HannieBadenhors 2016 Cover CorporateCitizenship

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Rudansky-Kloppers, Tersia Botha.; Corporate Citizenship
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Corporate Citizenship
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Contents in brief
Preface
Part 1 Context
Chapter 1: Introduction to corporate citizenship
Chapter 2: Sustainable development and climate change
Chapter 3: Evolution of corporate citizenship
Chapter 4: Rationale of corporate citizenship
Part 2 How
Chapter 5: Responsible leadership
Chapter 6: Risk management in corporate governance
Chapter 7: Strategic management and competitive advantage
Chapter 8: Stakeholder engagement
Chapter 9: Management of business ethics
Part 3 Implementation
Chapter 10: Sustainable procurement and supply chain management
Chapter 11: Operations and logistics management
Chapter 12: The human resource function and corporate citizenship
Chapter 13: Marketing management
Chapter 14: Financial management
Part 4 Critical perspectives and conclusion

Chapter 15: Conclusion
Index
Table of contents
Part 1 Context
1 Introduction to corporate citizenship
1 Introduction
.1 Corporate citizenship defined
1 Corporations, companies and business
.2 Corporate citizenship with a capitalist stance
1 Our approach in this textbook
.3 Structure of this book
1
Conclusion
.4
Multiple-choice questions
1
.5 Discussion questions
1 Additional reading
.6 References
1
.7 Sustainable development and climate change
2 Introduction
2 The emergence of sustainable development
.1 1968 – Club of Rome
2 1969 – International Union for the Conservation of Nature (IUCN)
.2 1972 – United Nations Conference on the Human Environment
2.2 1974 – World Council of Churches (WCC)
.1 1980 – World Conservation Strategy
2.2
1983–1987
.2
Conceptualising
2.2 sustainable development
.3 The systems theory
2.2 What is sustainability?
.4 What is development?
2.2 Defining sustainable development
.5 elements of sustainable development
The
2 2.2 The core elements of sustainable development
.3.6 Interconnections of the elements of sustainable development
2.3
Society’s ecological footprint
.1
Views of sustainability
2.3
Responses to the challenge of unsustainable development
.2
Rio Summit 1992
2.3
.3 The Millennium Declaration
2 2.3 World Summit on Sustainable Development (WSSD), Johannesburg 2002
.4.4 Rio+20 (The Future we want)
2.4 United Nations Sustainable Development Summit (the post-2015 Agenda) and the Sustainable
.1 Development Goals (SDGs)
2 2 The
2.4 future of sustainable development
.2
.6 .5Climate change in the context of sustainable development
2 Climate change defined
.7
2.7 Climate change facts
.1 Strategies for addressing climate change
2.7 Corporates taking climate action
.2
Conclusion
2.7
.3
Discussion questions
2.7
Additional reading
.4
2 2 References
2.7
.9 .8.5
Evolution
2.9 of corporate citizenship
Introduction
.1
The
2.9 changing role of corporates
Variables
.2 influencing corporates to change
2.9 Globalisation
.3 Advances in technology and a radical transformation of the world of work
3 2.10
2.9 Increased power and demand from customers
.4 The growing importance of intellectual capital and learning
3 The changing roles and expectations of workers
.1
Increasing corporate power and responsibility
3
.2 Political changes
3 Corporate citizenship
.3 Defining corporate citizenship
3.3 The history of corporate citizenship
Facilitating
.1 corporate citizenship: A framework
Conclusion
3.3
.2
3.3
.3
Additional reading
3.3
References
.4
3.3
Rationale of corporate citizenship
.5
Introduction
3.3
The
.6 moral drive for corporate citizenship
3 Defining
3.3 morality and ethics
.4Ethical
.7 theories
3.4 Consequential ethical theories
.1 Non-consequential ethical theories
3 3 3.4 Contemporary ethical theories
.6 .5.2
Doing good to do well
4 Corporate citizenship and legislation
4 The role of legislation in business
.1 Categories of laws and regulations that govern corporate activities
4 Legislation and ethics
.2
Corporate citizenship and corporate financial performance
4
What is meant by financial performance?
.3
4 Social responsibility and financial performance – the arguments
.4 Evidence of social responsibility influencing financial performance – an academic review
Conclusion
4.4
.1
4.4
.2
Additional reading
4 4 References
4.4
.6 .5.3
4.6
How
.1
Responsible leadership
4.6
Introduction
.2
Defining management
4 4.6
.7The
.3 levels and functional areas of management
Defining
4.7 leadership
Management
.1 versus leadership
Leadership
4.7 approaches
.2 Leadership traits approach
4
Part 2 4.7 Leadership styles approaches
.8.3 Contemporary leadership approaches
5 Responsible leadership
5 Values and value creation in corporations
.1 Leadership responsibilities with respect to key stakeholders
5 Responsible leadership in action
.2 Conclusion
5
.3
5 Discussion questions
.4 Additional reading
5 References
.5
5 Risk management in corporate governance
.6 Introduction
5.6
Background to corporate governance
.1
Defining the concept and primary goal of corporate governance
5.6
Principles of corporate governance
.2
Risk management framework
5 5.6 Risk management culture
.7.3 Risk management strategy
5.7
Risk management structure
.1
5.7 Risk management process
Principles
.2 of risk governance
Contextualisation
6 5 5.7 of the principles of corporate governance in terms of corporate citizenship
.8Corporate
.3 governance principles for a government
6 Conclusion
.1 Multiple-choice questions
6 Discussion questions
.2 References
6
.3 Strategic management and competitive advantage
6 Introduction
.4 The interface between strategic management, corporate citizenship and sustainability
6
Strategic management process
.5
Corporate citizenship
6.5 Sustainability
.1 Embedding sustainability into the strategic management process: the goal of a sustainable corporate
7.3
6.5
Strategic direction
.2
Strategic analysis
6.5 The internal environment
.3
The external environment
6 6 6.5
.7 .6Sustainability
.4 embedded business models and strategies
6 Business model innovation for sustainability
.8 Sustainability – an integral part of strategic choice
6 Sustainability – an integral part of strategy implementation
.9 Leadership
7 Culture
7 Structure
.1 Reward systems
7 Policies and procedures
.2 Training and education
7.2 Stakeholders
.1
Technology
7.2
Strategy performance management and control
.2
7 7 Conclusion
7.2
.5 .4Multiple-choice
.3 questions
Discussion
7.5 questions
Additional
.1 reading
7 References
7.5
.6.2
7.6
Stakeholder engagement
.1
Introduction
7 Emergence
7.6 of the stakeholder concept
.7.2
Who are the stakeholders of corporations?
7.7
Stakeholder identification
.1
Benefits of stakeholder identification
7.7
.2 Approaches to stakeholder identification
Stakeholder
7.7 prioritisation
Stakeholder engagement
.3
7.7 How to engage stakeholders
Stakeholder
.4 relationship management
7.7 Shared value
.5 Social capital
7.7 Stakeholders as part of a network
.6
Influences of external stakeholders on corporates
7.7 Business, government and the public
.7
Influences of internal stakeholders on corporates
7 7 7.7
Employee related legislation
.9 .8.8
8 Employees: the key to sustainability
8 Stakeholder engagement issues
.1 Conclusion
8 Multiple-choice questions
.2 Discussion questions
8 Additional reading
.3 References
8
.4 Management of business ethics
8.4
Introduction
.1
Ethics
8 8 8.4
Business ethics
.6 .5.2
An introduction to business ethics
8 8.6
.7.1 The levels of business ethics
8.7 Arguments against and drivers for business ethics
Regulation
.1 and business ethics
Managing
8.7 business ethics
.2 Formal management of business ethics in organisations
8 8.7 Informal management of business ethics
.3
.8Organisational cultures
8 8.8 Levels of organisational culture
.9.1
Corporate ethical culture
8.9 Components and characteristics of an ethical culture
.1 Strong and weak ethical cultures
9 8.11
8.10
8.9
Virtues in an ethical culture
.2
9 Ethical behaviour model
.1 Individual characteristics (A in Figure 9.3)
9 Ethical beliefs and sensitivities (B in Figure 9.3)
.2 Ethical intuitions (C in Figure 9.3)
9 Theory of planned behaviour (D in Figure 9.3)
.3 An issue’s moral intensity (E in Figure 9.3)
9.3 Organisational characteristics (F in Figure 9.3)
.1 Ethical intentions (G in Figure 9.3)
9.3
Ethical decision making
.2 Nine-step ethical decision-making model
9 9 9.3
Conclusion
.5 .4.3
9.5
Discussion
.1 questions
Additional
9 9.5 reading
.6References
.2
9 9.6
.7Implementation
.1
Sustainable
9.7 procurement and supply chain management
Introduction
.1
Creating
9.7 value through supply chain management
.2
Corporate social responsibility and procurement
9 Selection
9.7 of suppliers and awarding contracts
.8.3 The importance of selecting the right suppliers
9.8 The selection process
.1 Developing suppliers
9.8
Long-term relationships with suppliers
.2
Procurement
9.8 and supply chain management in the public sector
.3 SCM Framework
9.8 Bid committees
.4
Ethical aspects in procurement and supply chain management
9.8 Rules for ethical procurement transactions
.5 Areas of unethical conduct in procurement
9.8 Measures to prevent unethical conduct
.6
Environmental responsibility in procurement and the supply chain
9 9.8
Conclusion
.9.7
3Multiple-choice
Part9.10
10 9.9 questions
Discussion
.1 questions
10 References
.1
10 Operations and logistics management
.2 Introduction
10 The five Rs of sustainable supply chains
.3 Sustainable operations management
10 Objectives of sustainable operations management
.4 Sustainable operations management in practice
10.4
Sustainable logistics management
.1 Transport
10.4
Outsourcing of logistics: third-party logistics providers
.2
10.4 Reverse logistics
Conclusion
.3
Multiple-choice
10
10.4 questions
Discussion
.4
.5 questions
References
10.5
.1
10
10.5human resource function and corporate citizenship
The
.2
.6
Introduction
10.6
Corporate citizenship within the HR context
.1
Human resource planning and corporate citizenship
10.6
Staffing (recruitment, selection and appointments) and corporate citizenship
.2
Development of human resources and corporate citizenship
11101010.6
Utilisation
.3 of human resources and corporate citizenship, including performance management
.8 .7
11 Career development and corporate citizenship
.1 Recognition and rewards and corporate citizenship
11 Employee health and wellness, as well as occupational health and safety and corporate citizenship
.2 Employment relations and corporate citizenship
11 The added-value debate from an HR perspective and corporate citizenship
.3 Conclusion
11.3
.1
11
11.3
Additional reading
.2
.4
References
11.4
.1
Marketing management
11.4
Introduction
.2
12 1211 Linking
11.4 marketing philosophies and corporate citizenship
.1 .3
.5 Marketing philosophies
12 Social marketing
.2 Customers’ wants and needs
12 The conscious customer
.3 Consumer protection in South Africa
12 NGOs and marketing
.4 The traditional marketing instruments and corporate citizenship
12
Product decisions, branding and packaging
.5
Pricing and corporate citizenship
12
.6 Where to sell (distribution and logistics in the supply chain)
12 Marketing communication, advertising and PR
.7 Ethical and cause-related marketing
12 Ethical marketing
.8 Cause-related marketing
12 Conclusion
.9 Multiple-choice questions
12.10 Discussion questions
12.11 Additional reading
12.12 References
13
13 Financial management
.1
Introduction
13
The financial management function
.2
Defining
13.2 financial management
.1 The fundamental objective of financial management
13.2 The ethics of maximising corporate value
13
.2
.3 The focus of financial management
Corporate
13.3 citizenship and the finance function
.1 Responsible investment
1313
13.3
Responsible financing
.2
.5 .4 Responsible financing from a corporate viewpoint
13.5 Responsible finance from a financier’s viewpoint
.1
Responsible distribution of profits
13.5
Integrated reporting
.2
Conclusion
13.5
Multiple-choice
.3 questions
Critical-thinking
13
13.5 questions
Additional
.4
.6 reading
References
13.6
.1
14 Critical
13.6 perspectives and conclusion
1413
.1 Conclusion
.2
.7
14 Introduction
.2 Summary of the key points
14.2 The initial premises
.1 Milton Friedman and the Holy Grail of the business case
14.2 When the business case breaks down
.2
Conclusion
14.2
.3
14
14.2
.4
.3
References
14
14.3
Index .4 .1
14.4
.1
14141414.4
.2
.7 .6 .5
Part 4
15
15
.1
15
.2
15
.3
15.3
.1
15
15.3
.2
.4
Preface
Corporate citizenship is a prominent international issue and has become a research priority in
various sciences, especially the management sciences. Contemporary corporations are no longer
expected only to perform financially, but are also expected to have an ethical relationship of
responsibility between the corporate itself and the society in which it operates and performs its
business activities. Corporate citizens have various rights (separately from the human rights of its
owners, managers or employees), but with these rights come various responsibilities and
obligations. These responsibilities and obligations revolve around two aspects. First, a corporation
has a legal and moral obligation towards the economic, social and natural environments within
which it operates. Second, a corporation also has an investment and sustainability obligation to
protect, preserve and enhance the wellbeing of the economic, social and natural environments in
which it operates. A corporation is expected to consider the impact that it has on the economic
environment within which the community operates. Furthermore, it must consider the
environmental, social and governance impact it has on the community in which it conducts its
business. Thus, corporates play an important role in delivering citizenship rights to citizens – a role
much larger than corporate charity. This being said, we adapt the Matten and Crane (2005) 1
definition of the term corporate citizenship in this book, namely ‘the role of the corporation in
administering citizenship rights for individuals’.
The real question is ‘How?’ ‘How can corporates be good corporate citizens?’ Corporate leaders
play an undeniably important role in a corporation’s road to administering citizenship rights for
individuals. Corporate leaders are expected to be ethical and responsible – they must use the
corporate’s strategic and operational planning to ensure that a sustainable business is being
developed. They are also expected not to compromise the natural environment, but rather to
consider the effect of the corporation and its strategies on the social, economic and natural
environment. Furthermore, sound corporate governance, stakeholder engagement and business
ethics are critical for corporates striving to practice good corporate citizenship.
The road to being a good corporate citizen does not end with strategic managers and leaders – it
needs to cascade down to all levels and all functional areas of management. Environmental, social,
ethical and governance issues should also be considered in the management of procurement and
the supply chain, operations and logistics, human resources, marketing and corporate finance.
We trust that the reader will find value in how we present corporate citizenship and the
conceptualisation, implementation, and evaluation of corporate citizenship practices within the
four key functional areas of business that we present in this book.
Tersia Botha
September 2016
1 Matten, D & Crane, A. 2005. Corporate citizenship: Toward an extended theoretical conceptualization.
Academy of Management Review, 30(1):166–179.
PART 1
Context
chapter
Introduction to corporate citizenship
Neil Eccles and Tracey Cohen
1
LEARNING OBJECTIVES
At the end of this chapter, you should be able to:

