furthermore, some theories combine differentapproaches and use the same temiinology with dif-ferent meanings. This problem is an old one. It was30 years ago that Votaw wrote; "corporate socialresponsibility means something, but not always the

fournal of Business Ethics 53: 51-71,2004.© 2()t)4 Kluwer Academic Publishers. Printed in the Netherlands.

52 Elisabet Ganiga and Domenec Mele

same thing to everybody. To some it conveys theidea of legal responsibility or hability; to others, itmeans socially responsible behavior in the ethicalsense; to still others, the meaning transmitted is thatof 'responsible for' in a causal mode; many simplyequate it with a charitable contribution; some take itto mean socially conscious; many of those who em-brace it most fervently see it as a mere synonym forlegitimacy in the context of belonging or beingproper or valid; a few see a sort of fiduciary dutyimposing higher standards of behavior on business-men than on citizens at large" (Votaw, 1972, p. 25).Nowadays the panorama is not much better. Carroll,one of the most prestigious scholars in this disciphne,characterized the situation as "an eclectic field withloose boundaries, multiple memberships, and differ-ing training/perspectives; broadly rather than fo-cused, multidisciplinary; wide breadth; brings in awider range of literature; and interdisciplinary"(Carroll, 1994, p. 14). Actually, as Carroll added(1994, p. 6), the map of the overall field is quite poor.

However, some attempts have been made to ad-dress this deficiency. Frederick (1987, 1998) out-lined a classification based on a conceptual transitionfrom the ethical-philosophical concept of CSR(what he calls CSRl), to the action-oriented man-agerial concept of social responsiveness (CSR2). Hethen included a normative element based on ethicsand values (CSR3) and finally he introduced thecosmos as the basic normative reference for socialissues in management and considered the role ofscience and religion in these issues (CSR4). In amore systematic way, Heald (1988) and Carroll(1999) have offered a historical sequence of the maindevelopments in how the responsibihries of businessin society have been understood.

Other classifications have been suggested based onmatten related to CSR, such as Issues Management(Wartick and Rude, 1986; Wood, 1991a) or theconcept of Corporate Citizenship (Alanan, 1998). Analternative approach is presented by Brummer (1991)who proposes a classification in four groups of theo-ries based on six criteria (motive, relation to profits,group affected by decisions, type of act, type of effect,expressed or ideal interest). These classifications, inspite of their valuable contribution, are quite limitedin scope and, what is more, the nature of the rela-tionship between business and society is rarely situatedat the center of their discussion. This vision could be

questioned as CSR seems to be a consequence of howthis relationship is undentood (Jones, 1983; McMa-hon, 1986; Preston, 1975; Wood, 1991b).

In order to contribute to a clarification of tbe fieldof business and society, our aim here is to map theterritory in which most relevant CSR theories andrelated approaches are situated. We udll do so byconsidering each theory from the perspective of howthe interaction phenomena between business andsociety are focused.

As the starting point for a proper classification, weassume as hypothesis that the most relevant CSRtheories and related approaches are focused on oneof the following aspects of social reality: economics,politics, social integration and ethics. The inspirationfor this hypothesis is rooted in four aspects that,according to Parsons (1961), can be observed in anysocial system: adaptation to the environment (relatedto resources and economics), goal attainment (re-lated to politics), social integration and patternmaintenance or latency (related to culture and val-ues). This hypothesis permits us to classify thesetheories in four groups:

1. A first group in which it is assumed that thecorporation is an instrument for wealth crea-

'• tion and that this is its sole social responsibil-ity. Only the economic aspect of theinteractions between business and society isconsidered. So any supposed social activity isaccepted if, and only if, it is consistent withwealth creation. This group of theories couldbe call ins tm met I tat theories because theyunderstand CSR as a mere means to the end ofprofits.

2. A second group in which the social power ofcorporation is emphasized, specifically in itsrelationship with society and its responsibihtyin the poUtical arena associated with thispower. This leads the corporation to acceptsocial duties and rights or pardcipate in certainsocial cooperation. We will call this grouppolitical theories.

3. A third group includes theories which considerthat business ought to integrate social de-mands. They usually argue that business de-pends on society for its continuity and growthand even for the existence of business itselfWe can term this group integrative theories.

Corporate Social Responsibility 53

3. A fourth group of theories understands that therelationship between business and society isembedded with etliical values. This leads to avision of CSR from an ethical perspective andas a consequence, finns ought to accept socialresponsibilities as an ethical obligation aboveany other consideration. We can term thisgroup ethical theories.

Throughout this paper we vnH present the mostrelevant theories on CSR and related matters, tryingto prove that they are all focused on one of theforementioned aspects. We will not explain eachtheory in detail, only what is necessary to verify ourhypothesis and, if necessary, some complementaryinfonnation to clarify what each is about. At the sametime, we will attempt to situate these theories andapproaches within a general map describing the cur-rent panorama regarding the role of business in society.

Instrumental theories

In this group of theories CSR is seen only as astrategic tool to achieve economic objectives and,ultimately, wealth creation. Representative of thisapproach is the well-known Friedman view that"the only one responsibility of business towardssociety is the maximization of profits to the share-holders within the legal framework and the ethicalcustom of tbe country" (1970)."

Instrumental theories have a long tradition andhave enjoyed a wide acceptance in business so fer. AsWindsor (2001) has pointed out recently, "a leit-motiv of wealth creation progressively dominates themanagerial conception of responsibility" (Windsor,2001, p. 226).

Concern for profits does not exclude taking intoaccount the interests of all who have a stake in thefirm (stakeholders). It has been argued that in certainconditions the satisfaction of these interests cancontribute to maximizing the shareholder value(MitcheU et al., 1997; Odgen and Watson, 1999).An adequate level of investment in philanthropy andsocial activities is also acceptable for the sake ofprofits (MeWilliams and Siegel, 2U01). We wUl re-turn to these points afterwards.

In practice, a number of studies have been carriedout to determine the correlation between CSR and

corporate financial performance. Of these, anincreasing number show a positive correlation be-tween the social responsibihty and financial perfor-mance of corporations in most cases (Frooman,1997; Griffin and Mahon, 1997; Key and Popkin,1998; Roman et ai, 1999; Waddock and Graves,1997) However, these findings have to be read withcaurion since such correlation is difficult to measure(Griffin, 2000; Rowley and Berman, 2000).

