Corporate Social responsibility:
Corporate social responsibility is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business
monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.CSR is the acknowledgement by companies that they should be

accountable not only for their financial performance, but for the impact of their activities on society and the environment. Business is already accountable for its activities over the diverse strands that now come under the 'CSR' umbrella such as human resources and environmental issues, sustainable development, waste management, health and safety practices, through a wide range of existing guidelines at national, EU and global levels. But it is important to distinguish between these base-line standards and CSR activity which is voluntary, business-driven and often goes well beyond what is required by legislation.
The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and

development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. CSR is the deliberate inclusion of Public Interest into corporate decision-making that is the core business of the company or firm. The honoring of a triple bottom line is: people, planet, profit. which perhaps is another approach of expressing the triple-bottom-line model mentioned above. If this is so, then it is reasonable to assume that corporate entities of all shapes and forms should consider issues that relate to the 3Ps as important to them for various reasons. People are the lifeblood of a corporate entity; without people, corporate entities will not exist. The planet also is the abode of people and corporate entities. If the planet is made uninhabitable because of corporate actions, then enterprises and people will similarly be wiped off the face of the Earth. And finally profit is a necessary condition as it enables companies to expand their activities and hopefully behave responsibly.


CSR form of corporate philanthropy has been practiced as early as the late 1800s at least in the USA (Sethi. many companies published so-called social reports to demonstrate socially responsible behavior (Signitzer and Prexl. 1977). Hence. this concept refers to practices in which organizations address societal needs by taking responsibility for the impact of their actions towards all stakeholders as well as the environment in which they operate. and strategic objectives of corporations should be compatible with those of society and the community. 1979. not to mention the interests of stakeholders. insures to a great extent the long-term viability of the corporations. It aligns business operations with social values. etc. there must be congruence in purpose between and among these entities. it has been pointed out that the roots of modern CSR date back to the 1930s. 1999). 2. Like other established concepts associated with sustainability. in turn. 2006)The modern era of CSR began with the publication of the first definitive book Social Responsibilities of the Businessman by Howard Bowen in 1953 (Carroll. In general terms. CSR is a broad concept as it combines economics. However. and alternative themes were established. more empirical research began to emerge. CSR definitions were developed and expanded primarily during the 1960s and proliferated during the 1970s while in the 1980s. visions. and business management. Corporations are now viewed as integral parts of society whose role is to help society develop which. The values. this is the essence of corporate philanthropy or corporate social responsibility. 2008). In simple terms. communications. (Friedman and Miles.Corporate social responsibility (CSR) is an organization s obligation to be accountable to all its stakeholders in all its operations and activities with the aim of achieving sustainable development not only in the economic dimension but also in the social and environmental dimensions. History of Corporate Social Responsibility: CSR has been around for a long time as its history can be traced back to ancient Greece according to an article published by Nicholas Ebserstadt in 1973. In the early 1970s. environment. It commonly involves organizations voluntarily adopting management practices to improve their social and environmental standards so to mitigate their negative impacts on the environment and 2 . societal studies.

and discretionary expectations that society has of organizations at a given point in time . then legal and then ethical. CSR aims at aligning organization s goals and societal constituency s expectations and values . while most recently emphasis has been on discretionary responsibilities. This order is according to his model in term of the role in the evolution of importance. For him the social responsibility of business encompasses the economic. ethical. Angelidis and Ibrahim. p. legal. Carroll (1979.society. CSR seeks to increase and promote the prosperity of an organization while improving higher living standards in society. Lerner and Fryxell.economic. environmental and social. early focus was on economics. (1997) states that CSR is all expectations that people have from a company s ability and willingness to follow the rules and regulations to perform just and responsibly towards all stakeholders. 500) has majorly contributed to the field of CSR. For Johnson (1971) social responsibility in reference to companies concerns the balancing of a multiplicity of stakeholder interests. Another definition provided by MMI Report. (1988) suggest that CSR describes the extent to which organizational outcomes are consistent with societal values and expectations. (1993) define CSR as corporate social actions and practices that aim to satisfy social needs. 3 .