• Define corporate citizenship
• Understand how corporates can administer citizenship rights through their core business
• Understand the general economic viewpoint from which corporate citizenship is
addressed in this book
• Outline the key elements and functions that support the practice of corporate citizenship
as covered in this book
KEYWORDS AND CONCEPTS

- administering of citizenship rights
- citizenship
- core business
- corporate/corporation
- corporate citizenship
- pursuit of profit
OPENING CASE SCENARIO
Woolworths leading the way as a responsible retailer – responding to sustainability

issues in the retail industry
In recent years, environmental and social sustainability issues in the global food and
clothing retail industry have fallen under the spotlight.
In food retail, there was the horse meat scandal in the UK in 2013, when donkey and
horse meat masqueraded as beef or lamb in some major retail stores.1 A year earlier,
consumers in South Africa were enraged to find fish listed as endangered on the
International Union for Conservation of Nature (IUCN) Red List on the shelves of some
retailers.2 Also during this period, the CNN Freedom Project exposed the sourcing of
cocoa for chocolate production as anything but sweet. According to this project, roughly
40% of the world’s supply of cocoa comes from plantations in the Ivory Coast, where
much of it is produced using child labour and modern forms of slavery.3 With the exposure
of unethical farming of livestock; irresponsible clearing of indigenous tropical forests to
make way for palm oil and other monocultures; and the sometimes gross exploitation of
suppliers and labourers in the supply chain coming to the fore, the food retail industry has
had more than its fair share of challenges in recent years.
Clothing retail has also not escaped scrutiny, particularly in relation to working
conditions in the garment supply chain. There were the high-profile scandals relating to
Nike in the early 2000s4 and Gap in 2007.5 The 2013 collapse of the Rana Plaza factory in
Bangladesh that killed 1 134 people and injured hundreds of others, reminded the world in
the harshest possible way that issues of worker safety and the true cost of cheap labour
and ‘fast fashion’ are far from resolved.6 Beyond these supply-chain labour issues,
clothing retailers have not escaped the gaze of environmental activists. The production of
cotton, the world’s most widespread profitable non-food crop, provides income for more
than 250 million people worldwide and employs almost 7% of all labour in developing
countries.7 This is a good thing, right? But did you know that it takes 2 700 litres of water
to produce a single t-shirt?8 To create and maintain cotton fields, often the conversion or
destruction (deforestation) of natural habitats occurs. Further impacts include soil erosion,
pollution and water contamination from fertilisers and pesticides.9
The above issues have financial, environmental and social implications, and touch on
the fundamental rights of people across the world. Retailers, who are in the business of
selling food and clothing, ought to consider these implications.
Woolworths: South Africa’s poster child for retail sustainability? 10, 11

Woolworths (Pty) Ltd is a large retail chain that originated in South Africa and today
operates in many parts of Africa, the Middle East, and in Australia. It trades through more
than 400 stores and employs around 31 000 people worldwide.12 The Group publicly
attributes much of its success to its uniquely engrained sustainability principles.
While caring for its communities and the environment have always been part of the
Woolworths Group’s stated ethos, the Group’s Good Business Journey (GBJ), which sets
ambitious sustainability targets, was officially launched in 2007. GBJ is the Group’s official
commitment to good corporate citizenship. This is practised by embedding a
consideration of environmental, social and governance issues into their core business with
a view to seeking opportunities emerging out of these to administer rights to citizens in the
jurisdictions in which the Group operates.
Woolworths’ sustainability efforts are directed by the vision ‘to be the most sustainable
retailer in the Southern Hemisphere’. The Group believes that this vision will be achieved
through its passion and commitment towards achieving and maintaining the highest
standards through sustainable business growth – being responsible and profitable
simultaneously. This is done within the context of the changing environmental and social
needs in the countries in which they operate.
With good governance structures in place, the GBJ drives growth, change and
diversity, and underpins the sustainability initiatives of the Group across eight focus areas.
Integral to its business operations, the focus areas include ethical sourcing, sustainable
farming, water scarcity, energy, waste, social development, transformation, as well as
health and wellness.
Woolworths continues to draw local and global recognition for its sustainability
initiatives. In South Africa, Woolworths has been included on the Johannesburg Stock
Exchange (JSE) Socially Responsible Investment (SRI) Index. On the the international
stage, the Group is one of five South African corporates to be included on the Dow Jones
World Sustainability Index. Woolworths has also won awards at the International Loyalty
Europe, Middle East and Africa (EMEA) Awards, including, Best Loyalty Programme of the
Year (EMEA) and Best Corporate Social Responsibility Initiative linked to loyalty (both
awards were linked to the MySchool, MyVillage, and MyPlanet customer loyalty cards).
Woolworths’ claim is that, by considering the relevant environmental, social and
governance (ESG) issues, the Group will achieve long-term sustainability and profitability.
1 Introduction
.1Climate change, natural and man-made disasters, pollution, poverty, inequality, lack of ecosystem
respect, rising numbers of endangered species, fast-depleting natural resources, the increasing
human population, poor ethical conduct, human rights abuses, ignorance, greed, irresponsible
development and investments, corruption, lax regulation and weak governance, corporate scandals
and global financial crises – these are some of the many issues confronting society in general and, in
the context of this book, the business world in particular.
Whilst society, consisting of governments, the business world, non-profit organisations (NPOs),
non-governmental organisations (NGOs) and other collective groups of citizens has purportedly
been moving towards addressing these issues, one might well ask the question: Have these moves
been adequate? Or have we taken one step forward and five steps backwards? Has society become
numb to issues such as poverty and human rights abuses? Has greed and corruption become
commonplace in business?
These are rhetorical questions. The persistence (and, in many cases, increasing intensity) of
these issues presents us with the only possible answers: Our collective efforts have not been
adequate; in many cases, we have taken five steps backwards; our numbness towards poverty and
human rights abuses persists; and greed and corruption are indeed commonplace, especially in
business.
Increasingly, the occurrence of these problems is becoming generalised across regions. In other
words, the problems are either evident within most nations, or alternatively simply transcend
national borders. Even the stark historical divide between developing and developed nations is, in
many instances, beginning to evaporate with the onward march of globalisation. And even where
the problems remain local, the increasingly global character of corporations means that it is
becoming much more difficult for corporations to avoid media exposure. In short, these issues are
significantly impacting the business landscape.
What then do corporates need to do to adjust to the changing business landscape and do they
need to adjust the corporate role? Might corporate citizenship be the answer? This textbook is titled
‘Corporate citizenship in South Africa and beyond’. So what is corporate citizenship and where does
the idea come from? We deal with these questions in much more depth in Chapters 2, 3 and 4 of this
book. However, it is necessary at the very outset to present the definition of corporate citizenship
upon which this book is grounded.
1 Corporate citizenship defined

.2
We have elected to follow Matten and Crane’s13 conceptualisation of corporate citizenship and for
the purpose of this book in general define it as the:
‘role of the corporation in administering citizenship rights for individuals.’
There are two features of this definition that appeal to us:

• First, it is grounded in a thorough consideration of the idea of citizenship with a specific emphasis
on the liberal political-economic tradition that characterises most industrialised societies. And
this provides a critical contextual framework for much of what is considered in this book.
• Second, it specifies emphatically that corporate citizenship is not about corporates as citizens,14
but rather that it is about the roles that corporates might play in administering citizenship rights
to citizens.
Implicit in the understanding of ‘roles’ is the fact that corporate citizenship encompasses much
more than corporate philanthropy and social investment – corporate charity if you like – which
tended to be the focus of earlier manifestations of corporate citizenship. Instead of this narrow or
‘limited’ 15 scope, corporate citizenship, according to the definition that we have chosen, embraces
the fact that business activity in general (that is, core business activity) has the potential to
influence the administering of citizenship rights enormously.
But what are citizenship rights? Following Marshall’s categorisation of these, Matten and Crane16
describe three different classes of citizenship rights as characterising the liberal political-economic
tradition: social or positive rights; civil or negative rights; and political rights. Social rights would
include things like the right to education, health care, and housing. Ultimately, these relate to
welfare, which must be provided. Civil rights would focus on the protection of citizens against
intrusions on their freedoms. So, things like freedom of speech, thought and religion would fall into
this category. Very importantly, the protection of private property rights would typically be a civil
right. Finally, political rights include all of the rights necessary to allow citizens to participate in the
formulation of public policies and practices by which society is governed. Things like the right to
vote would be included here.
As Matten and Crane17 argue, historically the administering of these rights has typically been the
responsibility of governments. However, for a variety of reasons, not least of all the process of
globalisation, corporations are increasingly finding themselves not only best placed to administer
some of these rights, but also expected to administer them in exchange for social legitimacy and the
licence to do business.
Example
Administering citizenship rights through ethical trade
Many social and civil rights of citizens are mediated through work. The social right to earn a dignified
wage; the social right of children to have time to be educated before entering into the workplace; the
civil right of citizens not to be forced to work; the civil right not to be discriminated against on the
basis of arbitrary things like race, gender or sexual orientation are all examples. However, as we have
already seen in the opening case scenario in this chapter, many participants in the clothing retail
industry have been complicit in the recent past in the violation of many of these citizenship rights
rather than in their administration. Woolworths, however, through its Good Business Journey position
statement on responsible sourcing,18 makes firm commitments regarding the protection of these and
other citizenship rights through 13 principles. It also outlines its basic approach to fulfilling these
principle commitments with particular emphasis on managing its supply chain. In this way, Woolworths
(on paper at least) is seeking to contribute positively to the administering of citizenship rights. But it is
also minimising its exposure to the risk of consumer boycotts like the ones experienced by other
retailers in recent years.
Example
Administering citizenship rights through packaging management
In much the same way as the protection of property rights would be deemed as a civil right, citizenship
rights in relation to the environment would also typically be defined as civil rights. An example of a
formal expression of such rights would be section 24 of the Constitution of the Republic of South
Africa (1996) which states that:
‘24. Everyone has the right—
(a) to an environment that is not harmful to their health or wellbeing; and
(b) to have the environment protected, for the benefit of present and future generations, through
reasonable legislative and other measures that—
(i) prevent pollution and ecological degradation;
(ii) promote conservation; and
(iii) secure ecologically sustainable development and use of natural resources while promoting
justifiable economic and social development.’
As described in the opening scenario in this chapter, there are many ways in which retailers interface
with the administering of such environmental rights both directly, and through their supply chains. One
very important way is through their practices relating to packaging. With regards to the issue of
packaging, Woolworths recognises environmental, social and indeed financial dimensions.19 From a
financial perspective, reducing packaging to a minimum typically means saving money. From a social
perspective, effective packaging means less wasted food. From an environmental perspective, less
packaging means less resource use on an input side and less waste as an output. With this in mind, in
its Good Business Journey, Woolworths formally makes a number of explicit commitments in relation
to packaging that might be thought of as enabling the administering of citizenship rights in relation to
the environment in particular.
DILEMMA
Consider the following extract from Woolworths Holdings Limited integrated report of 2014:
‘Much is done throughout the group through The Good Business Journey. The Date Expired
Foods Programme in Woolworths generated R424 million worth of food given to needy
institutions, and that is after our staff have been offered product at half price. We also contributed
R52 million through our MySchool programme to schools and other charities.’20
Are these examples of Woolworths administering citizenship rights through its core business? Or are
they merely philanthropic (charity) initiatives of donating food and money?
1 Corporations, companies and business

.3Having presented the basic definition of corporate citizenship, it is now necessary to turn to our
basic conception of a ‘corporation’ or ‘company’. In this book, we typically use the terms
‘corporation’ or ‘corporate’ in preference to ‘company’. The only reason for this convention,
however, is that it is the word ‘corporate’ and not ‘company’ that is found in the phrase ‘corporate
citizenship’. To all intents and purposes, we view corporations and companies as synonymous and
define them in the capitalist sense as privately owned entities ultimately engaged in the pursuit of
profit for the owners.
Beyond specifying this ultimate character of a corporation (privately owned and pursuing profit),
we really do not limit our consideration in any way. For instance, while the term ‘corporation’ is
quite often associated with large, often multinational, businesses we do not consider the
understanding of corporate citizenship presented here to be limited to these. Collectively, small
businesses can have a great impact on an economy, on society and on the environment.
Example
The potential influence of corporations
In 2012, small, micro and medium enterprises (SMMEs) contributed more than 45% of South Africa’s
total GDP.21 In the same year, however, multinationals such as Royal Dutch Shell, Exxon Mobil,
Walmart Stores and British Petroleum (BP) each had revenues exceeding South Africa’s entire gross
domestic product (GDP). Due to the sheer magnitude of major global corporations operating across
multiple countries, their individual and combined influence and impact on society and the environment
is huge. This calls for a growing expectation and need for corporations of all types and sizes to step up
and play a bigger role in society.22 Despite the type or size of a business, it is clear that collectively (in
the case of SMMEs) and solely (in the case of large multinationals) businesses are powerful entities
that can be a force for good in driving socio-economic development; or, they can be a hindrance if
they are only interested in pursuing profit (usually for a minority group) at social and environmental
costs.
The principles and practices that are outlined in this book ought to be generally useful, irrespective
of the size of the entity involved. Any tendency in the chapters that follow to disproportionately use
large global corporations to illustrate principles or practices is simply based on the global
recognition that these enjoy.
1 Corporate citizenship with a capitalist stance

.4Our decision to opt for a traditionally capitalist definition of a corporation is very important. It must
be noted that much of what has been written about corporate citizenship to date has been framed
as a rebellion against strongly capitalist shareholder-focused notions of corporations as expressed
by the likes of Milton Friedman in his famous 1970 New York Times Magazine article entitled ‘The
Social Responsibility of Business is to Increase its Profits’.23 Friedman has almost always been
framed as the villain in the corporate citizenship story.
Our definition of a corporation, however, implies that in this book we do not do this. In fact, quite
the contrary. The basic premise underlying most of this book is that corporations are indeed
principally engaged in the pursuit of profit for the owners and that any activities that corporates
might undertake under the banner of corporate citizenship (that is, administering citizenship rights
to individuals) must be consistent with this ultimate purpose.
1 Our approach in this textbook

.5Our goal here is to craft a book with a particular emphasis on the practice of corporate citizenship.
In other words:
• our understanding of corporate citizenship as the roles that corporates might play in administering
citizenship rights to citizens; and
• our understanding of corporations as privately owned entities ultimately or principally engaged in
the pursuit of profit for the owners.
Our focus for most of the remainder of this book is on describing how corporates have in the past,
and might better in the future, practically execute their citizenship role.
In order to achieve this, we have adopted what we think is a rather innovative approach. This
approach is based on the anecdotal observation that corporate citizenship as an idea has moved
from a fringe position as little as ten years ago, to a much more mainstream business consideration
today. Recognising this, we have elected not to assemble a group of corporate citizenship experts to
write the book. Instead we decided to invite a group of experts in various fields of management
science to apply their minds to the tasks corporates might face in executing their particular
corporate citizenship roles.
1 Structure of this book

.6This then brings us to the structure of this book. We have divided the book into four sections. The
chapters of the book are structured to complement one another, as well as to be read and referred to
individually should the need arise. Although the emphasis of the book (as we have already stated) is
on practice, in Part 1 we elaborate on the necessary context for corporate citizenship. This
comprises five chapters:
• In Chapter 1, we introduce corporate citizenship.
• Chapter 2 unpacks the concepts of sustainability and sustainable development. We look at
environmental, social and economic issues of sustainability at a macro level and aim to develop
an understanding of the tension and alignment between these issues. We trace the problem of
our historical and recent development, and highlight the fundamental social need to pursue
sustainability to ultimately attain the future we want. Chapter 2 has absolutely nothing to do
with corporates! It simply sets out what citizenship rights might entail and the challenges that
might be confronted in the administration of these. It defines the opportunity space for the
practice of corporate citizenship.
• Considering the foundational issues laid in Chapter 2, Chapter 3 looks at business as a response to
the challenge of sustainable development. We first take an in-depth look at the historical
development of corporate citizenship, the differing perspectives and various approaches. In so
doing, we interrogate in much more depth than we have done in this chapter (Chapter 1), the
definitions of corporate citizenship and the similarities and differences of related concepts.
• In Chapter 4, we present the social imperative for corporates participating in corporate citizenship
(the administration of citizenship rights to citizens). We also interrogate that rationale for
corporate citizenship far more comprehensively. While we do discuss the ethical rationale to a
very limited extent, the focus in this chapter is most definitely on grounding our rationale in the
capitalist definition of the corporation that we have assumed in this book.
In Part 2 we begin to think about ‘how’ we can ‘do’ corporate citizenship. We consider the
capabilities of business that are essential for corporate citizenship roles to be successfully
incorporated into the key functional areas of business. This section comprises five chapters:
• We start out this section with the recognition that transforming the ‘why’ into the ‘how’ inevitably
requires leadership. Chapter 5 explores the meaning of the terms ‘management’ and
‘leadership’ and the differentiation between these terms. Various traditional and contemporary
leadership approaches are examined, focusing on the most recent development in the field,
namely responsible leadership. The chapter concludes with a discussion of the practice of
responsible leadership.
• Sound corporate governance is critical for businesses striving to be good corporate citizens.
Chapter 6 walks us through a brief history of corporate governance and frameworks. The author
presents the principles and processes of good corporate governance, risk management,
reporting and assurance. The chapter demonstrates the link between corporate governance,
ethics, stakeholder engagement and leadership and illustrates how the corporate citizenship
architecture should be governed.
• The authors of Chapter 7 present an overview of sustainable strategic management; they
incorporate corporate citizenship considerations in strategy formulation and implementation;
they consider the implications of embedding corporate citizenship in business strategy; and,
finally, they present the role of corporate citizenship in achieving a competitive advantage for a
business.
• Chapter 8 on stakeholder engagement is a vital contribution to this textbook as it considers the
relationship between business and its stakeholders. Without such stakeholders, business would
not exist. The authors identify the various stakeholders and materiality issues when prioritising
stakeholder groups. They illustrate the stakeholder engagement process, present the tools for
effective stakeholder engagement and relationship management, and touch upon the
consequences of inadequacies in such. Stakeholder engagement from a management
perspective is also considered.
• Operating within ethical realms is essential for good corporate citizenship. Chapter 9 presents the
considerations for the effective management of ethics. The chapter includes the fundamentals
and principles of personal and organisational ethics, ethical decision making, as well as formal
and informal tools required to manage ethics within the corporate culture.
In Part 3 of the book, we critically consider the conceptualisation, implementation, and evaluation
of corporate citizenship practices within four key functional areas of business. Upon integrating the
corporate citizenship spirit within each functional area, authors consider the environmental, social
and governance issues that are continuously changing in terms of character and priority. This
section too comprises five chapters:
• Procurement and supply chain management is covered in Chapter 10. The authors explain ethical
procurement, the criteria for selecting suppliers and the influence a business’s procurement
function may have on said suppliers. The authors look at the growing impact of public
procurement and the role of procurement as a tool to change socio-economic roles is touched
upon.
• Chapter 11 is based on operations and logistics management. These functions offer a broad range
of opportunities to capitalise upon as businesses aim to be good corporate citizens. In this
chapter, new product development, third-party logistics, as well as waste and carbon
management are discussed.
• The implications of corporate citizenship for the human resource function within a business are
presented in Chapter 12. Inclusions in this chapter are recruitment practices and workforce
retention, employee wellness, remuneration, training and development, talent management,
occupational health and safety, discrimination, labour laws and employee rights and other
workplace issues that address the evolving contract between business and its internal
stakeholder group.
• Chapter 13 considers the implication of corporate citizenship on the marketing management
function. This involves looking at marketing philosophies, new needs and wants of consumers, a
contemporary view of the essential ‘Ps’ in marketing (including product, price, place and
promotion), the Consumer Protection Act 68 of 2008 and other essential elements of marketing
which will increase a business’s corporate citizenship status.
• Chapter 14 looks at the financial management function. In this chapter, the authors will look at the
financial implications of implementing corporate citizenship. These implications are considered
from both an investment and a finance perspective.
Finally, in Part 4 (entitled Critical perspectives and conclusion) we wrap up this book. We do this in
one chapter:
• Our decision to premise this book on a shareholder centred definition of a corporation à la Milton
Friedman is not without its problems. In Chapter 15 we critically reflect on the implications of
this premise. This is clearly somewhat at odds with our otherwise instrumental and pragmatic
approach to this subject. However, it is necessary to at least acknowledge potential
shortcomings of the approach that we describe. We also, in Chapter 15, by way of conclusion
reflect back on the ground covered in this book.
1 Conclusion
.7Human society is facing enormous sustainability challenges, challenges relating to the delivery of
fundamental rights to increasing numbers of citizens around the world today and into the future.
Some of the more pressing of these challenges were listed explicitly in the opening line of the
Introduction to this chapter but this list is certainly not exhaustive. As these challenges become
more generalised and prominent around the globe, it is absolutely obvious that corporations, as
increasingly powerful social institutions, must be part of solutions if effective solutions are to be
found. This imperative throws up both challenges and opportunities for corporations. Mitigating
the challenges and grasping the opportunities associated with administering citizenship rights is the
work of corporate citizenship. This book aims to lay the foundation for understanding corporate
citizenship, and to provide the knowledge and tools that will equip corporates to fulfil their
potential in terms of administering citizenship rights while remaining true to their core purpose of
delivering profit to owners.
1. Which one of the following scenarios represents the best example of corporate citizenship as
defined in this chapter?
a. A large IT company donates 10% of its profit to the Save the Rhino campaign.
b. Following a devastating flood, a pharmaceutical company donates 10 tons of antibiotics to
prevent an outbreak of cholera.
c. An insurance company sets up a fund that allows its employees to donate up to 2% of their
annual income to local charities.
d. A bank introduces a very profitable micro-finance division that provides micro businesses
with start-up capital and in so doing helps to address the unemployment problem.
e. Every year the employees of a large paint manufacturer go and paint local schools instead of
having a Christmas function.
2. In the capitalist sense, the primary purpose of a business corporation is to:

a. create jobs for people
b. deliver profits to the owners
c. make whatever it is that the business makes
d. be responsible citizens
e. contribute to economic growth
3. Climate change potentially threatens the wellbeing of billions of humans. Which one of the
following responses would represent an example of a corporate citizenship response to climate
change for a corporation that manufactures cars?
a. Donate money to a research institute that specialises in the development of more
fuel-efficient engines.
b. Deny the existence of climate change.
c. Invest in research and development of more fuel-efficient cars in anticipation of growing
demand for these in the market.
d. Donate money to a research institute that specialises in presenting skeptic views on climate
change.
e. Adjust the onboard computers of your cars to make them appear to be more fuel-efficient.
4. Using children as a cheap source of labour can be very profitable but denies these children the
right to be children, and the right to education. There have been various incidents of this
reported in the clothing manufacturing sector. Which one of the following would represent an
example of a clothing retailer channelling the political rights of citizens to express their
unhappiness with this practice?
a. Lobbying governments in regions where child labour occurs to put in place policies
preventing the practice
b. Donating a percentage of the proceeds from the sale of their garments to Greenpeace
c. Setting up a monitoring team to ensure that garment suppliers are not using child labour
d. Donating money to an NGO that develops online educational systems that might be
delivered to children who are working
e. Selling t-shirts that say: ‘Not made by little hands!’
5. The right to health care is a basic social right that is often denied to people who are poor. How
might a pharmaceutical firm seek to address this problem through corporate citizenship?
a. It is very difficult for a pharmaceutical firm to help address this as it needs to generate profits
and poor people can’t afford to pay cost price for the drugs they need, let alone any
margins.
b. It can donate a certain proportion of its proceeds to NGOs that deliver basic health care to
poor people.
c. It can partner with government to sell large volumes of drugs but with smaller margins to
keep the costs down.
d. It can start a ‘for every ten you buy we’ll donate one’ scheme.
e. It could start a generics division that can supply drugs that are no longer patent protected at
a fraction of the original cost.
1. List three companies that you think are excellent corporate citizens and explain why you feel that
this is the case with reference to the definition of corporate citizenship presented in this
chapter. Then list three companies that you think are bad corporate citizens and, again, explain
your choice.
2. In this book we follow Matten and Crane’s (2005) definition of corporate citizenship as the ‘role of
the corporation in administering citizenship rights for individuals’. Think about examples of
citizenship rights that are not being adequately administered. Describe these and then explain
how corporates might be able to play a constructive role in addressing this inadequacy as part
of a corporate citizenship programme.
3. A basic premise of this book is that corporations are principally engaged in the pursuit of profit for
the owners and that any activities that corporates might undertake under the banner of
corporate citizenship must be consistent with this ultimate purpose. Critically reflect on this
premise. Does it make sense? Are there any limitations inherent in it?
Additional reading
• Aßländer, MS & Curbach, J. 2014. The Corporation as Citizen? Towards a New Understanding of
Corporate Citizenship. Journal of Business Ethics, 120:541–554.
• Carroll, AB & Buchholtz, AK. 2012. Business & Society. Ethics, Sustainability and Stakeholder
Management. 9th edition. Cengage, Stanford.
• Crane, A, McWilliams, A, Matten, D, Moon, J & Siegel, DS. 2008. The Oxford Handbook of Corporate
Social Responsibility. Oxford University Press, Oxford.
• Friedman, M. 1970. The social responsibility of business is to increase its profits. The New York
Times Magazine, September 13.
• Matten, D & Crane, A. 2005. Corporate citizenship: Toward an extended theoretical
conceptualization. Academy of Management Review, 30(1):166–179.
• Sison, AJG. 2011. Aristotelian Citizenship and Corporate Citizenship: Who is a Citizen of the
Corporate Polis? Journal of Business Ethics, 100:3–9.
• Waddell, S. 2000. New institutions for the practice of corporate citizenship: Historical, intersectoral
and developmental perspectives. Business and Society Review, 105(1):107–126.
References
1. The Guardian. 2015. Abattoir boss fined £8,000 over horsemeat charges. [Online]. Available: http:/
/www.theguardian.com/uk-news/2015/mar/23/uk-abattoir-boss-peter-boddy-fined
-horsemeat-charges 23 March 2015 [25 April 2015].
2. Rondganger, L. 2012. Red-listed fish on chain store shelves. [Online]. Available: http://www.iol.co
.za/dailynews/news/red-listed-fish-on-chain-store-shelves-1.1324265#.VVXOLPmqpBc [25
April 2015].
3. McKenzie, D & Swails, B. 2012. Child slavery and chocolate: All too easy to find. [Online].
Available: http://thecnnfreedomproject.blogs.cnn.com/2012/01/19/child-slavery-and
-chocolate-all-too-easy-to-find/ [24 April 2015].
4. Locke, RM. 2002. The promise and perils of globalization: The case of Nike. [Online]. Available:
https://ipc.mit.edu/sites/default/files/documents/02-007.pdf [11 December 2015].
5. The Guardian. 2007. Child sweatshop shame threatens Gap’s ethical image. [Online]. Available:
http://www.theguardian.com/business/2007/oct/28/ethicalbusiness.india [11 December
2015].
6. The Guardian. 2015. Two years after Rana Plaza, have conditions improved in Bangladesh’s
factories? [Online]. Available: http://www.theguardian.com/sustainable-business/2015/apr/24
/bangladesh-factories-building-collapse-garment-dhaka-rana-plaza-brands-hm-gap-workers
-construction [27 April 2015].
7. WWF. Nd. Sustainable agriculture: Cotton. [Online]. Available: https://www.worldwildlife.org
/industries/cotton [27 April 2015].
8. World Wildlife Foundation. 2013. The impact of a cotton t-shirt: How smart choices can make a
difference in our water and energy footprint. [Online]. Available: http://www.worldwildlife.org
/stories/the-impact-of-a-cotton-t-shirt [27 April 2015].
9. WWF. Nd. Sustainable agriculture: Cotton. [Online]. Available: https://www.worldwildlife.org
/industries/cotton [27 April 2015].
10. Woolworths Holding Limited. 2014. Woolworths Holding Limited 2014: Integrated report.
[Online]. Available: http://www.woolworthsholdings.co.za/investor/annual_reports/ar2014
/whl_2014_integrated_reprt1.pdf [26 April 2015].
11. Woolworths Holdings Limited. 2014. Woolworths Holdings Limited 2014: Good business journey
report. [Online] Available: http://www.woolworthsholdings.co.za/investor/annual_reports
/ar2014/whl_2014_gbj1.pdf [26 April 2015].
12. Woolworths Holdings Limited. 2015. Corporate Profile: Overview. [Online]. Available: http:/
/www.woolworthsholdings.co.za/corporate/profile_overview.asp [26 April 2015].
13. Matten, D & Crane, A. 2005. Corporate citizenship: Toward an extended theoretical
conceptualization. Academy of Management Review, 30(1):166–179, 173.
14. Waddell, S. 2000. New institutions for the practice of corporate citizenship: Historical,
intersectoral and developmental perspectives. Business and Society Review, 105(1):107–126.
15. Ibid.
16. Ibid.
17. Ibid.
18. Woolworths Holdings Limited. 2015. Woolworths Holdings Ethical Trade Positioning Statement.
[Online]. Available: http://www.woolworths.co.za/
images/elasticera/New_Site/Corporate/responsible_sourcing_position_statement.pdf [11
December 2015].
19. Woolworths Holdings Limited. 2015. Woolworths Packaging Position Statement. [Online].
Available: http://www.woolworths.co.za/images/New_Site/Corporate/packaging.pdf [11
December 2015].
20. Ibid.
21. UCT Graduate School of Business. 2012. Lack of entrepreneurship threatens to empty Africa’s
breadbasket. [Online]. Available: http://www.gsb.uct.ac.za/Newsrunner/Story.asp
?intContentID=282 [10 May 2015].
22. Strategy Dynamics Global SA. 2013. Corporate clout 2013: Time for responsible capitalism. p. 17.
[Online]. Available: https://www.globaltrends.com/reports/?doc_id=500539&task=view
_details [30 April 2015].
23. Friedman, M. 1970. The social responsibility of business is to increase its profits. The New York
Times Magazine, 13 September.
chapter
Sustainable development and climate
change
Tersia Botha and Tracey Cohen 2
LEARNING OBJECTIVES

• Understand the emergence of sustainable development
• Conceptualise the term sustainable development
• Develop a foundational knowledge of the elements of sustainable development
• Understand the implications of society’s ecological footprint
• Differentiate between the various views on sustainability
• Provide an overview of the responses to the challenge of unsustainable development
• Defend the future of sustainable development
• Understand climate change within the context of sustainable development

- Brundtland Report
- climate change
- climate change adaptation
- climate change mitigation
- development
- ecological footprint
- economy
- environment
- environmental movement
- society
- strong view of sustainability
- sustainability
- sustainable development
- systems theory
- weak view of sustainability
Shaping the future we want