Three main groups of instrumental theories canbe identified, depending on the economic objectiveproposed. In the first group the objective is themaximization of shareholder value, measured by theshare price. Frequently, this leads to a short-tennprofits orientation. The second group of theoriesfocuses on the strategic goal of achieving competi-tive advantages, which would produce long-tcnnprofits. In both cases, CSR is only a question ofenlightened self-interest (Keim, 1978) since CSRsare a mere instrument for profits. The third is relatedto cause-related marketing and i.s very close to thesecond. Let us examine briefly the philosophy andsome variants of these groups.

Maximizing the shareholder value

A well-known approach is that which takes thestraightforward contribution to maximizing theshareholder value as the supreme criterion to evaluatespecific corporate social activity. Any investment insocial demands that would produce an increase of theshareholder value should be made, acting withoutdeception and fraud. In contrast, if the social demandsonly impose a cost on the company they should berejected. Friedman (1970) is clear, giving an exampleabout investment in the local community: "It will bein the long run interest of a corporation that is a majoremployer in a small conununity to devote resourcesto providing amenities to that community or toimproving its government. That makes it easier toattract desirable employees, it may reduce the wagebill or lessen losses from pilferage and sabotage or haveother worthwhile effects." So, the socio-economicobjectives are completely separate from the economicobjectives.

Currently, this approach usually takes the share-holder value maximization as the supreme referencefor corporate decision-making. The Agency Theory

54 Elisabet Garriga and Domenec Mele

(Jensen and Meckling, 1976; Ross, 1973) is the mostpopular way to articulate this reference. However,today it is quite readily accepted that shareholdervalue maximization is not incompatible with satis-fying certain interests of people with a stake in thefimi (stakeholders). In this respect, Jensen (2(J00) hasproposed what he calls 'enlightened value maximi-zation'. This concept specifies long-tenn valuemaximization or value-seeking as the firm's objec-tive. At the same time, this objective is employed asthe criterion for making the requisite tradeoSsamong its stakeholders.

Strategies for achieving competitive advantages

A second group of theories are focused on how toallocate resources in order to achieve long-tennsocial objectives and create a competitive advantage(Husted and Allen, 2000). In this group three ap-proaches can be included: (a) social investments incompetitive context, (b) natural resource-based viewof the firm and its dynamic capabilities and (c)strategies for the bottom of the economic pyramid.

a) Social investments in a competitive context. Porter and

Kramer (2002) have recently applied the well-knownPorter model on competitive advantage (Porter.1980) to consider investment in areas of what theycall competitive context.'^ The authors argue thatinvesting in philanthropic activities may be the onlyway to improve the context of competitive advantageof a firm and usually creates greater social value thanindividual donors or government can. The reasonpresented - the opposite of Freidnian's position - isthat the finii has the knowledge and resources for abetter understanding of how to solve some problemsrelated to its mission. As Burke and Lodgson (1996)pointed out, when philanthropic activities are closerto the company's mission, they create greater wealththan others kinds of donations. That is what happens,e.g., when a telecommunications company is teach-ing computer network administration to students ofthe local community.

Porter and Kramer conclude, "philanthropicinvestments by members of cluster, either individ-ually or collectively, can have a powerful etfect onthe cluster competitiveness and the performance ofall its constituents companies" (2002, pp. 60-61).

b) Natural resource-based view of the firm and dynamic

capabilities. The resource-based view of the firm(Barney, 1991; Wernerfelt, 1984) maintains that theability of a firm to perform better than its compet-itors depends on the unique interplay of human,organizational, and physical resources over time.Traditionally, resources that are most hkely to leadto competitive advantage are those that meet fourcriteria: they should be valuable, rare, and inimita-ble, and the organization must be organized to de-ploy these resources effectively.

The "dynamic capabilities" approach presents thedynamic aspect of the resources; it is focused on thedrivers behind the creation, evolution and recom-bination of the resources into new sources of com-petitive advantage (Teece et al., 1997). So dynamiccapabilities are organizational and strategic routines,by which managers acquire resources, modify them,integrate them, and recombine them to generatenew value-creating strategies. Based on this per-spective, some authors have identified social andethical resources and capabilities which can be asource of competitive advantage, such as the processof moral decision-making (Petrick and Quinn,2001), the process of perception, deliberation andresponsiveness or capacity of adaptation (Litz, 1996)and the development of proper relationships withthe primary stakeholders: employees, customers,suppliers, and communities (Harrison and St. John,1996; Hillman and Keim, 2001).

A more complete model of the 'Resource-BasedView of the Firm' has been presented by Hart(1995). It includes aspects of dynamic capabilitiesand a link with the external environment. Hart ar-gues that the most important drivers for new re-source and capabihties development vrill beconstraints and challenges posed by the naturalbiophysical environment. Hart has developed hisconceptual fi-amework with three main inter-connected strategic capabilities: pollution preven-tion, product stewardship and sustainabledevelopment. He considers as critical resourcescontinuous inprovement, stakeholder integrationand shared vision.

c) Strategies for the bottom of the economic pyramid.

Traditionally most business strategies are focused ontargeting products at upper and middle-class people,but most of the world's population is poor or lower-


middle class. At the bottom of the economic pyra-mid there may be some 4000 million people. Onrefiection. certain strategies can serve the poor andsimultaneously make profits. Prahalad (2002), ana-lyzing the India experience, has suggested somenund-set changes for converting the poor into activeconsumers. The first of these is seeing the poor as anopportunity to innovate rather than as a problem.

A specific means for attending to the bottom ofthe economic pyramid is disruptive innovation.Disruptive innovations (Christensen and Overdorf,2000; Christensen et al., 2001) are products or ser-vices that do not have the same capabilities andconditions as those being used by customers in themainstream markets; as a result they can be intro-duced only for new or less demanding applicationsamong non-traditional customers, with a low-costproduction and adapted to the necessities of thepopulation. For example a teleconununicadonscompany inventing a small cellular telephone systemwith lower costs but also with less service adapted tothe base of the economic pyramid.

