Contemporary Issues in

Management

Dr. Muhammad Atiq

Corporate Social Responsibility (CSR)
 The basic questions before discussing
CSR

What do we mean by business?

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Do businesses have any social responsibilities?

If yes, what are the social responsibilities of

businesses?
 CSR: Evolution and Definition

In modern times, the seminal work of Howard R. Bowen

Social Responsibilities of the Businessman (1953)
It refers to the obligations of businessmen to pursue those
policies, to make those decisions, or to follow those lines of
action which are desirable in terms of the objectives and
values of our society (Bowen, 1953, p. 6)
Businessmen apply social responsibility when they consider
the needs and interest of others who may be affected by
business actions. In so doing, they look beyond their firms
narrow economic and technical interests (Davis and
Blomstrom, 1966, p. 12)
 CSR: Evolution and Definition

Friedman (1962, 1970) argued that business has no social

responsibility other than generation of profits and obeying
the law

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The most widely adopted and debated definition of CSR is
given by Archie B. Carroll who defines CSR as:
The social responsibility of business encompasses the
economic, legal, ethical, and discretionary expectations that
society has of organizations at a given point in time (Carroll,
1979, p. 500)
 CSR: Evolution and Definition

Economic: generating employment and profits

Legal: obeying the law (e.g. minimum wage)
Ethical: Doing what is fair, just and right (e.g. respecting
people, providing good quality products etc.)
Discretionary: mainly philanthropic contributions like
building schools, cash donations to hospitals etc.

Most controversial of all is discretionary responsibility as its

limits are vague
 CSR: Evolution and Definition

In 1984, Freeman published his seminal work Strategic

Management: A Stakeholder Approach
In 1990s, the publications on CSR increased and it started
gaining momentum
Primarily, stakeholder theory remained the focus of CSR
publications
The late 1990s saw a great shift in the policies of corporate
managers
The adoption of CSR started with a belief that businesses
were having a negative impact on the natural environment
 CSR: Evolution and Definition

In 2002, Michael Porter and Mark Kramer introduced the

notion of Strategic Philanthropy
In 2006, they introduced the concept of Strategic CSR

Despite its significance, there is no single commonly agreed

upon definition of CSR (Turker, 2009)

CSR clearly means different things to different people in

different countries (Frynas, 2009, p. 4)
CSR: Evolution and Definition

Dahlsrud (2008) analyzed 37 definitions of CSR and concludes

that CSR has five dimensions:
Environmental dimension, social dimension, economic dimension,
stakeholder dimension and voluntariness dimension

In 2013, Atiq and Karatas-Ozkan introduced the term SCSR in

place of strategic CSR

SCSR entails linking opportunity-centred approach to CSR in

order to extract both corporate and social value simultaneously
 CSR: Evolution and Definition

Atiq (2014) defines CSR in the context of Pakistan as:

Such corporate initiatives that educate stakeholders on important
aspects of personal and business well-being, focus on the quality of
product, provide relief and assistance to employees in time of need and
contribute towards the development and uplift of society in general,
can be termed as CSR.
Critique of CSR

CSR critics claim that the corporate sector is involved in green

washing rather than CSR (Hess and Warren, 2008)

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Green washing: The practice of highlighting good eco-friendly
and social aspects of operations in order to green wash
significantly worse social and non eco-friendly aspects of CSR

Rather than focusing on key societal issues, corporations attempt

to define CSR simply in terms of philanthropic activities and
voluntary community involvement projects (Shamir, 2004; 2005)
Rationale for CSR

Businesses have to engage in CSR because government, activists,

and the media are closely scrutinizing the social and environmental
consequences of business activities (Porter and Kramer, 2006)

CSR produces reputational gains that ultimately lead to the creation

of competitive advantage (Fombrun et al., 2000)

Reputational gain = the market value of the company in excess of

its liquidation value and intellectual capital
 Rationale for CSR

CSR acts as an opportunity platform as well as helps tone down the

risks faced by the corporation (Fombrun et al., 2000)

CSR can be a vehicle for differentiation and thus competitive

advantage (Gelbmann, 2010)

Pivato et al. (2008) maintain that consumer trust, improved

reputation, increased customer satisfaction, and clear
differentiation from competitors are the benefits of engaging in
socially responsible practices
Stakeholder Theory