Imagine the future, an ideal future for all. A world with thriving ecosystems, where all life is
lived with dignity. A society where poverty has been eradicated, everyone has access to
quality education and health care, modern energy and sanitation systems. A society that is
equal in all spheres; is prosperous, and where there is justice, freedom and peace.
But with the current unsustainable resource exploitation and increasing unequal wealth
distribution – is there a chance that humankind will reach that future? Or, is the reality that
the global industrial civilisation could collapse in coming decades?
The rise and collapse of civilisations is a recurrent cycle found throughout history.
History holds records of great civilisations that were susceptible to collapse. Examples of
this include the fall of the Roman Empire, and the equally advanced Han, Mauryan, and
Gupta Empires, as well as advanced Mesopotamian Empires. These civilisations are
testimony to the fact that even advanced, sophisticated, complex and creative civilisations
can be both fragile and impermanent. Great civilisations were not built in a day, and
neither did they collapse in a day. Civilisations decline and ultimately fall due to internal
erosion over time. By investigating the dynamics between humankind and the nature of
the past cases of collapse, the most prominent interrelated factors that explain
civilisational decline (and which may help determine the risk of collapse today) include
population, climate, water, agriculture and energy. These factors can lead to collapse
when they converge to generate two crucial social features, specifically the stretching of
resources as a result of the pressure placed on the ecological carrying capacity, and the
economic stratification (separation) of society into rich elites and poor masses.1
Currently, there are high levels of economic stratification, where resources are not
equally distributed throughout society, which can directly be linked to overconsumption of
resources. This overconsumption is based largely in industrialised countries (which
includes people from almost every country around the world, but mainly concentrated in
the Westernised nations).2 For example, the United States has less than 5% of the global
population, however, it uses at least a quarter of the world’s fossil fuels (burning 25% coal,
26% oil and 27% of the planet’s natural gas).3
Sustainability analysts cite the future as being less predictable, more volatile and more
crowded than ever before. The playing field will be disrupted in radical and unexpected
ways – these disruptions are occurring rapidly in weather patterns (and climate change),
geopolitics (the effects of human and environmental geography on the economy, politics
and state power), market demands and technology – shifting the face of sustainability.4
Has humankind learnt from the past? Or will we continue to make the same mistakes?
2 Introduction
.1
Corporate citizenship was introduced in Chapter 1, as a concept through which the business
activities of corporates have the potential to greatly influence the administration of citizenship
rights. The chapter also noted that, in order for corporations to survive (and thrive), they need to
understand the changing business landscape and how environmental, social and governance (ESG)
issues are a means of addressing these rights. For corporates to ensure that their practices are
sustainable, they need to effectively consider the ESG issues in all the business functions. Ideally,
corporates should not only look at the challenge of unsustainability. Rather, corporates should view
sustainability as an absolute necessity and an opportunity as well as a driver of innovation in their
practices. In order to do this, it is imperative that corporates understand the notion of sustainable
development. Therefore, in Chapter 2, we take the conversation further by unpacking the concept of
sustainable development. The environmental, social and economic issues related to corporate
citizenship (as discussed in Chapter 1), are addressed in this chapter at a macro level and aim to
develop an understanding of the tension and alignment between these issues.
Sustainable development is a multi-dimensional concept. Although a thorough discussion of
the concept is provided further in this chapter, for now it will suffice to define it as follows:
‘development that meets the needs of the present without compromising the ability of future
generations to meet their own needs.’5
This definition of sustainable development contains two key aspects. First, it includes the concept of
needs, particularly the essential needs of the world’s poor to which priority should be given, as well
as the needs of society at large. Second, it includes the idea of limitation, imposed by the current
state of technological and social environment’s ability to meet present and future needs. For more
than a quarter of a century, sustainable development has been on the international agenda.
However, it is only in recent times that the concept has gained popularity. One reason for this is the
fast pace of technological advances during the past 30 years, which increased the availability of
information to us today. The availability of information enables us to measure the impacts and
consequences of our actions leading to unsustainable development more accurately than before.
Furthermore, the realities of various issues such as the impact of environmental degradation,
climate change, rising inequalities, and increasing scandals can no longer be denied.
You might have heard the statement ‘we need 1.5 earths to meet the demands we currently make
on nature’ before, since it is often mentioned in the sustainable development debate. This
statement is true, since our current demands on our natural environment are increasing at an ever
accelerating and unsustainable rate. Biodiversity is often used as an indication of the state of the
natural environment, since it refers to the diversity of micro-organisms, plants and animal species
as well as the ecosystems within which they interact and live.6 The latest available World Wildlife
Fund for Nature (WWF) Living Planet Report reveals that biological diversity (also referred to as
biodiversity) is decreasing sharply, with an overall decline of 52% between 1970 and 2010.7 That is
more than half of the planet’s biodiversity in just 40 years! But what does a decrease in biodiversity
really mean for the natural environment, the economy, and humanity? As society and the economy
develop, we are eating into our natural capital, making it more difficult to sustain the needs of future
generations.8
In this chapter, we will first discuss the emergence of sustainable development, followed by a
further conceptualisation of the concept. The elements of sustainable development, society’s
ecological footprint and various responses to the challenge of sustainable development will also
receive attention, followed by a brief discussion of the future of sustainable development. This
chapter will conclude with a brief discussion of climate change within the context of sustainability.
Before we turn our attention to the emergence of sustainable development, we need to clarify the
concepts ‘developing’ and ‘developed’ nations or countries. For decades, countries around the
world were broadly classified into two categories, based on their economic development, namely
developing and developed countries or nations. These two categorisations are based on a number
of criteria ranging from per capita income to life expectancy and literacy rates. Developing countries
are the less-developed countries with lower ratings on these statistical criteria.
2 The emergence of sustainable development

.2The concept ‘sustainable development’ can be traced as far back as some 300 years ago to
seventeenth-century Europe.9 This section, however, will cover the recent history from 1945, the
post-war (World War II) development era.
The motivating power behind the establishment of the post-war international economic system
was the task of reconstructing what had been damaged during World War II. This development was
supported by institutions such as the International Bank for Reconstruction and Development (a
member of the World Bank Group established in 1944) that offers funding to developing countries.
This time of ‘progress’ led to optimism and a greater hope for a braver world and progressive
international ideas. However, this period of development also led to inequalities, widening gaps
between rich (industrialised and developed) and poor (under-developed and developing) nations
as well as social inequalities within nations.10
The United Nations (UN) was established in 1945, the year after the establishment of the
International Bank for Reconciliation and Development. A key priority of the UN was to ‘achieve
international co-operation in solving international problems of an economic, social, cultural, or
humanitarian character and in promoting and encouraging respect for human rights and for
fundamental freedoms for all without distinction as to race, sex, language, or religion’.
As can be seen from the above priority, the initial focus of the UN was on social and economic
matters. While improving people’s wellbeing continues to be a main priority of the UN, the global
understanding of development has changed over the years – from a focus on social and economic
matters, to a focus on the natural environment.11 By the late 1960s, growing evidence showed that
economic development was taking place at a rate that was unsustainable for society as well as the
natural environment. With large-scale industrial pollution, the growing threat of nuclear radiation
and mass destruction of ecosystems becoming evident, great concern was triggered about a ‘global
environmental crisis’. As this awareness heightened globally, it was clear that a modern
environmental movement had begun.12 This movement criticised the social and economic
development paradigm that had been pursued since 1945. Activists for environmental sustainability
may have initially been viewed as pessimists, but their efforts were not in vain as their messages
gave rise to research into environmental sustainability, which eventually gained momentum. In
what follows, the emergence of sustainable development from 1968 to today will be discussed.
2.2 1968 – Club of Rome

.1
In 1968, a small group of professionals from a variety of disciplines met at a villa in Rome. The idea
of the gathering was to discuss the dilemma of prevailing short-term thinking in international
affairs. In particular, the concerns regarding unlimited resource consumption in an increasingly
interdependent world were discussed.
It was then that the Club of Rome was founded, initially as an informal, non-profit association.
The Club grew to be more formal in nature, and to date has published over 33 reports concerning
the future of humanity.13
2.2 1969 – International Union for the Conservation of Nature (IUCN)

.2
The internationally active civil society organisation, the International Union for the Conservation of
Nature (IUCN), met in New Delhi, India. The IUCN voted to draft a programme that would demand
a new, ethically responsible manner of dealing with the biosphere and its living resources, further
connecting it with the struggle against poverty in the countries of the global South.14
2.2 1972 – United Nations Conference on the Human Environment

.3
The United Nations Conference on the Human Environment took place in Stockholm, Sweden. This
was the first major international gathering to take place, discussing sustainability at a global level. It
was there that the United Nations Environmental Programme (UNEP) was established, with a
‘mandate to encourage economic growth which is compatible with the protection of the
environment’.15
1972 was a significant year magnifying the environmental issues society faced. As an outcome of
the Club of Rome, the book titled The Limits to Growth (LTG) was published. The team behind the
book were initially seen as grave doomsayers. However, the tone of the book was optimistic;
stressing that one could reduce the damage caused by exceeding ecological limits, if early action
was taken. The LTG warned that development was occurring at an unsustainable rate. It reported
that the then use of resources and consequent emissions would lead to global ecological constraints
and resource scarcity, and that this would have a significant influence on global development in the
twenty-first century. The LTG illustrated how growth in population and natural resource use
interacts with a variety of limits. While the limits to growth may appear in many forms, the
publication focused primarily on the planet’s physical limits – limits in the form of exhausting
natural resources and the finite (fixed/restricted) capacity of the earth to absorb emissions from
industry (as well as agriculture).16
2.2 1974 – World Council of Churches (WCC)

.4
The World Council of Churches (WCC) met in Bucharest, Romania, to explore solutions to the
environmental crisis, whilst simultaneously addressing the question of justice. A co-author of the
Club of Rome Report and participant at the conference proposed the formulation of the ‘ecologically
sustainable society’, which was accepted a year later at a plenary meeting in Nairobi. The WCC then
adopted its new model of a ‘just, participatory and sustainable society’.17
2.2 1980 – World Conservation Strategy

.5
The outcome of the IUCN plenary meeting held in New Delhi in 1969 was released. This document
became the joint work of the IUCN, the UNEP and the World Wide Fund for Nature (WWF) and took
ten years to compile. The document was released and presented to the global public in February
1980, titled the World Conservation Strategy. The introduction to the document explained, ‘for
development to be sustainable it must take account of social and ecological factors, as well as
economic ones.’ The World Conservation Strategy defined conservation as ‘the management of
human use of the biosphere so that it may yield the greatest sustainable benefits to present
generations while maintaining its potential to meet the needs and aspirations of future generations’.
18
2.2 1983–1987
.6
Sustainable development, as a concept, officially emerged in the 1980s whilst considering scientific
perspectives on the interdependence of society and the environment. At this point, much of what
had been envisioned by the mandate developed at the Stockholm conference in 1972 had not yet
been addressed. Therefore, in 1983 the United Nations (UN) convened the World Commission on
Environment and Development (WCED),19 which was instructed to formulate a global agenda for
change. The commission was chaired by Gro Harlem Brundtland, Madam Prime Minister of
Norway. The outcome of the commission was released in 1987 with a report titled Our Common
Future, also popularly known as the Brundtland Report. This was a landmark report that advanced
the understanding of global interdependence as well as the relationship between economics and
the environment, which was initially introduced by the World Conservation Strategy.20 Today, the
Brundtland definition is still the most widely accepted definition of sustainable development and
we will explore it further in the next section.
2 Conceptualising sustainable development

.3In order to understand the concept of sustainable development, we will first focus on the systems
theory, which will place the concept into perspective. Thereafter, we will establish the meaning of
‘sustainable’, followed by a discussion of ‘development’. Lastly, we will provide a clear definition of
the term ‘sustainable development’.
2.3 The systems theory
.1
Systems theory originates from the work of biologist Ludwig von Bertalanffy, which was called
‘General Systems Theory’ (GST). The principles of the theory have grown and have been applied to
various other areas, such as linguistics, sociology, ecology, organisational theory and management,
human resource development, education, computer science, biology and many more. Von
Bertalanffy believed that a general systems theory should be an important regulative device in
science. He also observed that certain characteristics appeared in all disciplines:
• In all disciplines, one needs to study the whole ‘organism’. Within this context, ‘organism’ refers to
the ‘whole’ that consists of various parts, each with its own function, structure and relationship
to the other parts.
• The organism has the tendency to strive for a steady state or an equilibrium.
• All systems are open. This means that the organism is affected by the environment within which it
exists, and it also affects the environment.
There are many examples of the application of the general systems theory. Systems psychology, for
example, is a branch of psychology that studies human behaviour and experience in complex
systems. Systems engineering is another application, which can be viewed as the application of
engineering techniques to the engineering of systems, as well as the application of a systems
approach to engineering efforts. The general systems theory can also be applied to corporates,
which, similar to other organisms, comprise many parts that make up the whole. These parts are,
for example, employees, teams, processes and procedures, systems and structures. All these parts
are interdependent and work together to achieve the corporate’s goals and objectives. The
corporate is also dependent on the environment for supplying resources or inputs (such as human
resources, physical resources, capital and information) that are transformed within the
organisation, offering the outputs (products and services) to the environment. Applying the systems
theory to corporates, it is important to note that corporates also strive to remain in balance and that
corporates are open systems – they are affected by the environment and the environment is also
affected by corporates. Furthermore, all the resources (or inputs) that corporates take from the
environment, are limited, whilst the needs of the consumer in terms of the outputs offered by
corporates, are unlimited. This brings us to the application of the general systems theory to
sustainable development, which will be highlighted in our discussion that follows.
2.3 What is sustainability?