Disruptive innovations can improve the social andeconomic conditions at the "base of the pyramid"and at the same time they create a competitiveadvantage for the firms in telecommunications,consumer electronics and energy production andmany other industries, especially in developingcountries (Hart and Christensen, 2002; Prahalad andHammond, 2002).

Cause-related marketing r ••-

Cause-related marketing has been defined as "theprocess of formulating and implementing marketingactivities that are characterized by an offer from thefirm to contribute a specified amount to a designatedcause when customers engage in a revenue-providingexchanges that satisfy organizational and individualobjectives" (Varadarajan and Menon, 1988, p. 60).Its goal then is to enhance company revenues andsales or customer relationship by building the brandthrough the acquisition of, and association with theethical dimension or social responsibility dimension(Murray and Montanari, 1986; Varadarajan andMenon, 1988). In a way, it seeks product differen-tiation by creating socially responsible attributes thataffect company reputation (Smith and Higgins,

2000). As McWilliams and Siegel (2001, p. 120) havepointed out: "support of cause related marketingcreates a reputation that a finn is reliable and honest.Consumers typically assume that the products of areliable and honest finn will be of high quality". Forexample, a pesticide-tree or non-animal-testedingredient can be perceived by some buyers as pref-erable to other attributes of competitors' products.

Other activities, which typically exploit cause-related marketing, are classical musical concerts, artexhibitions, golf tournaments or literacy campaigns.All of these are a fomi of enlightened self-interestand a win-win situation as both the company andthe charitable cause receive benefits: "the brandmanager uses consumer concern for businessresponsibility as a means for securing competitiveadvantage. At the same time a chantable cause re-ceives substantial fmancial benefits" (Smith andHiggins, 2000, p. 309).

Political theories

A group of CSR theories and approaches focus oninteractions and connections between business andsociety and on the power and position of business andits inherent responsibility. They include both politi-cal considerations and political analysis in the CSRdebate. Although there are a variety of approaches,two major theories can be distinguished: CorporateConstimtionahsm and Corporate Citizenship.

Corporate constitutionalism

Davis (1960) was one of the first to explore the roleof power that business has in society and the socialimpact of this power . In doing so, he introducesbusiness power as a new element in the debate ofCSR. He held that business is a social institution andit must use power responsibly. Additionally, Davisnoted that the causes that generate the social powerof the firm are not solely intemal ot the finn but alsoexternal. Their locus is unstable and constantlyshifting, from the economic to the social forum andfrom there to the pohtical forum and vice versa.

Davis attacked the assumption of the classicaleconomic theory of perfect competition that pre-cludes the involvement of the firm in society besides


the creation of wealth. The firm has power toinfluence the equilibrium of the market and there-fore the price is not a Pareto optimum reflecting thefree will of participants with perfect knowledge ofthe market.

Davis formulated two principles that express howsocial power has to be managed: "the social powerequation" and "the iron law of responsibility". Thesocial power equation principle states that "socialresponsibilities of businessmen arise from theamount of social power that they have" (Davis,1967, p. 48). The iron law of responsibility refers tothe negative consequences of the absence of use ofpower. In his own words: "Whoever does not usehis social power responsibly will lose it. In the longmn those who do not use power in a manner whichsociety considers responsible will tend to lose itbecause other groups eventually will step in to as-sume those responsibilities" (1960, p. 63). So if afirm does not use its social power, it will lose itsposition in society because other groups will occupyit, especially when society demands responsibilityfrom business (Davis, 1960).

According to Davis, the equation of social power-responsibility has to be understood through thefiinctional role of business and managers. In thisrespect, Davis rejects the idea of total responsibilityof business as he rejected the radical free-marketideology ot no responsibility of business. The limitsof functional power come from the pressures ofdifferent constituency groups. This "restricts orga-nizational power in the same way that a govern-mental constitution does." The constituency groupsdo not destroy power. Rather they define conditionsfor its responsible use. They channel organizationalpower in a supportive way and to protect otherinterests against unreasonable organizational power(Davis, 1967, p. 68). As a consequence, his theory iscalled "Corporate Constitutionalism".

Integrative social contract theory

Donaldson (1982) considered the business andsociety relationship from the social contract tradi-rion, mainly from the philosophical thought ofLocke. He assumed that a sort of implicit socialcontract between business and society exists. This

social contract implies some indirect obligations ofbusiness towards society. This approach wouldovercome some limitarions of deoncological andteleological theories appHed to business.

Afterwards, Donaldson and Dunfee (1994,1999) extended this approacb and proposed an"Integrative Social Contract Theory" (ISCT) inorder to take into account the socio-cultural contextand also to integrate empirical and nonnative aspectsof management. Social responsibilities come fromconsent. These scholars assumed two levels of con-sent. Firstly a theoretical macrosocial contractappealing to all rational contractors, and secondly, areal microsocial contract by members of numerouslocalized communities. According to these authors,this theory offers a process in which the contractsamong industries, departments and economic sys-tems can be legirimate. In this process the partici-pants will agree upon the ground rules defining thefoundation of economics that will be acceptable tothem.

The macrosocial contract provides rules forany social contracting. These rules are calledthe "hyper-norms"; they ought to take prece-dence over other contracts. These hyper-norms areso fiindamental and basic that they "are discerniblein a convergence of religious, political and philo-sophical thought" (Donaldson and Dunfee, 2000, p.441). The microsocial contracts show explicit orimplicit agreements that are binding within anidentified community, whatever this may be:industry, companies or economic systems. Thesemicrosocial contracts, which generate 'authenticnorms', are based on the attitudes and behaviors ofthe members of the no mi-gen era ting communityand, in order to be legitimate, have to accord withthe hyper-nonns.

Corporate citizenship- ;»

Although the idea of the firm as citizen is not new(Davis, 1973) a renewed interest in this conceptamong practitioners has appeared recently due tocertain facton that have had an impact on thebusiness and society relationship. Among these fac-tors, especially worthy of note are the crisis of theWelfare State and the globalization phenomenon.These, together with the deregulation process and

Corporate Sodal Responsibility 57

decreasing costs with technological improvements,have meant that some large multinational companieshave greater economical and social power than somegovernments. The corporate citizenship frameworklooks to give an account of this new reality, as wewill try to explain here.