Stakeholder theory is the most widely used theory of

explaining corporate responses to social problems (Frynas,
2009; Atiq and Karatas-Ozkan, 2013)

Donaldson and Preston (1995, p. 67) define stakeholders as

persons or groups with legitimate interests in procedural
and/or substantive aspects of corporate activity

Clarkson (1995) defines stakeholders as persons or groups

that have, or claim, ownership, rights, or interests in a
corporation and its activities, past, present, or future (p. 106)
Stakeholder Theory

Clarkson (1995) classifies stakeholders as primary and secondary

stakeholders

Those stakeholders are primary stakeholders on whom the

corporation depends for its survival and without whose support it
cannot continue its operations
Customers, employees, suppliers, shareholders, the Government,
and the community

Secondary stakeholders are those on whom the corporation does

not depend for its survival
Media and special interest groups
Stakeholder Theory

Freemans work is considered the most influential work on

stakeholder theory

Freeman (1984) contends that organizations should operate

by taking into account the often conflicting needs and
demands of stakeholders and attempt to balance the
conflicting interests of stakeholders

Creation of value for stakeholders will lead to the creation of

value for shareholders
Stakeholder Saliency

Stakeholders possessing three attributes, namely power, legitimacy

and urgency are considered more important by managers than

other stakeholders (Mitchell et al., 1997)

Power means the ability to bring about change that one desires

Legitimacy refers to socially accepted and expected structures or

behaviours (ibid, p. 866)
Stakeholder Saliency

Urgency can be described as the degree to which

stakeholder claims call for immediate attention (ibid, p. 867)

Power and legitimacy combine to create authority and

urgency brings dynamism to the stakeholder-manager
relationship

Government is the most salient stakeholder followed by

owners and customers out of 10 relevant environmental
stakeholders in Spains manufacturing sector(Gago and
Antolin, 2004)
Balancing Stakeholder Interests

To examine and address the issue of distributing corporate

resources among the stakeholders (Reynolds et al., 2006)

Resources are not easily divisible and managers give relatively

unequal importance to stakeholders(Mitchell et al., 1997)

Corporations accord attention to only a few stakeholders because

of impractability of balancing interests, corporate priorities, focus
on short-term objectives, limited resources and competitive
pressures (Jamali, 2008)
Critique of Stakeholder Theory

Balancing stakeholder interests is impractical because the number

of those who affect or are affected by the corporation is infinite
(Sternberg, 1997)

Sternberg (1997) contends that there might be difference of

opinion among the members of the same stakeholder group as to
what constitutes benefit for them

Stakeholder theory violates the agency theory of the firm by

requiring that the assets of the firm be used for the benefit of all
stakeholders (ibid)
Critique of Stakeholder Theory

By gaining the confidence of stakeholders, managers may indulge

in pursuing items of self-interest, which may go un-noticed
(Cennamo et al., 2009)

Managers may over-invest in social initiatives, which may lead to

a deterioration in the competitive positioning of the firm (ibid)

On these grounds, Cennamo et al. (2009) claim that engaging in

stakeholder management can have invisible costs

Stakeholder theory focuses on stakeholder pressures and

prescribes a reactive behaviour for corporations (Frynas, 2009)
Theory of Strategic CSR (SCSR)

Corporations should take a pro-active stance to the needs of

society because of:
Increased Competition
Increased globalization enabled by rapid changes in
technology
Changing customer preferences

Corporations need to have an entrepreneurial focus on their social

responsibility initiatives

The goal of SCSR is to create shared value

SCSR

Strategic CSR approach originally developed by Burke and

Logsdon (1996)
Corporate social responsibility (policy, programme or process) is
strategic when it yields substantial business-related benefits to the
firm, in particular by supporting core business activities and thus
contributing to the firms effectiveness in accomplishing its
mission (Burke and Logsdon, 1996, p. 496)

SCSR has five dimensions:

Central to the firms mission, specific to the firm, makes the firm
positively visible, is pro-active and voluntary
SCSR

CSR initiatives should be aligned with the strategic goals and

resources of the corporation, in order to achieve both corporate and
social benefits (McAlister and Ferrell, 2002)