.2
The Brundtland Report marked the point of departure for the sustainability debate. In its most
simplistic form, sustainability means to maintain, to keep being, to preserve and to support, with
structures to hold on to. To be sustainable means to sustain resources and the uses thereof, to avoid
meltdown and failure.21
Sustainability cannot simply be implemented. It is an all-inclusive design, with present and
future considerations – looking at the long term, and the ‘big’ picture. Sustainability connects the
three dimensions of ecology, the economy and social justice. These three dimensions need to be
connected in a gentle manner. For example, society relies on the economy for employment, goods
and services, and it relies on the environment for the air we breathe, the food we eat and the water
we drink. The economy relies on the environment for natural resources and it relies on society for
human capital. While the environment does not need society, nor the economy for its existence, in
order for an economy to flourish in the long term, and for humanity to continue its existence, the
environment relies on society and the economy to respect and protect it. This connection fosters
new patterns of production and consumption, patterns that are compatible with the bearing
capacity of the ecosystems, in order to reduce humanity’s footprint on the environment. It is a
survival strategy and a call for new civilisation design – we already have the necessary intellectual
resources, the technologies, and the sensitivity for the values of human rights and human dignity.22
Sustainability can be seen as a science. It can also be described as an emerging field of research
dealing with the interactions between natural, social and economic systems, and with how those
interactions affect the challenge of sustainability.23 Sustainability is also multidisciplinary and
should not be limited to specific fields, such as biological sciences and geography. It is a concept
that pertains to engineers (who design our infrastructure), entrepreneurs (who develop innovative
solutions to societal problems), investors (who have the responsibility of investing society’s hard
earned money in the right institutions), and governments and policy makers (to ensure structures
such as legislation are put in place to protect society, the environment and business competitors).
Lastly, understanding sustainability in business management is a priority to ensure that
sustainability is embedded throughout all the functions of business.
The general systems theory can be applied to the three dimensions of ecology, the economy and
social justice. Each of these dimensions can be viewed as open systems. Each of these dimensions is
also dependent on all the other systems, with a tendency to remain in balance. Any action by any
part of the system that will lead to a state of disequilibrium, will lead to other actions with the aim to
return to a state of equilibrium. Sustainability, therefore, requires a balance in terms of each of these
dimensions.
2.3 What is development?

.3
Development as discourse emerged as a set of theories and practices that influenced the post WW II
evolution of the developing world. To develop means to grow, mature, progress, improve, advance
and to change.24 To an ecological economist however, growth is different from development, where
growth is quantitative (meaning an increase in size or an increase in production that can be
measured in quantity), while development is qualitative (meaning an improvement in the quality of
goods and services, with or without growth).25 Within the context of sustainable development, it is
important for us to realise that the qualitative and quantitative measures are of equal importance.
For example, we should not only consider the quantity of the resources provided in our natural
environment, we should also consider the quality thereof. To state this practically – it is good to
have a secure income, but what if the air in your part of the world is unclean and polluted?
The Brundtland Report explains ‘development’ more precisely within the context of sustainable
development,26 and we will look at this and ‘sustainable development’ more closely in the next
section.
2.3 Defining sustainable development

.4
To understand the compilation of the definition for sustainable development that will be used in
this book, let us take a look at some considerations and important statements of the Brundtland
Report.
The Brundtland Report was released in 1987. During this time, a paradigm shift occurred. Where
the focus in the past had been on various social concerns (such as inequality, social injustices and
poverty), it now moved to a focus on the environment. Various environmental problems (which also
vary in terms of urgency and complexity) were identified. Examples of these are global warming,
threats to the earth’s ozone layer, degradation of the environment and deserts that consume more
and more agricultural land. Although some members involved in writing the report felt that it
should only focus on environmental issues, Brundtland stated in her introductory message that
focusing only on environmental issues would have been a grave mistake. The main reason for this
statement is that the environment is part of a complex system and cannot be separated from human
actions, human needs and human ambitions. Therefore, the environment can never be analysed in
isolation and separately from the system in which it plays an important role. The use of the word
‘development’ has also been seen in isolation by many, thereby giving it a limited focus of what
poor (developing) nations should do to become richer (become ‘developed’). Many participants in
the international arena were of the opinion that ‘development’ was a concern for specialists
involved in issues such as ‘developing assistance’ in ‘poor nations’ needing the development.
Brundtland broke it down by stating that ‘the environment is where we all live; and development
is what we all do in attempting to improve our lot within that abode. The two are inseparable.’27 In
other words, the natural environment constitutes society’s home (abode), and it is in our (society’s)
nature to continue to improve our livelihoods in this home. As we improve these livelihoods, we
develop and use the environment as a means to do so – therefore, development cannot be
separated from the environment – which brings us back to an application of the systems theory!
Development issues must be seen as essential, even for the political leaders of developed
countries. For these countries, their development paths are unsustainable as natural resources are
being used faster than they can be replenished. In addition, the path to their development can be
attributed to the use of cheap and often exploited labour from developing nations. Although termed
‘developed’, the reality is that developed countries still continue to improve and therefore continue
to develop. Most developed nations have great economic and political power, and as a result are
often seen as benchmarks and examples for developing nations. For this reason, developed nations
need to be more mindful of their development decisions as they may influence the decisions of
developing nations and could consequently determine how society progresses into future
generations.
Developing countries need the environment to improve their livelihoods. To relieve the
deepening poverty in the developing world, action is needed by politicians and policy makers, to
ensure that environmental resources are safeguarded and managed respectfully, leading to
sustainable human progress and survival.
Consequently, Brundtland defined sustainable development as follows:
‘Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.’28
The term ‘needs’ in the above definition refers to essential needs, or the satisfaction of basic needs.
Development is thus placed in the context of the struggle against poverty, and the relationship and
contrast of wealth between the rich countries in the North and the poor countries in the South of the
globe (the so-called north–south justice). In the same breath, the report emphasises that the current
and future bearing capacity of the ecosystem must define the limits of technology and civilisation.
This means that the standard that is used for economic activity must not be the globalised markets,
but rather, the standard used should be the permanent bearing capacity of the ecosystems.
The Brundtland definition of sustainable development covers two basic dimensions that can also
be referred to as pillars – the social dimension (human needs), and the environmental dimension
(the imperative to preserve the ability to provide ecosystem services). However, the economic
dimension is missing from the definition. As a central issue in the report, economic growth is
viewed not as a goal for its own sake, but rather as a means for achieving the key aim of satisfying
needs while recognising the ecological limits established and shaped by society.29
When one comprehensively reads the Brundtland Commission’s report, it brings to light the
context within which the definition of sustainable development has been created – that is, a focus
on development and/or growth to meet society’s ever-changing needs, in a sustainable manner.
Sustainable development can be seen as a visionary paradigm that governments, corporates, and
civil society have accepted as a guiding principle over the past 20 years. While progress has been
made on sustainable development metrics, and improved corporate and NGO participation in the
sustainable development process, the concept still remains elusive and implementation has proven
difficult. Despite everything we know about the consequences of development at its current rate,
and while we have the vision to be sustainable, unsustainable trends (such as overfishing,
deforestation, exploitation of ‘cheap’ labour in developing countries and poor governance)
continue.30
The next section will focus on the three elements of sustainable development.
2 The elements of sustainable development
.4The issues presented in the previous section can be characterised into three elements of sustainable
development (also known as the three pillars of sustainable development): society, the environment
and the economy. This section first explains each of these elements in more detail, followed by a
discussion of the interconnectedness between these elements.
2.4 The core elements of sustainable development

.1
Society
The term society refers to people living in a particular country or region as a nation, where they
share customs, common traditions, values, laws, activities and interests.31 Humanity in its entirety is
society.
From the stage of early civilisation, the scale and pace of society’s interventions increased with
each development and elaboration of civilised life. As society developed, the tempo of development
quickened. From the seventeenth century, every index of growth, including population, energy, use
of food supplies, minerals consumed and urbanisation – began to increase.32
Consider the growth of the human population. World population edged up from the levels made
possible by neolithic agriculture to perhaps 400 million by the fall of Rome. Over a thousand years
later, in about AD 1600, it reached the first billion. Thereafter the acceleration increased as a result
of rising production in farms and factories as the Industrial Revolution gathered momentum and
was followed by a steady fall in the death rate, particularly in the infant mortality rate. The second
billion arrived after only 300 years, in 1900. The third billion took only 50 years and the fourth billion
was reached by 1980, taking only 30 years.33
The human population today is over 7 billion people. Of the 7 billion, 2.2 billion people live on
less than US$2 per day, which is the average poverty line in developing countries and a common
measurement of deep deprivation.34 Those people who live on the equivalent of US$2 per day to pay
for food to eat as well as non-food items, such as clothes to wear and shelter to live in, are
considered to be living on the poverty line; those people living on less than the equivalent amount
are considered to be living in poverty. While the equivalent of US$2 was R30 in 2016, the latest
update of the poverty line in South Africa was estimated by Statistics South Africa (Stats SA) as living
below R25,50 per day or R779 per month. According to Stats SA, 27 million people (of a population
of 53 million) live below the poverty line in South Africa. This means, just over half of the country’s
citizens live in poverty.35
Issues that humanity face include poverty, unemployment, inequalities between gender, race
and religion, inequalities among and within generations, between the rich and poor, disease,
extreme hunger, infant mortality, limited or no access to education; injustice; discrimination and
violence and effects of corruption and poor governance. As far as poverty is concerned, consider the
following facts.
The Human Development Report of 2014 indicated that people in most countries have been
doing steadily better in human development. Efforts around the world have led to advances in
technology, education and incomes hold greater promise for longer, healthier and more secure
lives. Globalisation has brought about positive gains. However, on a wide and great scale, there is
also a sense of precariousness (danger or risk) in terms of livelihoods, personal security, in the
environment and in global politics. Health and nutrition are examples of aspects of human
development that can quickly be weakened or taken away by an economic slump or a natural
disaster. Assault and theft can leave people physically and psychologically impoverished.
Unresponsive and corrupt state institutions can leave those in need of assistance without any. These
are critical aspects that all add to individual and community vulnerability. Although poverty
reduction has been reported, more than 15% of the global population (2.2 billion people) are either
near or living in multidimensional poverty (like development, poverty can also be
multidimensional, with metrics such as deprivation in health, education and standard of living,
taken into consideration alongside the monetary measures of poverty).36 Furthermore, 80% of the
global population lack comprehensive social protection, 12% suffer from chronic hunger, and
nearly half of all workers (which is more than 1.5 billion people) are in informal or precarious
employment.37
The environment
The environment is quite a broad term and can be seen as many things to many people. Within the
context of sustainable development, ‘environment’ refers to the natural environment – the
biosphere in which humanity and all other life on earth exists. It includes the earth’s land, oceans,
and atmosphere, ecosystems and biodiversity that give life. The environment makes up natural
capital, which is everything in nature that provides human beings with wellbeing including natural
resources, environmental amenities and the pollution absorptive capacity of the environment.
There are a variety of fundamental environmental issues that include climate change (which will
be discussed in great detail in section 2.9), natural resource wastage and non-renewable energy
sources, stress on biodiversity within ecosystems, and pollution that has wide- ranging and severe
impacts on the environment, as do toxins and chemicals. Environmental problems are not only
local problems, the issues are geographically interconnected in a global manner.
Society and the economy rely on natural resources and they should therefore be managed and
protected by politicians and decision makers, rather than rapidly exploited. This is necessary for a
sustainable future.
Environmental changes affect the other pillars of sustainable development – human wellbeing
depends on natural resources, which include water, arable land, fish and wood as well as ecosystem
services such as pollination, nutrient cycling and erosion control. Therefore, putting ecosystem
services at the core of planning and managing activities of governments, corporates and
development institutions that depend on natural resources brings economic and social benefits. 38
The economy
The term ‘economy’ is used when referring to a community’s system for using its resources to
produce wealth. The basic economic problem seeks to find answers to the following three
fundamental questions:
1. What should be produced from resources to increase the wealth of the community?
2. How should these be produced?
3. For whom should these be produced?
Economic growth is normally associated with an increase in productive capacity. In other words,
doing more with less, or using limited resources to gain the greatest possible satisfaction of people’s
unlimited needs. Traditionally, increases in capital stock, advances in technology and improvement
in the quality and level of literacy were considered to be the principal causes of economic growth.
However, sustainable development has brought in additional drivers of economic growth factors to
consider, which will be discussed below:39
• Energy. Economic growth in modern society has been driven primarily by the combustion of fossil
fuels. Almost all of our buildings and activities within them depend on electricity, mostly
generated by burning coal. Our food is produced with the help of petroleum-derived fertiliser
and petroleum-powered machinery, which then require more petroleum to transport through
the supply chain to eventually reach the consumer. Cities and suburbs in the developed world
are organised around infrastructure built for automobiles when oil was cheap and plentiful. We
live in a high-energy civilisation driven by a finite supply of fossil fuels, which have negative
effects on the environment, such as global warming, oil spills, acid rain and, in general, air
quality deterioration.
• Consumption. Society has developed an innate desire to acquire goods and services that have
assumed a central position in contemporary culture. Furthermore, much of what is consumed
consists of disposable, short-lived products that increase the rate of production and the flows of
materials and waste. This consumption-driven economic growth has in a large part contributed
to the destruction of the ecological and social fabric.
• Globalisation. Globalisation is seen as a controversial driver of economic growth. On the one hand,
it has positive effects on wellbeing and economic health, up to a certain level. On the other hand,
beyond a certain threshold, globalisation can contribute to social injustice and environmental
harm.
The following section will focus on the interconnections and potential trade-offs between society,
the environment and the economy.
2.4 Interconnections of the elements of sustainable development