!n the 80s the term "corporate citizenship" wasintroduced into the business and society relationshipmainly through practitioners (Altman and Vidaver-Cohen, 2000). Since the late 1990s and early 21stcentury this term has become more and more pop-ular in business and increasing academic work hasbeen carried out (Andriof and Mclntosh, 2001;Matten and Crane, in press).

Although the academic reflection on the conceptof "corporate citizenship", and on a similar onecalled 'the business citizen', is quite recent (Matten etal., 2003; Wood and Logsdon, 2002; among others),this notion has always connoted a sense of belongingto a community. Perhaps for this reason it has been sopopular among managers and business people, be-cause it is increasingly clear that business needs to takeinto account the community where it is operating.

The term "corporate citizenship" cannot have thesame meaning for everybody. Matten et al. (2003)have distinguished three views of "corporate citi-zenship": (1) a limited view, (2) a view equivalent toCSR and (3) an extended view of corporate citi-zenship, which is held by them. In the limited view"corporate citizenship" is used in a sense quite closeto corporate philanthropy, social investment orcertain responsibilities assumed towards the localcommunity. The equivalent to CSR view is quitecommon. Carroll (1999) believes that "Corporatecitizenship" seems a new conceptualization of therole of business in society and depending on whichway it is defined, this notion largely overlaps withother theories on the responsibility of business insociety. Finally, in the extended view ot corporatecitizenship (Matten et al., 2003, Matten and Crane,in press), corporations enter the arena of citizenshipat the point of government failure in the protectionof citizenship. This view arises from the fact thatsome corporations have gradually come to replacethe most powerful institution in the traditionalconcept of citizenship, namely government.

The temi "citizenship", taken from political sci-ence, is at the core of the "corporate citizenship"notion. For Wood and Logsdon "business citizen-

ship cannot be deemed equivalent to individualcitizenship-instead it derives from and is secondaryto individual citizenship" (2002, p. 86). Whether ornot this view is accepted, theories and approaches on"corporate citizenship" are focused on rights,responsibilities and possible partnerships of businessin society.

Some theories on corporate citizenship are basedon a social contract theory (Dion, 2001) as devel-oped by Donaldson and Dunfee (1994, 1999), al-though other approaches are also possible (Woodand Logsdon, 2002).

in spite of some noteworthy differences in cor-porate citizenship theories, most authors generallyconverge on some points, such as a strong sense ofbusiness responsibility towards the local community,partnerships, which are the specific ways of formal-izing the willingness to improve the local commu-nity, and for consideration for the environment.

The concern for local community has extendedprogressively to a global concern in great part due tothe very intense protests against globalization, mainlysince the end of the 90s. This sense of global corporatecitizenship led to the joint statement "Global Cor-porate Citizenship - the Leadership Challenge forCEOs and Boards", signed by 34 of the world largestmultinational corporations during the World Eco-nomic Forum in New York in January 2002. Subse-quently, business with local responsibility and, at thesame time, being a global actor that places emphasis onbusiness responsibilities in a global context, have beenconsidered as a key issue by some scholars (Tichy et al.,1997; Wood and Lodgson, 2002).

Integrative theories

This group of theories looks at how business inte-grates social demands, arguing that busmess dependson society for its existence, continuity and growth.Social demands are generally considered to be theway in which society interacts with business andgives it a certain legitimacy and prestige. As a con-sequence, corporate management should take intoaccount social demands, and integrate them in such away that the business operates in accordance withsocial values.

So, the content of business responsibility is limitedto the space and time of each situation depending on


the values of society at that moment, and comesthrough the company's functional roles (Preston andPost, 1975). In other words, there is no specificaction that management is responsible for perform-ing throughout time and in each industry. Basically,the theones of this group are focused on thedetection and scanning of, and response to, the socialdemands that achieve social legitimacy, greater socialacceptance and prestige.

Issues management

Social responsiveness, or responsiveness in the face ofsocial issues, and processes to manage them within theorganization (Sethi, 1975) was an approach whicharose in the 70s. In this approach it is crucial to con-sider the gap between what the organization's relevantpublics expect its performance to be and the organi-zation's actual perfonnance. These gaps are usuallylocated in the zone that Ackemian (1973, p. 92) callsthe "zone of discretion" (neither regulated nor illegalnor sanctioned) where the company receives someunclear signals from the environment. The firmshould perceive the gap and choose a response inorder to close it (Ackemian and Bauer, 1976).

Ackemian (1973), among other scholars, analyzedthe relevant factors regarding the intemal structuresof organizations and integration mechanisms tomanage social issues within the organization. Theway a social objective is spread and integrated acrossthe organization, he termed "process of institution-alization". According to Jones (1980, p. 65), "cor-porate behavior should not in most cases be judgedby the decisions actually reached but by the processby which they are reached". Consequently, heemphasized the idea of process rather than principlesas die appropriate approach to CSR issues.

Jones draws an analogy with the political processassessing that the appropriate process of CSR shouldbe a fair process where all interests have had theopportunity to be heard. So Jones has shifted thecriterion to the inputs in the decision-making pro-cess rather than outcomes, and has focused more onthe process of implementation of CSR activities thanon the process of conceptualization.

The concept of "social responsiveness" was soonwidened with the concept "Issues Management".The latter includes the former but emphasizes the

process for making a corporate response to socialissues. Issues management has been defined byWartick and Rude (1986, p. 124) as "the processesby which the corporation can identify, evaluate andrespond to those social and political issues whichmay impact significantly upon it". They add thatissues management attempts to minimize "surprises"which accompany social and political change byserving as an early warning system for potentialenvironmental threats and opportunities. Further, itprompts more systematic and effective responses toparticular issues by serving as a coordinating andintegrating force within the corporation. Issuesmanagement research has been influenced by thestrategy field, since it has been seen as a special groupof strategic issues (Greening and Gray, 1994), or apart of international suidies (Brewer, 1992). That ledto the study of topics related with issues (identifi-cation, evaluation and categorization), formalizationof stages of social issues and management issue re-sponse. Other factors, which have been considered,include the corporate responses to media exposure,interest group pressures and business crises, as well asorganization size, top management commitment andother organizational tactors.