Ethical organizations take courses of action that are considered fair. 1997). Donating to charities in the form of a percentage of pre-tax earnings provides a concrete measure of the social effort of corporate leaders (Brønn and Vrioni. Mullen. discretionary duties include most CSR activities. Finally. Other economic responsibilities involve providing responsibly priced goods and services.3. public relations and philanthropy. 1988). Some of these activities are briefly described below as adapted from Brønn and Vrioni. legal. encompassing citizenship. Organizations have economic. (2001). 1997). Companies must abide by the laws that govern and regulate business activities. 1988. CSR Activities in Business: Most commonly CSR encompasses different activities that are professed to be undertaken by organizations following the path of sustainability in their operations. they are responding to societal needs and expectations regarding social disclosure to stakeholders (Lerner & Fryxell. To the extent that corporations provide data on their societal activities. ethical and discretionary duties. This can be justified by how industrial companies comply with regulations as to eliminating 4 . (2001): Corporate philanthropy: This activity is about performance beyond an organization legal obligation which can have a significant impact on the communities within the network in which an organization operates (Lerner & Fryxell. Business strategists have the economic responsibility to maximize the company's profits. Social disclosure: This activity usually involves the organization s performance in providing information on initiatives and efforts undertaken with respect to socio-ecological sustainability. providing jobs and paying taxes. Company s Environmental record: Pro-social positioning of many organizations is identified with their environmental record such as compliance to environment policies related to air and water (Mullen. right and socially proper. Ethical duties go beyond economic and legal requirements.

learning and development and internal and external communications. is only the tip of a value proposition that can go much deeper a value proposition that can directly help the corporation enter new markets. encourage employee volunteer activities and have greater local economic impact (tax revenues. Some even claim that their CSR activities have increased their share prices by attracting incremental new investments from the growing number of Social Investment Funds. Community involvement: Organizations involved highly in their communities appear to make more charitable contributions. now recognize that reputations for social responsibility can burnish the company s brand. 2001). 1997). for example. in Scandinavia it is only natural that the state interferes in more or less all aspects of life particularly in economic life. however. attract new customers. This. CSR as value creator: Many companies. (2001) state that a fairly regulated society. and protecting biodiversity. improve economies in existing markets and create totally new business opportunities. This is best exemplified in Scandinavian countries that are so-called welfare states.persistent chemicals. recognition. offsetting greenhouse gases emissions. 4. employee benefits and advancement. in their January 2011 Harvard Business Review article. Michael Porter and Mark Kramer. jobs. educational programs and investments) (Bronn and Vrioni. Workforce diversity: Including women and minorities in leadership positions is perceived as aspects of an organization s humanistic contribution to equality in the culturally diverse workplace (Mullen. In fact. etc. aid in recruiting employees and improve employee commitment to the organization. argue that 5 . corporate social responsibility involves compliance with laws and regulations set by the government as a part of the state duties. However. As Bronn and Vrioni. in addition to rewards.

Corporate Social Responsibility as Business Strategy: For any company. as with IBM s Corporate Service Corps which deploys teams of high-potential employees on 30-day projects to help emerging countries address some of their most pressing societal needs. It is about choosing a unique position doing things differently from competitors in a way that lowers costs or better 6 . for example. Porter and Kramer view Shared Value Creation as the next evolution of CSR.companies must recast narrowly defined CSR programs around a proposition for creating shared value an approach designed to deliver as much value to the company as to society. a category of offerings that is expected to grow at twice the rate of total company revenues over the next five years. as in the $18 billion that General Electric derived from the sale of Ecomagination products in 2009. as in the $250 million savings (a $2. y Big revenue gains. They insist that a structured approach to Shared Value Creation (the latest non-intuitive buzzword for efforts intended to deliver both business and societal value) can. by the very process of creating societal value. strategy must go beyond best practices. 5. It is a form of self-interested behavior that creates economic value to the company. they also view it as the next evolution of capitalism a more sophisticated form of capitalism that arises not out of charity but of a deeper understanding of competition and economic value creation. A form of behavior that will also help mend badly frayed corporate and capitalist reputations and facilitate a more productive relationship between business and governments. y Big improvements to employee leadership development and retention. yield: y Big cost savings.71 return on every dollar it spent on these programs from 2002 through 2008) that Johnson & Johnson attributed to its employee wellness programs.