.2
The various elements of sustainable development are all related and connected to each other.
Figure 2.1 illustrates the interconnectedness between these elements.
Figure 2.1: Interconnectedness of elements of sustainable development
The elements of sustainable development (the economy, the environment and society) should be
viewed in no particular order, meaning that the one is not more important than the other.
Furthermore, these elements should be balanced, so that one does not destroy the other. Every
decision that we make, every project that is considered, should be done in a sustainable context,
meaning that we should strive to link economic, social and environmental parts of the society to
strengthen it in totality. Each element of the overlapping circles is interconnected to demonstrate
the interaction between all areas of life.
To act in a sustainable development fashion, where the three elements are balanced and
interconnected, a major transformation in three areas is needed, namely (1) growth in population;
(2) how humans consume materials and resources; and (3) the role of technology in sustainable
development. These are discussed in more detail below:
1. Growth in population. Statistics pertaining to population growth were discussed in section 2.4.1.
We know that the current rate of population growth and/or growth rates in consumption of
resources cannot be sustained. We also know that the larger the population of a society and/or
the larger its rate of consumption of resources, the more difficult it is to transform the society to
a condition of sustainability. Therefore, population growth needs to be transformed.
2. How humans consume materials and resources. We have indicated numerous times in this chapter
that the current human consumption of material and resources cannot be sustained. In order
to transform this situation, environmental limits need to be defined in no uncertain terms.
Furthermore, attention needs to be given to aspects such as the more effective and efficient use
of materials and resources; the reduction of waste; the prevention of pollution; educating
society in terms of the sustainable use of resources and materials; and changing the perception,
attitude and behaviour of the society towards a more ethical and responsible use of resources.
3. The role of technology in sustainable development. The development of new technology and
technology transfer need to be mindful of the effects thereof on sustainable development. The
focus should be on a win-win situation for the environment, society and the economy.
Sustainable development does not mean a return to some sort of pre-industrial lifestyle. It’s
about getting a better quality of life, not worse, where the key is to use technology to ensure
sustainable development.
DILEMMA
Water – essential to life
Water is essential to life on earth, to everything in life – health, agriculture, food, energy, transportation,
nature, leisure, and pretty much all the products used on a daily basis. Well, aren’t we lucky that over
two-thirds of the earth’s surface is covered by water?
Yes and no. Despite the vast quantity of water on earth, the majority of this water is held by the
oceans. This leaves only 0.5% of the world’s water resources available to provide for the freshwater
needs of our planet’s ecosystem and population. Unfortunately, this water is not evenly distributed
around the globe. No more than 10 countries possess 60% of this water supply.
In many cities around the world, groundwater is being used at a much faster rate than it is being
replenished, while poor maintenance of aging water networks waste more than 40% of its water supply
through leaks and cracks. While water is being wasted in some parts of the world, other parts still lack
access to fresh water supply.40
The Water Project website (http://thewaterproject.org) reveals some statistics of the ‘water crisis’:
• 783 million people do not have access to clean and safe drinking water (37% of those people live in
sub-Saharan Africa).
• In developing countries, approximately 80% of illnesses are linked to poor water and sanitation
conditions.
• Almost one out of every five deaths under the age of five worldwide is due to a water-related disease.
• Approximately 64% of households rely on women to get the family’s water when there is no water
source in the home. Girls under the age of 15 are twice as likely as boys to be the family member
responsible for fetching water. The average container for water collection in Africa, the jerry can,
weighs over 20 kg when full.
• Over half of the developing world’s primary schools don’t have access to water and sanitation
facilities. Without toilets, girls often drop out of school at puberty.
• Globally, 443 million school days are lost each year due to water-related diseases.
• The United Nations estimates that sub-Saharan Africa alone loses 40 billion hours per year collecting
water; the same as an entire year’s labour in all of France!
Consider your personal situation regarding access to fresh water and take note of the amount of water
you use per day.
The dilemma box above paints a daunting picture of the worldwide availability of sufficient water
resources. In many countries, water conservation programmes are implemented to address this
issue. One such country is Singapore and the box on the next page provides an overview of the
governments’ endeavours (and huge successes) in water conservation.
In the next section, we will focus on the impact of society’s actions on the natural environment,
referred to as society’s ecological footprint.
2 Society’s ecological footprint

.5
Society’s ecological footprint revolves around the relationship between society’s current economic
model of development and the impact is has on the environment.
From our previous discussions, we now know that economic development is taking place beyond
the limits of the planet. Meadow, Randers and Meadows41 refer to this as the overshoot. This
overshoot usually occurs unintentionally, in other words, accidentally.
In most instances, an overshoot may cause little harm to the environment. However,
occasionally the potential for catastrophic overshoot does arise. A possibility of such an overshoot is
our planet’s accelerating population growth and its materialistic economy, which is surpassing the
support capabilities of the earth. This relationship between humanity’s demands on the planet and
the planet’s actual capacity to provide for those demands, is phrased the ecological footprint (EF).
The EF is ‘a measure of how much biologically productive land and water an individual, population
or activity requires to produce all the resources it consumes, and to absorb the waste it generates,
using prevailing technology and resource management practices’.42
The EF is calculated by the amount of land that would be required to provide the natural
resources consumed by a population and to absorb their wastes. To calculate the EF, a
mathematical approach is required, which was first presented by Mathis Wackernagel and his
colleagues for the Earth Council in 1997. It was later adopted by the World Wide Fund for Nature
(WWF), which now provides data on the ecological footprint of more than 150 nations in its annual
Living Planet Report.43
According to the 2014 Living Planet Report (the most recent publication at the time of writing this
book), populations of mammals, birds, reptiles, amphibians and fish, have dropped by 52%
between 1972 and 2010. By measuring the rate of their demise, it acts as a barometer of what we are
doing to the earth, our only home.45
Example
Water conservation in Singapore44
Singapore has a land area of 714.3 km2. Although surrounded by oceans, Singapore lacks natural
resources, especially water, to sustain a growing population (from 3.04 million in 1990 to the current
5.18 million). Singapore’s government implemented a water conservation programme, focusing on
both the supply and the demand for fresh water.
Water supply
With the lack of natural fresh water and the country’s limited water catchment areas, the government
managed to increase water supply with the help of its neighbouring country, Malaysia. Initially, 80% of
Singapore’s water came from Malaysia. This over-reliance on Malaysia, became a weakness for
Singapore. With this in mind, Singapore’s government implemented the following programmes to
increase the country’s water supply:
• Local water catchment areas. Water catchment areas have been developed from half to two-thirds of
Singapore’s land area.
• Imported water. The government succeeded in reducing the country’s water imported from Malaysia
from 80% to the current 40%.
• NEWater. NEWater treats used water with reverse osmosis, making water recyclable. Four plants of
NEWater are currently used, producing 30% of the nation’s water needs.
• Desalinated water. Desalinated water comes from sea water and is also based on reverse osmosis.
Water desalination provides 25% of the country’s water needs.
• Sanitation. Waste water in Singapore was, until 2010, collected through a sewer system that included
139 pumping stations. The stations pumped water to six waste water treatment plants. These will
gradually be decommissioned while a new system, the Deep Tunnel Sewerage System, becomes
operational. The latter consists of a 48 kilometre-long, deep tunnel sewer that runs below ground
and channels water to a reclamation plant. Most of the treated used water is discharged into the
sea, while some of it is further purified into NEWater. The amazing feature of the deep tunnel is that
it works entirely on gravity – eliminating the need for pumping stations and reducing the risks of
overflows.
• Storm water management. A storm water drainage system is used, consisting of public roadside
drains and major canals and waterways that are carefully maintained. Since its implementation, this
system has reduced the flood-prone area of the country drastically.
Demand for water