Tlie principle of public responsibility

Some authors have tried to give an appropriatecontent and substance to help and guide the firm'sresponsibility by limiting the scope of the corporateresponsibility. Preston and Post (1975, 1981) criti-cized a responsiveness approach and the purelyprocess approach (Jones, 1980) as insufficient. In-stead, they proposed "the principle of publicresponsibility". They choose the term "public" ra-ther than "social", to stress the importance of thepublic process, rather than personal-morality viewsor narrow interest groups defining the scope ofresponsibilities.

According to Preston and Post an appropriateguideline for a legitimate managerial behavior isfound within the framework of relevant publicpolicy. They added that "public policy includes notonly the literal text of law and regulation but also thebroad pattern of social direction reflected in publicopinion, emerging issues, formal legal requirementsand enforcement or implementation practices"


(Preston and Post, 1981, p. 57). This is the essence ofthe principle of public responsibility.

Preston and Post analyzed the scope of managerialresponsibiUty in terms of the "primary" and "sec-ondary" involvement of the fmn in its social envi-ronment. Primary involvement includes the essentialeconomic task of the firm, such as locating andestablishing its facilities, procuring suppliers, engag-ing employees, carrying out its production functionsand marketing products. It also includes legalrequirements. Secondary involvements come asconsequence of the primary. They are, e.g., careerand earning opportunities for some individuals,which come from the pnmary activity of selectionand advancement of employees.

At the same time, these authors are in favor ofbusiness intervention in the public policy processespecially with respect to areas in which specificpublic policy is not yet clearly established or it is intransition: "It is legitimate - and may be essential -that affected firms participate openly in the policyfonnation" (Preston and Post, 1981, p. 61).

In practice, discovering the content of the prin-ciple of public responsibility is a complex and difficulttask and requires substantial management attention.As Preston and Post recognized, "the content ofpublic policy is not necessarily obvious or easy todiscover, nor is it invariable overtime" (1981, p. 57).According to this view, if business adhered to thestandards of perfonnance in law and the existingpublic policy process, then it would be judgedacceptably responsive in terms of social expectations.

The development of this approach was parallel tothe study of the scope regarding business-govem-ment relationship (Vogel, 1986). These studies fo-cused on government regulations - their formulationand implementation - as well as corporate strategiesto influence these regulations, including campaigncontributions, lobbying, coalition building, grass-roots organization, corporate public affairs and therole of public interest and other advocacy groups.

Stakeholder management

Instead ot tocusing on generic responsiveness, spe-cific issues or on the public responsibility principle,the approach called "stakeholder management" isoriented towards "stakeholden" or people who af-

fect or are affected by corporate policies and prac-tices. Although the practice of stakeholdermanagement is long-established, its academicdevelopment started only at the end of 70s (see, e.g.,Sturdivant, 1979). In a seminal paper, Emshoff andFreeman (1978) presented two basic principles,which underpin stakeholder management. The firstis that the central goal is to achieve maximum overallcooperation between the entire system of stake-holder groups and the objectives of the corporation.The second states that the most efficient strategies formanaging stakeholder relations involve efforts,which simultaneously deal with issues affectingmultiple stakeholders.

Stakeholder management tries to integrate groupswith a stake in the firm into managerial decision-making. A great deal of empirical research has beendone, guided by a sense of pragmatism. It includestopics such as how to determine the best practice incorporate stakeholder relations (Bendheim et al.,1998), stakeholder salience to managers (Agle andMitchell, 1999; Mitchell et al., 1997), die impact ofstakeholder management on financial performance(Berman et al., 1999), the influence of stakeholdernetwork stmctural relations (Rowley, 1997) andhow managers can successfully balance the com-peting demands of various stakeholder groups (Og-den and Watson, 1999).

In recent times, corporations have been pressuredby non-governmental organizations (NGOs), activ-ists, communities, goverrmients, media and otherinstimtional forces. These groups demand what theyconsider to be responsible corporate practices. Nowsome corporations are seeking corporate responses tosocial demands by establishing dialogue with a widespectrum of stakeholders.

Stakeholder dialogue helps to address the questionof responsiveness to the generally unclear signals re-ceived from the envirormient. In addition, this dia-logue "not only enhances a company's sensitivity toits environment but also increases the environmentsundentanding of the dilemmas facing the organiza-tion" (Kaptein and Van Tulder, 2003 p. 208).

Corporate social perfonnance

A set of theories attempts to integrate some of theprevious theories. The corporate social perfonnance

60 Eiisabet Ganiga and Domenec Mele

(CSP) includes a search for social legitimacy, withprocesses for giving appropriate responses.

Carroll (1979), generally considered to haveintroduced this model, suggested a model of "cor-porate performance" with three elements: a basicdefinition of social responsibihty, a hsting of issues inwhich social responsibility exists and a specificationof the philosophy of response to social issues. Carrollconsidered that a definition of social responsibility,which fiilly addresses the entire range of obligationsbusiness has to society, must embody the economic,legal, ethical, and discretionary categories of businessperformance. He later incorporated his four-partcategorization into a "Pyramid of Corporate SocialResponsibihties" (Carroll, 1991). Recently, Sch-wartz and Carroll (2003) have proposed an alterna-tive approach based on three core domains(economic, legal and ethical responsibilities) and aVenn model firamework. The Venn frameworkyields seven CSR categories resulting from theoverlap of the three core domains.

Wartich and Cochran (1985) extended the Carrollapproach suggesting that corporate social involve-ment rests on the principles of social responsibility,the process of social responsiveness and the pohcy ofissues management. A new development came withWood (1991b) who presented a model of corporatesocial perfonnance composed of principles of CSR,processes ot corporate social responsiveness andoutcomes of corporate behavior. The principles otCSR are understood to be analytical forms to befilled with value content that is operationalized. Theyinclude: pnnciples of CSR, expressed on institu-tional, organizational and individual levels, processesof corporate social responsiveness, such as environ-mental assessment, stakeholder management and is-sues management, and outcomes of corporatebehavior including social impacts, social programsand social policies.

