Corporate social responsibility


Corporate social responsibility refers to companies conducting their core operations in a responsible and sustainable way to create a positive corporate social impact. It is a form of international private business self-regulation which aims to contribute to societal and environmental goals by reducing harm, for instance by reducing a company's carbon footprint or increasing positive outcomes for all stakeholders. It is related to the company's commitment to be ethical in its production, employment, and investment practices.
While CSR often takes the form of a philanthropic, activist, or charitable nature by supporting volunteering through pro bono programs, community development, and by administering monetary grants to non-profit organizations for the public benefit, corporations have been seen shifting to a holistic and strategic approach. Strategic CSR is a long-term approach to creating a net positive social impact based on brand alignment, stakeholder integration and ethical behaviour. Moreover, some scholars and firms are using the term "creating shared value", an extension of CSR which allows for social obligations to be met while the company reaps a profit.
For publicly listed companies, CSR often takes the form of environmental, social, and governance practices and reports, but many companies have pledged to go beyond that. In some countries, companies are mandated or incentivized by governments to measure and report their impact on society, the community, and/or the environment. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. Further, CSR has been considered a form of corporate self-regulation, shifting from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels.
When focusing on corporate environmental responsibility, most firms use the term "sustainability" to explore the effort the company makes to reduce environmental harm such as by reducing waste and emissions, or by making a contribution through climate action and climate activism. Other companies focus more on their social impact, activism, or corporate citizenship. It is, therefore, important to know that CSR reports can take any of these names.
Businesses engage in CSR for strategic, ethical, or instrumental reasons. From a strategic perspective, CSR can contribute to firm performance, particularly when CSR is embedded straticially in the company, aligned with its brand, and occurs when the company utilises its market position to create impact Doing so, could lead to higher levels of financial and employee performance. These benefits accrue by increasing positive public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies encourage the company to make a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others. From an ethical perspective, some businesses will adopt CSR policies and practices because of the ethical beliefs of senior management: for example, the CEO of outdoor-apparel company Patagonia, Inc. argues that harming the environment is ethically objectionable.
Proponents argue that corporations increase long-term profits by operating with a CSR perspective, while critics argue that CSR distracts from businesses' economic role. A 2000 study compared existing econometric studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact were due to flawed empirical analysis and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes. Critics have questioned the "lofty" and sometimes "unrealistic expectations" of CSR, or observed that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. In line with this critical perspective, political and sociological institutionalists became interested in CSR in the context of theories of globalization, neoliberalism, and late capitalism.

Definition

Since the 1960s, corporate social responsibility has attracted attention from a range of businesses, academics and stakeholders and been referred to by a number of other terms, including "corporate sustainability", "sustainable business", "corporate conscience", "corporate citizenship", "purpose", "social impact", "conscious capitalism", and "responsible business".
A wide variety of definitions have been developed, but with little consensus. Part of the definition problem has arisen because of the different interests represented. A business person may define CSR as a business strategy, an NGO activist may see it as 'greenwash' while a government official may see it as voluntary regulation. "In addition, disagreement about the definition will arise from the disciplinary approach." For example, while an economist might consider the director's discretion necessary for CSR to be implemented a risk of agency costs, a law academic may consider that discretion to be an appropriate expression of what the law demands from directors. In the 1930s, two law professors, A. A. Berle and Merrick Dodd, famously debated how directors should be made to uphold the public interest: Berle believed there had to be legally enforceable rules in favor of labor, customers and the public equal to or ahead of shareholders, while Dodd argued that powers of directors were simply held on trust.
Corporate social responsibility was defined by Sheehy as "international private business self-regulation". Sheehy examined a range of different disciplinary approaches to defining CSR. The definitions reviewed included the economic definition of "sacrificing profits", a management definition of "beyond compliance", institutionalist views of CSR as a "socio-political movement," and the law's focus on directors' duties. Further, Sheehy considered Archie B. Carroll's description of CSR as a pyramid of responsibilities, namely, economic, legal, ethical, and philanthropic responsibilities. While Carroll was not defining CSR, but simply arguing for the classification of activities, Sheehy developed a definition differently following the philosophy of science—the branch of philosophy used for explaining phenomena.
Carroll extended corporate social responsibility from the traditional economic and legal responsibility to ethical and philanthropic responsibility in response to the rising concerns on ethical issues in businesses. A review of 14,523 articles found that stakeholder perspective is the most prevalent dimension of corporate social responsibility. This view is reflected in the Business Dictionary that defines CSR as "a company's sense of responsibility towards the community and environment in which it operates. Companies express this citizenship through their waste and pollution reduction processes, by contributing educational and social programs, and by earning adequate returns on the employed resources."