so many companies adopt corporate social responsibility (CSR) programs as a means of business strategy. 7 . and how customers perceive competitor CSR strategy. and effectiveness. Many opportunities to pioneer innovations to benefit both society and a company s own competitiveness can arise in the product offering and the value chain. customers and members of society. many executives take on CSR programs as part of a company's overall ethical goal. implementation. Most of the companies have a variety of people affected by the actions of the organization. is the first in a series of innovative car models that have produced competitive advantage and environmental benefits. However. Toyota has created a unique position with customers and is well on its way to establishing its technology as the world standard. These principles apply to a company s relationship to society as readily as to its relationship to its customers and rivals. After a comprehensive study of competitor strategy and an internal policy review performed. Strategic CSR involves both inside-out and outside-in dimensions working in tandem. the hybrid electric/gasoline vehicle.serves a particular set of customer needs. Toyota s response to concerns over automobile emissions is an example. Prius has given Toyota a lead so substantial that Ford and other car companies are licensing the technology. Each of these interest groups has a stake in the social responsibility of the business. Voted 2004 Car of the Year by Motor Trend magazine. a comparison can be drawn and a strategy developed for competition with CSR initiatives. investors. Pleasing these stakeholders is good for business. Toyota s Prius. Benchmarking involves reviewing competitor CSR initiatives. Strategic CSR moves beyond good corporate citizenship and mitigating harmful value chain impacts to mount a small number of initiatives whose social and business benefits are large and distinctive. It is here that the opportunities for shared value truly lie. Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy. Hybrid engines emit as little as 10% of the harmful pollutants conventional vehicles produce while consuming only half as much gas. These stakeholders include employees. as well as measuring and evaluating the impact that those policies have on society and the environment.

This was before the era of stakeholder theory which was popularized in the 1980s. employees.Strategic CSR also unlocks shared value by investing in social aspects of context that strengthen company competitiveness. Friedman (1970) concludes. 6. customers. there are two classes of stakeholders. and benefit society. A symbiotic relationship develops: The success of the company and the success of the community become mutually reinforcing. the more closely tied a social issue is to the company s business. strategies. He argues that members 8 . suppliers. Stakeholder Strategy: Before the issue of CSR became topical around the world. governments and communities. But Clarkson (1995) notes that organizations do not operate for the sole benefit of one stakeholder group. Anything other than that. Friedman (1962. Freeman defined a stakeholder as any group or individual who can affect or is affected by the achievement of the organization s objectives. which is to make as much profit as possible while conforming to the basic rules of society. Typically. these corporations like other citizens pay their taxes and should therefore expect governments to expend the revenues they receive from taxes in the provision of social benefits for all taxpayers. Stakeholder is a complex and multifarious concept as it involves different philosophical underpinnings and diverse implications for management. the greater the opportunity to leverage the firm s resources and capabilities. 1970) argues that what CSR requires corporate entities to do is actually the responsibility of governments. it was the interest of the shareholders/owners (the providers of capital) that was wrongly perceived as being of paramount importance by corporate managers who were and are still their appointed agents (Jensen and Meckling 1976). Initially. The first class he refers to as primary stakeholders: shareholders. and so on (Friedman and Miles. policymaking. 1970) had posited that organizations owe no responsibility to the larger publics but only to their owners the shareholders and that their responsibility has only one element. Strategic decision makers understand that each group of stakeholders has specific needs and those needs occasionally conflict. is pure socialism which is not what capitalism is all about. 2006). eminent scholars such as Levitt (1958) and Friedman (1962.

This is reflected in the premise of corporate sustainability whose purpose is to increase both financial and social capital. and value. Employees are also primary stakeholders who have both legal and moral claims on the organization. etc. Many social commentators also suggest that companies have a direct responsibility to future generations and to the natural environment. This should be embedded in the internal and external strategies. Organizations also have specific responsibilities to their customers in terms of producing and marketing goods and services that offer functionality. An organization has legal and moral obligations to its owners. Diverging groups of stakeholders are likely to reconcile over CSR initiatives. safety. These obligations include. and to the other companies with whom they do business. More to the point. to local communities. forthrightness. CSR involves conducting business operations in compliance with all applicable laws and regulations as well as ethical standards including integrity. The second class he refers to as secondary stakeholders: they influence or are influenced by the entity s activities but are not engaged directly in transactions with it and are therefore not so important for its survival but could still be a source of unwanted bad publicity. CSR helps overcome this conflict by offering an ethical focal point for divergent goals. which can be greatly affected by the actions of resident organizations and thus have a direct stake in their operations. 1970). It would therefore be futile for the entity in question to ignore the interests of all but one of its stakeholders as advocated by Levitt (1958) and Friedman (1962.of this class are so important in the life of a business entity that the firm would cease to exist without their continuing support. CSR encompasses many dimensions and principles on which organizations should focus on to demonstrate the congruence between the practice and its communication/reporting to stakeholders. A few corporations which were criticized for encouraging sweatshop practices in some South-East Asian countries discovered this to their cost a few years ago. honesty. holism and fairness. but are not limited to. actions and practices because it is vital for organizations to preserve a positive relationship with 9 . That said shareholder value seems to be the focal point when adopting CSR as a policy for an organization. which may not help every stakeholder. but contribute to all of society. attempting to ensure that owners receive an adequate return on their investment.