Ethical theories

There is a fourth group of theories or approachesfocus on the ethical requirements that cement therelationship between business and society. They arebased on principles that express the right thing to door the necessity to achieve a good society. As mainapproaches we can distinguish the following.

Normative stakeholder theory

Stakeholder management has been included withinthe integrative theories group because some authorsconsider that this fonn of management is a way tointegrate social demands. However, stakeholdermanagement has become an ethically based theorymainly since 1984 when Freeman wrote StrategicManagement: a Stakeholder Approach. In this book, betook as starring point that "managers bear a fiduciaryrelationship to stakeholders" (Freeman, 1984, p. xx),instead of having exclusively fiduciary dudes towardsstockholders, as was held by the conventional viewof the finn. He understood as stakeholders thosegroups who have a stake in or claim on the firm(suppliers, customers, employees, stockholders, andthe local community). In a more precise way,Donaldson and Preston (1995, p. 67) held that thestakeholder theory has a normative core based ontwo major ideas (1) stakeholders are persons orgroups with legitimate interests in procedural and/orsubstantive aspects of corporate activity (stakeholdersare identified by their interests in the corporation,whether or not the corporation has any corre-sponding functional interest in them) and (2) theinterests of all stakeholders are of intrinsic value (thatis, each group of stakeholders merits considerationfor its own sake and not merely because of its abilityto further the interests of some other group, such asthe shareowners).

Following this theory, a socially responsible firmrequires simultaneous attention to the legiti-mate interests of all appropriate stakeholders andhas to balance such a multiphcity of interests andnot only the interests of the finn's stockhold-ers. Supporters of nomiative stakeholder theoryhave attempted to justify it through arguments takenfrom Kantian capitalism (Bow ie, 1991; Evan andFreeman, 1988), modern theories of property anddistributive justice (Donaldson and Preston, 1995),and also Libertarian theories with its notions offreedom, rights and consent (Freeman and Philips,2002).

A generic fonnulation of stakeholder theory is notsufficient. In order to point out how corporationshave to be governed and how managers ought to act,a nowtative core ot ethical principles is required(Freeman, 1994). To this end, different scholars haveproposed differing normative ethical theories. Free-


man and Evan (1990) introduced Rawlsian princi-ples. Bowie (1998) proposed a combination ofKantian and Rawlsian grounds. Freeman (1994)proposed the doctrine of fair contracts and Phillips(1997, 2003) suggested introducing the fairnessprinciple based on six of Rawls' characteristics of theprinciple of fair play: mutual benefit, justice, coop-eration, sacrifice, free-rider possibility and voluntaryacceptance of the benefits of cooperative schemes.Lately, Freeman and Philips (2002) have presentedsix principles for the guidance of stakeholder theoryby combining Libertarian concepts and the Faimessprinciple. Some scholars (Burton and Dunn, 1996;Wicks et al., 1994) proposed instead using a "fem-inist ethics" approach. Donaldson and Dunfee(1999) hold their 'Integrative Social Contract The-ory'. Argandofia (1998) suggested the common goodnotion and Wijnberg (2000) an Aristotelian ap-proach. From a practical perspective, the normativecore of which is risk management. The ClarksonCenter for Business Ethics (1999) has published a setof Principles of Stakeholder Management.

Stakeholder nonnative theory has suffered criticaldistortions and friendly misinterpretations, whichFreeman and co-workers are trying to clarity (Phil-lips et al., 2003). In practice, this theory has beenapplied to a variety of business fields, includingstakeholder management for the business and societyrelationship, in a number of textbooks Some of thesehave been republished several times (Carroll andBuchholtz, 2002; Post et al, 2002; Weiss, 2003;among others).

In short, stakeholder approach grounded in ethi-cal theories presents a different perspective on CSR,in which ethics is central.

Universal rights

Human rights have been taken as a basis for CSR,especially in the global market place (Cassel, 2001).In recent years, some human-rights-based approachesfor corporate responsibility have been proposed. Oneof them is the UN Global Compact, which includesnine principles in the areas of human rights, labor andthe environment. It was first presented by the UnitedNations Secretary- General Kofi Annan in an addressto The World Economic Forum in 1999. In 2000 theGlobal Compact's operational phase was launched at

UN Headquarters in New York. Many companieshave since adopted it. Another, previously presentedand updated in 1999, is The Global Sullivan Princi-ples, which has the objective of supporting eco-nomic, social and political justice by companieswhere they do business. The certification SA8000(www.cepaa.org) for accreditation of social respon-sibility is also based on human and labor rights. De-spite using different approaches, all are based on theUniversal Declaration of Human Rights adopted bythe United Nations general assembly in 1948 and onother international declarations of human rights, la-bor rights and environmental protection.

Although for many people universal rights are aquestion of mere consensus, they have a theoreticalgrounding, and some moral philosophy theories givethem support (Donnelly, 1985). It is worth men-tioning the Natural Law tradition (Simon, 1992),which defends the existence of natural human rights(Maritain, 1971).

Sustainable development

Another values-based concept, which has becomepopular, is "sustainable development". Althoughthis approach was developed at macro level ratherthan corporate level, it demands a relevant corporatecontribution. The term came into widespread use in1987, when the World Commission on Environ-ment and Development (United Nations) publisheda report known as "Bnitland Report". This reportstated that "sustainable development" seeks to meetthe needs of the present without compromising theability to meet the future generation to meet theirown needs" (World Commission on Environmentand Development, 1987, p. 8). Although this reportoriginally only included the environmental factor,the concept of "sustainable development" has sinceexpanded to include the consideration of the socialdimension as being inseparable from development.In the words of the World Business Council forSustainable Development (2000, p. 2), sustainabledevelopment "requires the integration of social,environmental, and economic considerations tomake balanced judgments for the long term".

Numerous definitions have been proposed forsustainable development (see a review in Gladwinand Kennelly 1995, p. 877). In spite of which, a


content analysis of the main definitions suggests thatsustainable development is "a process of achievinghuman development in an inclusive, connected,equiparable, prudent and secure manner." (Gladwinand Kennelly 1995. p. 876).