Consumer perspectives

Most consumers agree that while achieving business targets, companies should engage in CSR efforts at the same time. Most consumers believe companies doing charity work will receive a positive response. Somerville also found that consumers are loyal and willing to spend more on retailers that support charity. Consumers also believe that retailers selling local products will gain loyalty. Smith shares the belief that marketing local products will gain consumer trust. However, environmental efforts are receiving negative views, given the belief that this would affect customer service. Oppewal et al. found that not all CSR activities are attractive to consumers. They recommended that retailers focus on one activity. Becker-Olsen found that if the social initiative done by the company is not aligned with other company goals it will have a negative impact. Mohr et al. and Groza et al. also emphasise the importance of reaching the consumer.

Approaches

The technology company Hewlett-Packard, based in California's Silicon Valley, codified their vision of corporate social responsibility as The HP Way in 1957, detailing their duty "To honor our obligations to society by being an economic, intellectual and social asset to each nation and each community in which we operate." The company organized or supported many community activities, with employees voluntarily spending unpaid personal time helping to improve society.
Some commentators have identified a difference between the Canadian, the Continental European, and the Anglo-Saxon approaches to CSR. It has been described that for Chinese consumers a socially responsible company makes safe, high-quality products; for Germans it provides secure employment; in South Africa it makes a positive contribution to social needs such as health care and education. Even within Europe, the discussion about CSR is very heterogeneous.
A more common approach to CSR is corporate philanthropy. This includes monetary donations and aid given to nonprofit organizations and communities. Donations are made in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding political contributions and commercial event sponsorship.
Another approach to CSR is to incorporate the CSR strategy directly into operations, such as procurement of Fair Trade tea and coffee.
Creating shared value, or CSV, is based on the idea that corporate success and social welfare are interdependent. The Harvard Business Review article "Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility" provided examples of companies that have developed deep linkages between their business strategies and CSR. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but emphasizes the opportunities for competitive advantage from building a social value proposition into corporate strategy. CSV gives the impression that only two stakeholders are essential – shareholders and consumers.
Many companies employ benchmarking to assess their CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor initiatives, measuring and evaluating the impact those policies have on society and the environment, and how others perceive competitor CSR strategy.
Meehan, Meehan and Richard developed a model known as the 3C-SR model, published in a frequently cited article in 2006, which aimed to offer "a new strategic approach to corporate responsibility". Their model sought to fill the gap between corporate social responsibility definitions and strategy, which the authors perceived to be an issue, and to provide guidance to managers on connecting businesses with ethically-aware consumers.
An approach described by Tóth Gergely and published by the Hungarian Association for Environmentally Aware Management refers to "Deep CSR" and the role of a "Truly Responsible Enterprise". Gergely's definition of "Deep CSR" is the behaviour displayed by a "Truly Responsible Enterprise", which:
  • sees itself as a part of the system, not a completely individual economic actor concerned only about maximizing its profit,
  • recognises unsustainability as the greatest challenge of our age,
  • accepts that businesses and enterprises have to work on solutions according to their economic weight,
  • honestly evaluates its weight and part in causing the problems,
  • takes essential steps – systematically, progressively, and focused – towards a more sustainable world.
The five principles of the TRE are:
  1. minimal transport
  2. maximal fairness
  3. zero economism
  4. maximum middle size
  5. product or service falling to the most sustainable 30%.