e. However. Benefits and Costs of CSR: Businesses that participate in CSR strategy must determine the cost and the return on investment. professional development.internal stakeholders. Overall. and rewards. The practice of CSR can benefit organizations in multiple ways. employees. etc). decrease costs because of 10 . Further to this point. it might reduce the quality and informational usefulness of CSR reporting. offering CSR media exposure for charity at a discounted cost. promotions. lack or failing to do so. The organization should be aware of the laws and regulations that protect and promote proper competition so to ensure legal and responsible conduct between its internal (i. Free CSR includes participating in sponsored events such as cause walks and collecting for food or clothing drives. by nature. Additionally. Many charitable donations are tax deductible. managers) and external stakeholders. recruitment. Communicating CRS at corporate level is deemed to be far more advantageous to corporate value creation. credibility and its transparency. recognition and motivation.e. such as discrimination.. create an environment where human needs can be met. structural integration. improper act or behavior that might inadvertently affect others. the organization should not encourage or advocates questionable or unethical business practices. and promote a safe physical and healthy working conditions. etc). It is the organization s duty to create an environment that is fairly and collegially supportive to its internal stakeholders. Otherwise. Operating with a perspective that is broader than the short-sighted approach of maximizing profits can create qualitative measures and innovative solutions that will create value and sustain the business. advancement. Environmental initiatives may. CSR policy includes that the organization should provide equal opportunities (i. the organization should continuously analyze its operations from a CSR perspective and adopt guidelines that seek to promote collaboration and communication with other stakeholders through multi-faceted partnerships with the vision to motivate them to work towards achieving CSR objectives and espousing similar practices. disparity. promote culturally diverse workplace (equality. CSR reporting needs to based on measures that ensure its integrity. recruitment inequality or backhanders and any other illegal.

which surveyed more than 1.less consumption or recycling. Environmentalism is spurred by an international concern for conservation. and Rynes found a correlation between social/environmental performance and financial performance. Strategists often choose social initiatives that match with their organization's culture or branding. The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise. balanced scorecards). Some companies may implement CSR-type values without a clearly defined team or programs KPMG's International Survey of Corporate (Social) Responsibility Reporting 2005. presents the following top ten motivators of CSR:  Economic considerations  Ethical considerations  Innovation and learning  Employee motivation  Risk management or risk reduction  Access to capital or increased shareholder value  Reputation or brand  Market position or share  Strengthened supplier relationships  Cost savings Social Initiatives: Business strategists looking for CSR opportunities have a variety of social initiatives open to them.600 companies worldwide. Orlitzky. Deming's Fourteen Points.g. and are difficult to quantify. Schmidt.. businesses may not be looking at short-run financial returns when developing their CSR strategy. the goodwill that CSR spreads is as hard to measure as awareness from marketing campaigns. fight poverty and encourage education. and many companies choose to take a "green" stance. Other charities help cure diseases.. but is likely to bring in new business and encourage customer loyalty. though there is a large body of literature exhorting business to adopt measures beyond financial ones (e. CSR may be based within the human resources. In all cases. business development or public relations departments of an organisation or may be given a separate unit reporting to the CEO or in some cases directly to the board. 11 . However.

Several major brands. corporations are only responsible to their shareholders and not to society as a whole. Some people perceive CSR as in-congruent with the very nature and purpose of business. companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers.Brand differentiation: In crowded marketplaces. such as The Co-operative Group. Although they accept that corporations should obey the laws of the countries within which they work. CSR can also help improve the perception of a company among its staff. Business service organizations can benefit too from building a reputation for integrity and best practice. Human resources: A CSR programme can be an aid to recruitment and retention particularly within the competitive graduate student market. and having a comprehensive policy can give an advantage. and that since only people can have social responsibilities. diversity. longevity and infant mortality have been created by economic growth attributed to free enterprise. CSR can play a role in building customer loyalty based on distinctive ethical values. The Body Shop and American Appear are built on ethical values. CSR has been found to encourage customer orientation among frontline employees. CSR can also be driven by employees' personal values. By taking substantive voluntary steps. particularly when staff can become involved through payroll giving. they can persuade governments and the wider public that they are taking issues such as health and safety. and indeed a hindrance to free trade. Those who assert that CSR is contrasting with capitalism and are in favor of neoliberalism argue that improvements in health. they assert that corporations have no other obligation to society. Milton Friedman have argued that a corporation's purpose is to maximize returns to its shareholders. License to operate: Corporations are keen to avoid interference in their business through taxation or regulations. fundraising activities or community volunteering. 12 . or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment. Potential recruits often ask about a firm's CSR policy during an interview.