The problem conies when the corporadon has todevelop the processes and implement strategies tomeet the corporate challenge of corporate sustain-able development. As Wheeler et al. (2003, p. 17)have stated, sustainability is "an ideal toward whichsociety and business can condnually strive, the waywe strive is by creadng value, creadng outcomes thatare consistent with the ideal of sustainability alongsocial environmental and economic dimensions".'

However, some suggestions have been proposedto achieve corporate ecological sustainability(Shrivastava, 1995; Stead and Stead, 2000; amongothers). A pragmatic proposal is to extend the tra-didonal "bottom line" accounting, which showsoverall net profitability, to a "triple bottom line"that would include economic, social and environ-mental aspects of corporadon. Van Marrewijk andWerre (2003) maintain that corporate sustainabilityis a custom-made process and each organizadonshould choose its own specific ambition and ap-proach regarding corporate sustainability. Thisshould meet the organizadon's aims and intendons,and be ahgned with the organizadon strategy, as anappropriate response to the circumstances in whichthe organization operates.

The common good approach

This third group of approaches, less consoh-dated than the stakeholder approach but with po-tendal, holds the common good of society asthe referential value for CSR (Mahon and McGo-wan, 1991; Velasquez, 1992). The common goodis a classical concept rooted in Aristotelian tradi-tion (Smith. 1999), in Medieval Scholasdcs(Kempshall, 1999), developed philosophically(Maritain, 1966) and assumed into Catholic socialthought (Carey, 2001) as a key reference for businessethics (Alford and Naughton, 2002; Mele, 2002;Pope John Paul II, 1991, #43). This approachmaintains that business, as with any other socialgroup or individual in society, has to contribute tothe common good, because it is a part of society. In

this respect, it has been argued that business is amediadng insdtution (Fort, 1996, 1999). Businessshould be neither hannful to nor a parasite onsociety, but purely a posidve contributor to the well-being of the society.

Business contributes to the common good indifferent ways, such as creadng wealth, providinggoods and services in an efficient and fair way, at thesame dme respecting the dignity and the inalienableand fundamental rights of the individual. Further-more, it contributes to social well-being and a har-monic way of hving together in just, peaceflil andfriendly condidons, both in the present and in thefuture (Mele, 2002).

To some extent, this approach has a lot in commonwith both the stakeholder approach (Argandona,1998) and sustainable development, but the philo-sophical base is different. Although there are severalways of understanding the nodon of common good(Sulmasy, 2001). the interpretation based on theknowledge of human nature and its fulfillment seemsto us pardcularly convincing. It permits the circum-navigation of cultural reladvism, which is frequentlyembedded in some definidons of sustainable devel-opment.

The common good nodon is also very close to theJapanese concept of Kyosei (Goodpaster, 1999;Kaku, 1997; Yamaji, 1997), understood as "hvingand working together for the common good'',which, together vidth the principle of human dig-nity, is one of the founding principles of the popular"The Caux Roundtable Principles for Business"(wv/w.cauxroundtable.org).

Discussion

The preceding descripdon, summed up on Table I,leads to the conclusion that the hypothesis consid-ered in the introducdon about the four basic focusemployed by CSR theories and related approaches isadequate. Consequently, most of the current theo-ries related to CSR could be broadly classified asinstrumental, polidcal, integrative and ethical theo-ries.

Donati (1991), a contemporary sociologist, hasreviewed many aspects of the work of Parsons. Hesuggests that adaptadon, goal attairunent, integradonand latency presented by Parsons (1961) as rigid

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functions, have to be understood as four intercon-nected dimensions present in every social phenom-enon. This suggests that the concept of business andsociety relationship must include these four aspectsor dimensions and some connection among themmust exist. This must be reflected in every theory. Insome authors, such as Friedman, it is relatively easyto discover these dimensions and connections, inother theories it is not so easy.

In fact, although the main concern in the Fried-man view (Friedman, 1970; Friedman and Fried-man, 1962) is for wealth creation, as we havepointed out above, this concern is rooted in certaincultural values regarding the free market, privateproperty and the fact that wealth creation is good forsociety. This shows us that certain values are present,even though they are frequently questioned. At thesame time, he accepts the rules of the free market,laws and ethical customs in each place. Friedmanand, above all, Jensen (2000) also accept the inte-gration of some social demands into the company ifit is profitable in the long-tenn. Regarding politics,underpinning the Friedman view there is a func-tional conception of the social with clear politicalconsequences. Society is understood as a mechanismwith nionoflinctional groups, each with a concretepurpose. Thus, the exclusive purpose of businessorganizations is the creation of wealth. It is held thatbusiness operating in a free market is the best way toallocate scarce resources because society can achievean optimum situation in the sense of Pareto (ParetoOptimum). This means that the satisfaction of al!people involved in the situation is the greatest pos-sible or, at least, the situation satisfies most of themwithout being detrimental for others. However, inthe presence of externalities, when decision-makersdo not take into account secondary effects of theiractions that burden or benefit others, the market isinefficient and the equilibrium is not a Pareto opti-mum. When externalities appear, another system ofsociety, the pohtical system, should act. The politicalsystem must confront these externalities throughtaxes, regulation and minimum package of rights.So, business contributes to the welfare of societythrough the market mechanism and in compliancewith the law. Of course, outside business, themanager can spend any quantity of personal moneyon social activities according to his or her per-sonal preferences. However, the social objectives


and demands come under business consider-ation only through the law applied by the politicalsystem.

A contrasting theory, in which the four dimen-sions mentioned and their connections are not soeasy to discover, is "the principle of public respon-sibility" of Preston and Post (1975). However, thesedimensions are implicit. In fact, this theory presup-poses a certain conception of society and values. Thepolitical dimension is clear, since public policy isassumed as basic criterion. Regarding wealth crea-tion, undoubtedly the application of this theorywould have consequences for profit generation.Actually, these scholars recognize that what they callsecondary relationships (related to secondaryinvolvements) "as essential to effective managementover the long term" (Preston and Post, 1981, p. 57).

It is not our aim to review all theories described,but what has been said regarding the four dimensionsin the approaches of Friedman and Preston and Post,could probably be extended to other theories. If ourintuition is correct, a proper concept of the businessand society relationship should include these fouraspects or dimensions, and some mode of integrationof them. Although most theories studied do notmake it explicit, one can appreciate a tendency toovercome this deficit.