Theory of SCSR further developed by Porter and Kramer (2002;

2006; 2011)
Shared value is an outcome of engaging in SCSR practices
Stakeholders cannot understand business complexities, the trade-
offs it has to make, the competitive context and business
capabilities
CSR initiatives should be highly relevant to the operations and
strategies of the corporation
SCSR

SCSR can have benefits for the corporation in terms of good

reputation, cost reduction, increased sales, product differentiation
and attracting highly qualified employees (Husted and Salazar,
2006)

Jamali (2007) finds that two out of the eight companies examined n
Lebanon are engaged in Strategic philanthropy only

She limits her conceptualization of SCSR to strategic philanthropy

only
SCSR

Atiq and Karatas-Ozkan (2013) link opportunity-centred approach

of entrepreneurship to CSR
SCSR comprises of not only strategic philanthropy but also
meeting the unmet needs of society in an entrepreneurial manner

Bryons Thyrazol product, Nestles Nesvita, Nestle Pure Life,

PSOs fuel cards and green fuels (Atiq, 2014)
Moreover, Atiq (2014) reports education of stakeholders, providing
right quality of product and concern for employees as SCSR
initiatives
 The Sustainable Enterprise

Shift from single bottom line to triple bottom line

Sustainability implies being economically, socially and

environmentally responsible

Changed paradigm of value creation means that corporations

should create shared value

This entails engaging in the process of sustainable

entrepreneurship
 The Sustainable Enterprise

It calls for combining an opportunity-centred approach with the

social and environmental responsibilities of a business
enterprise to create shared value

By practicing sustainable entrepreneurship, a business enterprise

will become a sustainable enterprise

This requires a paradigmatic shift in the management, strategies,

processes, operations and business models of enterprises
The Discourse on Sustainability and Sustainable
Entrepreneurship

In its report to the UN in 1988, the Brundtland Commission

(named after the Norwegian PM Gro Harlem Brundtland) defined
sustainability as:
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Meeting the needs of the present without compromising the
ability of future generations to meet their own needs

To date, this is the most widely used definition of sustainability

 The Discourse on Sustainability and Sustainable
Entrepreneurship

Since then, sustainability and sustainable entrepreneurship are taken for

granted to highlight environmental issues/green products only
The debate around sustainability started due to a wide-spread
belief that businesses are having a negative impact on the natural
environment
Even today, after so much research and publications on the topic of
sustainability, people tend to conceptualize sustainability in terms of
environmental responsibility
The Discourse on Sustainability and Sustainable
Entrepreneurship
Extant research on sustainable entrepreneurship reveals that it has been
approached from the perspective of natural environment

Authors Perspective on sustainable

entrepreneurship

Menon and Menon (1997) Enviropreneurial marketing

Lober (1998); Dean and McMullen Environmental entrepreneurship

(2007)

Miles and Covin (2000) Green marketing

Menguc and Ozanne (2005) Natural environmental orientation

Definition of Sustainable Entrepreneurship

Miles et al. (2009) define sustainable entrepreneurship as the

process of leveraging innovation of an organizations products,
processes, strategies, domain, or business models to discover,
assess and ultimately exploit attractive economic opportunities
created by latent and manifest environmental problems and /or
social responsibility issues (p. 69).
Definition of Sustainable Entrepreneurship

Schaltegger and Wagner (2011) conceptualize sustainable

entrepreneurship as the realization of sustainability
innovations aimed at the mass market and providing benefit
to the larger part of society (p. 225).
Definition of Sustainable Entrepreneurship

Atiq and Karatas-Ozkan (2013) define sustainable

entrepreneurship in the following words:

Sustainable entrepreneurship is the process of embedding

sustainability in the business operations of a company. It is driven
by an entrepreneurial approach (an opportunity centred approach
innovativeness, pro-activeness and risk taking) in order to generate
shared value (p. 12).
Practical Implications of Sustainable
Entrepreneurship

Launching green products, conserving energy use, conserving

the use of natural resources, investing in the competitive context
and launching products in response to societal needs

PSOs green fuels and fuel cards, Shells New Vision retail
outlets, Bryons Thyrazol, Engro Foods Dairy Omung, Nestles
Pure Life and Nesvita