For example. so all economic entities have an obligation to society . CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement. More recently. Moreover.Many religious and cultural traditions hold that the economy exists to serve human beings. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. in McDonald's Restaurants v Morris & Steel. May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and conditions'[23]and true that 'if one eats enough McDonald's food. the petroleum giant BP(well-known for its high-profile advertising campaigns on environmental aspects of its operations). many CSR proponents point out that CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement. and McDonald's (see below) to distract the public from ethical questions posed by their core operations. with the very real risk of heart disease. the McDonald's Corporation's association with Ronald McDonald Househas been viewed as CSR and relationship marketing. as CSR has become mainstream. Motives: Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT). Lord Justices Pill. 13 . Another concern is that sometimes companies claim to promote CSR and be committed to sustainable development but simultaneously engage in harmful business practices. as discussed above. the company has beefed up its CSR programs related to its labor. They suggest that corporations which exist solely to maximize profits are unable to advance the interests of society as a whole. one's diet may well become high in fat etc. environmental and other practices[22] All the same. since the 1970s..

Those in the some of their resources to addressing social issues. the differences in societal expectations around the world can be expected to lessen in the coming years. To the extent that businesses internalize the costs of socially responsible actions. Therefore. It will increase the chances that they will have a future and reduce the chances of increased governmental regulation. The "competitive" argument recognizes the fact that addressing social issues comes at a cost to business. accounting. they should attempt to address and solve them. marketing. and environmental practices of corporations. Corporations should focus on earning a profit for their shareholders and leave social issues to others.Arguments For and Against CSR : FOR AGAINST The rise of the modern corporation created and continues to create many social problems. There are several arguments in favor of corporate social responsibility. held by critics of the corporate world. it is in corporations' best interest to assume social responsibilities. They 14 . is that since large corporations create many social problems. Assuming social responsibilities places those corporations doing so at a competitive disadvantage relative to those who do not. but those in another country do not. the corporate world should assume responsibility for addressing these problems. Those holding this view criticize the production. Large corporations have huge reserves of human Those who are most capable should and financial capital. Taking on social and moral issues is not economically feasible. According to Carroll and Buchholtz. they hurt their competitive position relative to other businesses. corporate world are not equipped to deal with social problems. since CSR is increasingly becoming a global concern. This argument is particularly relevant in a globally competitive environment if businesses in one country expend assets to address social issues. In the long run. One view. They should devote at least address social issues.

their power is not strong enough to influence corporate organizations into integrating CSR principles in conducting business. and it possesses tremendous financial resources. (Wal-Mart. and in conducting their operations in an open and honest manner. even though the stakeholders have similar interests in companies. type. for example.%20History." Read more: Corporate Social Responsibility . company. definition. business.%20company.%20type. These stakeholders. according to Carroll and Buchholtz. A very different argument in favor of corporate social responsibility is the "self-interest" argument. some suggest that businesses should assume social responsibilities because they are among the few private entities that have the resources to do so. History file:///E:/Documents%20and%20Settings/Tabara/Desktop/Corporate%20Social%20Responsibility%20%20organization.organization. these companies are forced to act in a socially responsible manner due to pressure from the media.%20model. Furthermore. model.) Thus. This view holds that companies must look beyond the shortterm.suggest that corporations can do a better job of producing quality. This is a long-term perspective that suggests corporations should conduct themselves in such a way in the present as to assure themselves of a favorable operating environment in the future. by doing so.%20levels. it may be in the corporate world's best interests to engage in socially responsive activities because. simply have the power to influence the financial performance of a company. The corporate world has some of the brightest minds in the world. consumers and similar groups. businesses should utilize some of their human and financial capital in order to "make the world a better place. Finally. safe products. the corporate world may forestall governmental intervention in the form of new legislation and regulation. whose interests should be taken into account in the decision-making process of a company. While a good number of organizations in advanced economies adopt CSR as a core business strategy because it can lead to benefits such as attracting qualified and motivated human capital. bottom-line perspective and realize that investments in society today will reap them benefits in the future. 15 .%20business.%20definition. But in developing countries like the Philippines. has annual revenues that exceed the annual GNP of some countries. levels.ht m#ixzz1SrnpWcLw Conclusion CSR has become a significant feature of business practices in the global economy. NGOs.

%20company.com/2007/01/02/strategic-csr-by-porter-and-kramer/ Corporate%20Social%20Responsibility%20%20organization.%20type.%20levels.htm y 16 .%20model.%20business.%20 History.%20definition.wordpress.y y y y Milton Friedman Economic Justice for All)for exAMPLE http://contributionmarketing.

Sign up to vote on this title
UsefulNot useful