In fact, in the last few years, some theories havebeen proposed in which two or even more of thesedimensions and their interconnection have beenconsidered. That is the case, e.g., of Wood's Cor-porate Social Performance model (1991b). Thismodel basically focuses on integrating social de-mands, however, it also considers institutionallegitimacy, accepting that "society grants legitimacyand power to business" (Davis, 1973, p. 314). In thismanner. Wood introduces both political and inte-grative dimensions while economic and ethicaldimensions are implicit. Regarding the latter, thestated principles of corporate responsibihty assumedare based on social control rather than on prescrip-tive responsibility coming from ethics. This is pre-cisely the criticism Swanson (1995) made of Wood'smodel. As an alternative, Swanson (1995, 1999)proposed a derived model in which she tried toinclude the ethical dimension explicitly, through atheory of values. Following Frederick (1992) sheaccepted that business organizations have responsi-bilities related to economizing and ecologizing.

Furthermore executive decision-making shouldforego power-seeking in favor of directing the firmto economize and ecologize.

More recently. Wood and Lodgson (2002),dealing with the corporate or business citizen model,have introduced the ethical dimension in theirmodel. They focus on the political dimension butalso incorporate universal rights into their vision ofcorporate behavior.

Theories on CSR, which take long-term profitsas the main goal nomially, use an empirical meth-odology and are descriptive, although explicidy theyalso present a conditional prescription. Their genericstatement might take the fonn: "if you want tomaximize profits you must assume CSR in the wsyproposed by this theory". In contrast, ethical theo-ries are prescriptive and use a normative methodol-ogy. Integrating empirical and nonnative aspects ofCSR, or economic and ethics, is great challenge.Some authors (Brandy, 1990; Etzioni, 1988; Quinnand Jones, 1995; and Swanson, 1999; Trevino andWeaver, 1994 among others) have considered thisproblem, but it is far from being resolved. This lackof integration has been denounced as the cause ofthe lack of a paradigm for the business and societyfield (Swanson, 1999).

Finally, the current situation presents many com-peting ethical theories. This very often producesconfusion and skepticism. The problem is especiallyserious in the case of ethical theories, and even withineach group of theories. Considering, for instance, thestakeholder normative theory. As we have explainedabove, this can be developed using a great number ofdifferent ethical theories. Although each of thesetheories states universal principles, in practice, theglobal effect is one of unabashed relativism: "If youare Utilitarian, you'll do this, if you are Kantian you'lldo that." (Solomon, 1992, p. 318).

Conclusion

We can conclude that most of current CSR theoriesare focused on four main aspects: (1) meetingobjectives that produce long-term profits, (2) usingbusiness power in a responsible way, (3) integratingsocial demands and (4) contributing to a good societyby doing what is ethically correct. This permits us toclassify the most relevant theories on CSR and related


concepts into four groups, which we have calledinstrumental, pohtical, integrative and value theories.Most of the theories considered do not make explicitthe impHcations of each specific approach for theaspects considered in others groups of theories.

Further research could analyze these fourdimensions and their connecdon in the most rele-vant theories and consider their contributions andlimitations. What seems more challenging, however,is to develop a new theory, which would overcomethese hniitations. This would require an accurateknowledge of reahty and a sound ethical foundadon.

Notes

Parsons considers the existence of four interconnectedproblems in any action system: (1) the problem mobiliz-ing of resources from the environment and then distrib-utir^ them throughout the system, which requiresadaptadon to environment; (2) the problem of establish-ing priorities among system goals and mobilizing systemresources for the attainment of the goals; (3) the problemof coordinadng and maintaining viable relationshipsamong system units and (4) the problem of assuring thatthe actors in the social system display the appropriatevalues. Thi.s entails motivation and other characteristics(pattern maintenance) and dealing with the internaltensions and strain of the actors in the social system(tension management). That means preserving the basicstructure of the system and adjusting to changingcondidons within the framework that the basic structureprovides. According to Parsons these problems necessitatefour requisites or imperatives for the maintenance of asocial system: adaptation (A), goal attainment (G),integration (I) and pattern inaintenance or latency (L).

Some years before, T. Leavitt, a Harvard BusinessSchool professor, expressed this approach in an even moreradical way: "Corporate welfare makes good sense if itmakes good economic sense - and not infrequendy itdoes. But if something does not make economic sense,sentiment or idealism ought not to let it in the door"(Leavitt, 1958, p. 42).* According to Porter and Kramer (2002), a comped-tive context consists of four interrelated elements ofthe local business environment that shape potentialproductivity. The first element is the factor condition,which involves employee education, natural resources,high quality technological institudons and physical infra-structure. The second element is related to demand

conditions; that is to say, how the firm can influence thequality and the size of local market by, for example,developing educated and demanding customers. Thethird, the context for strategy and rivalry involves howthe firm can invest in incendves and norms that rulecompetidon as for example all the efforts for reducingcorruption, preventing the formation of cartels andopening markets. The last is the firm's investment inrelated and supporting industries, for example, strength-ening the relationship with suppliers of services, compo-nents and machinery.

According to Davis, "markets leave business theoret-ically without any social power and hence, no socialresponsibility (balanced zero equation). This zero equa-tion ot no power and no responsibility is a propertheoredcal model for pure competition, but it is theoryonly and it's inconsistent with the power realities ofmodem organizations. They posses such a great inidadve,economic assets, and power in their acdons do have socialeffects" (Davis, 1967. p. 49).

In fact, different models have been constructed in orderto explain how and why partnerships are buUt and how todetennine, measure, evaluate partnerships (Andrioff,2001; Zadek, 2001).

That is not the only problem. According to Gla-dwin and Kennelly (1995, p. 876), the concept ofsustainable development is "fuzzy, elusive, contestableand/or ideologically controversial" and with multipleobjectives and ingredients, complex interdependenciesand considerable moral thickness. But, in spite ofeverything, the concept is becoming more and morepopular and has introduced an important element to theCSR debate.

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Department of Business Ethics,IESE Business School,University of Navarra,

Au. Pearson, 21,08034 Barcelona,

SpainE-mail: [email protected], [email protected]

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