Singapore’s government implemented various initiatives to lower the nation’s demand for water. For
example, the aim of the water conservation awareness programme is to decrease per capita domestic
water consumption, which proved to be a very successful programme. The country’s per capita
domestic water consumption has decreased from 165 litres per day in 2003, to a current 150 litres per
day. The government’s target is a consumption of 147 litres per day by 2020 and 140 litres per day by
2030. Various educational programmes were launched, focusing on educating the public on water
conservation.
The ‘barometer’ mentioned above, is just one of the many indicators reflecting humanity’s heavy
demand upon the planet, it reflects that we are using nature’s gifts (resources) as though we had
more than just one planet at our disposal. We are taking more from our ecosystems and natural
processes than can be replenished! How could this not jeopardise our future? Nature conservation
and sustainable development go hand-in-hand. It is not only about preserving biodiversity and wild
places, but also just as much about safeguarding the future of humanity – our wellbeing, economy,
food security and social stability – indeed, our very survival.46
As stated in the introduction, with humanity’s current demands on nature each year, we would
need 1.5 earths in order to meet these demands. Humanity’s demands include the following:
renewable resources that we consume for food, fuel and fibre; the land which we build on, as well as
the forests we need to absorb our carbon emissions. For more than 40 years, humanity’s demand on
nature has exceeded what our planet can replenish. The ecological footprint (which measures the
area, in hectares, required to supply the ecological goods and services we use) outstrips our
biocapacity (which is the land actually available to provide these goods and services). Humanity’s
demand has exceeded the planet’s biocapacity, which is the amount of biologically productive land
and sea area that is available to regenerate these resources. With this overshoot, which continues to
grow, it is becoming more and more difficult to meet the needs of an ever-growing global human
population, never mind meet the needs (in terms of just space) for other species that we share this
earth with. Adding to this complex situation, is the uneven distribution of resources between
developing and developed nations. For example, people in industrialised countries are consuming
resources and services at a much faster rate than those in developing countries.48
Example
Footprint facts47
At the start of this section, we explained the ecological footprint (EF). While we discussed the EF in
general, there are various ways in which the EF can be measured. Footprints can be measured
globally, regionally, at an individual level, or based on specific activities to produce a product or a
service. Furthermore, the EF can be broken down into more specific metrics such as a water footprint
and a land footprint.
• More than half of the total EF is attributable to the global carbon footprint.
• Agriculture accounts for 92% of the global water footprint (humanity’s growing water needs and
climate change are intensifying the challenges of water scarcity).
• The dual effect of an increasing population and a footprint per person will in turn multiply the pressure
placed on the earth’s ecological resources.
• The EF per capita of high-income countries is five times more than that of low-income countries.
• When importing natural resources from other countries, biodiversity loss is effectively being
outsourced. According to the Living Planet Report, high-income countries appear to show a 10%
increase in biodiversity, while middle-income and low-income countries appear to show declines in
biodiversity of 18% and 58% respectively. This could be attributed to high-income countries
extracting resources from middle-and low-income countries.
• Countries with a high level of human development tend to have higher EFs – their challenge is
increasing human development whilst at the same time, keeping their footprint down to globally
sustainable levels.
• The earth has planetary boundaries with regulating processes that keep it in a stable state where life
can thrive. Crossing these boundaries could cause irreversible environmental changes. Three
boundaries have already been crossed, biodiversity loss, climate change and nitrogen. Nitrogen is
essential to global food security but nitrogen pollution has severe impacts on aquatic ecosystems,
air quality, biodiversity, climate and human health.
This ‘overshoot’ has been possible, for now, but the sum of all human demands no longer fits
within what nature can renew – the consequences have lead and are continuing to lead to
diminished resource stocks and waste is accumulating faster than it can be absorbed or recycled.
For example, the carbon concentration in the atmosphere is growing; to prevent an overshoot, this
carbon concentration could be reduced by increasing efficiencies in the use of resources and energy
through technological innovations.
Our economic prosperity and our wellbeing are reliant upon the natural capital provided by a
healthy planet. It may appear as though protecting nature is a luxury in a world where so many
people live in poverty. However, Marco Lambertini (director general of WWF International) assures
us it is the opposite. For many of the world’s poorest people, protecting nature is a lifeline. However,
despite the differing economic standings between developed and developing nations, we are all in
this together – we all need food, fresh water and clean air to live healthy lives. 49
How do we recognise the needs and aspirations of people, and ensure the right to economic
development, all the while protecting the environment? The authors of this book aim to answer
these questions in their respective chapters.
Given what we have learnt about society’s ecological footprint (EF), the example box on the
previous page illustrated some of the realities of society’s footprint on the earth.
In the preceding sections, the emergence and elements of sustainable development were
explained and we have discussed the implications of the ecological footprint. In the next section,
attention will be given to the various views of sustainability.
2 Views of sustainability
.6
Many questions about sustainability as a science are being asked continuously, whether by
philosophers, corporate managers, civil society, government, or even the layperson or someone
hearing about the ‘concept’ as a ‘thing’ for the first time. One way to understand why the questions
regarding sustainability are being asked, is to understand different views of sustainability. In this
case, we look simply at the weak and strong sustainability debates. The debate around the weak
and strong views of sustainability science covers the question of whether natural capital should be
regarded as substitutable or as complementary to human capital. Within this context, human
capital refers to produced capital such as infrastructure, labour and knowledge. Natural capital
covers the stock of the environmental assets such as fossil fuel, biodiversity and other ecosystem
structures and functions relevant for ecosystem services. These broad views are presented by
Hopwood, Mellor and O’Brien and are addressed below:50
• Weak sustainability. This view sees natural and human capital as substitutable with each other. In
other words, human capital can substitute natural capital. An example of weak sustainability
could be the mining of coal and using it for the production of electricity. The natural resource
(coal) is replaced by a manufactured good (electricity). The electricity is then in turn used to
improve domestic life quality and for industrial purposes.
• Strong sustainability. Natural capital is vital to human existence. The strong viewpoint of
sustainability states that human capital cannot be a substitute of the multiple processes
applicable to natural capital. This viewpoint further states that human capital and natural
capital should be seen as complementary and not as two variables that are interchangeable or
substitutable. This viewpoint also accepts that there are certain functions that the natural
environment performs that cannot be duplicated by humans. The ozone layer is a good example
of a variable in the natural environment (which is crucial for human existence) that is almost
impossible for humans to duplicate. By the same token, photosynthesis and the water cycle are
variables in the natural environment that cannot be duplicated by humans, although both
variables are crucial for human existence.
Viewers of strong sustainability may wish to pursue this paradigm for a number of reasons:
• The loss of some natural capital may be irreversible.
• There remains considerable ignorance, uncertainty and risk attached to the way in which natural
capital works (for example, there is ongoing research of the global carbon cycle) – in other
words, we cannot be entirely sure what the damaging effect will be. This takes into account the
precautionary principle that simply states: if you are not sure whether you can fix it, don’t break
it.
• There is evidence suggesting we are more averse (opposed) to losses in utility than we are keen to
gain it. This implies that we are highly averse to losses in natural capital functions that directly
provide us with utility. This includes, for example, basic life support such as drinkable water and
clean air.
• The ethical argument for non-substitutability that suggests that increased future consumption is
not an appropriate substitute for natural capital losses.
In his inaugural address in 1961, USA President JF Kennedy said:
‘For man holds in his mortal hands the ability to end all forms of human poverty and all forms
of human life’
J.K. Kennedy
This address reveals a great paradox of our time. On one hand, we have invented incredible
technologies (for example, the internet which has created global connectivity and vaccinations
against deadly diseases). With the power of these technologies, it makes it possible to foresee the
end of extreme poverty, control of disease, and success in the battle against hunger. On the other
hand, these technological opportunities and successes could threaten our very survival, if poorly
guided, governed and implemented.51
The following section focuses on the responses to the challenge of sustainable development.
2 Responses to the challenge of unsustainable development

.7
Earlier in this chapter we presented a brief history of the sustainable development movement. This
section covers the response to the challenge of unsustainable development since 1992.
2.7 Rio Summit 1992
.1
The United Nations Conference on Environment and Development (UNCED), also known as the
Earth Summit, was hosted in Rio de Janeiro, Brazil, in 1992. The primary output of the UNCED was
Agenda 21, a comprehensive plan of action to be taken locally, nationally and globally in every area
in which humans impact on the environment.
Agenda 21 addressed the problems pressing at the time of meeting and aimed at preparing the
world for the challenges of the next century. It reflected a global consensus and political
commitment at the highest level on development and environment co-operation, with the notion
that special attention should be given to the particular circumstances facing economies in
transition.52
2.7 The Millennium Declaration

.2
By the year 2000, implementation of the actions set out in Agenda 21 had not yet been sufficiently
addressed. In September 2000, the United Nations Millennium Declaration was adopted by the 189
Member States of the United Nations. This declaration embodied a number of specific
commitments, which aimed at improving the ‘lot of humanity’ in the new century. Amongst other
commitments, the Millennium Development Goals (MDGs) were developed and are presented
below: 53
• Goal 1: Eradicate extreme poverty and hunger
• Goal 2: Achieve universal primary education
• Goal 3: Promote gender equality and empower women
• Goal 4: Reduce child mortality
• Goal 5: Improve maternal health
• Goal 6: Combat HIV/Aids, Malaria and other diseases
• Goal 7: Ensure environmental sustainability
• Goal 8: Develop a global partnership for development
Each of the above goals had a set of targets and indicators for development, to be realised by the
year 2015, allowing a 15-year time-frame for their achievement. The eight goals represent a
partnership between the developed countries and the developing countries determined, as the
Millennium Development states, ‘to create an environment – at the national and global levels alike –
which is conducive to development and the elimination of poverty.’ 54
While the MDGs were not entirely achieved by the year 2015, Ban Ki-Moon, the Secretary
General of the UN noted that the global mobilisation behind the MDGs produced the most
successful anti-poverty movement in history. The landmark commitment of the MDGs entered into
by world leaders in 2000, was to ‘spare no effort to free our fellow men, women and children from
the abject (hopeless) and dehumanising conditions of extreme poverty’. This commitment,
translated into the framework of the MDGs and practical steps that have enabled people across the
world to improve their lives and their future prospects.55
DILEMMA
The following extract is taken from section 1.1 of Agenda 21 (United Nations Division for Sustainable
Development, 1992).
‘Humanity stands at a defining moment in history. We are confronted with a perpetuation of

disparities between and within nations, a worsening of poverty, hunger, ill health and illiteracy, and
the continuing deterioration of the ecosystems on which we depend for our wellbeing. However,
integration of environment and development concerns and greater attention to them will lead to
the fulfilment of basic needs, improved living standards for all, better protected and managed
ecosystems and a safer, more prosperous future. No nation can achieve this on its own; but
together we can – in a global partnership for sustainable development.’
Almost 25 years later, do you believe Agenda 21 was ambitious or not ambitious enough?
2.7 World Summit on Sustainable Development (WSSD), Johannesburg 200256

.3
At the WSSD, the representatives from around the world reaffirmed their commitment to
sustainable development, with a determination to ensure that their collective strength would be
used for constructive partnership for change and for the achievement of the common goal of
sustainable development. The conference recognised the importance of building human solidarity,
urged the promotion of dialogue and co-operation in the world, regardless of race, disability,
religion, language, culture or tradition.
2.7 Rio+20 (The Future we want)57

.4
Twenty years after the Earth Summit, world leaders returned to Rio de Janeiro for the Rio+20 United
Nations Conference on Sustainable Development (UNCSD). At this summit in 2012, the 2030
Agenda for Sustainable Development was drafted, only to be signed-off at the United Nations
Sustainable Development Summit in 2015. This agenda is a plan of action centred on people, the
planet and prosperity, as well as seeking to strengthen universal peace in greater freedom. It is
recognised that eradicating poverty in each of its dimensions and forms (which includes extreme
poverty), is the greatest challenge and a crucial requirement for sustainable development. The
agenda resolves to free the human race from the oppression of poverty and hungers to rectify our
wrongs and protect the planet for a secure future.
As an outcome of the Rio+20 Summit and included in the 2030 Agenda for Sustainable
Development, the areas of critical importance for humanity and the planet were summarised into
five key areas, also called The 5 Ps. The 5 Ps have been placed in a table as presented in Table 2.1.
Table 2.1: The 5 Ps - Key areas of importance for humanity and the planet58
The 5 Ps The Agenda is determined to…

People end poverty and hunger (in all forms and dimensions) and to ensure that all
human beings can fulfill their potential, in dignity, equality and in a healthy
environment.
Planet protect the planet from degradation, (including) through sustainable
consumption and production, sustainably managing the earth’s natural
resources and taking urgent action on climate change, so that it can support
the needs of the present and future generations.
Prosperity ensure that all human beings can enjoy prosperous and fulfilling lives and that
economic, social and technological progress occurs in harmony with nature.
Peace foster peaceful, just and inclusive societies, which are free from fear and
violence. Sustainable development cannot be without peace and there can
be no peace, without sustainable development.
Partnership mobilise the means required to implement the 2030 Agenda through a
revitalised Global Partnership for Sustainable Development, based on the
spirit of strengthened global solidarity, focused in particular on the needs of
the poorest and most vulnerable and with the participation of ALL countries,
ALL stakeholders and ALL people.
Source: From 70/1. Transforming our world: the 2030 Agenda for Sustainable Development. Resolution
adopted by the General Assembly on 25 September 2015. © 2015 United Nations. Reprinted with the
permission of the United Nations.
The outcome documents were built upon the foundations laid in the Stockholm Declaration of
the United Nations Conference, the Rio Declaration and reaffirmed commitment to implement the
Rio Declaration, Agenda 21, the Plan of Implementation of the WSSD, and other plans and
programmes of action committed to by the many UN conferences which took place the world. The
main document was titled the Future we want, it contained the newly formulated Sustainable
Development Goals (SDGs), which will be presented in brief in section 2.7.5 below.
2.7 United Nations Sustainable Development Summit (the post-2015 Agenda)

.5
and the Sustainable Development Goals (SDGs)
These goals were signed into agreement by the UN General Assembly in New York at the United
Nations Sustainable Development Summit 2015 (also referred to as the United Nations Summit for
the Adoption of the post-2015 Development Agenda). This summit was held during September 2015,
and the SDGs came into effect on 1 January 2016.
In 2015, governments, institutions, corporates, and citizens came together to embark on a new
path to improve the lives of people everywhere, where decisions made ‘will determine the global
course of action to end poverty, promote prosperity and wellbeing for all, protect the environment
and address climate change.’ A new sustainable development agenda and a new global agreement
on climate change was adopted. The actions resulted in the new SDGs.59
There are 17 SDGs that comprise 169 detailed targets, demonstrating the scale and ambition of
the new worldwide agenda that seeks, among other ambitions, to build on the MDGs and complete
what they did not achieve. This includes realising the human rights of all people and particularly to
achieve gender equality (which includes the empowerment of all women and girls).60
The 17 SDGs are presented in Table 2.2 below.61
Table 2.2: Sustainable Development Goals
Source: Reprinted by permission of The United Nations; Project Everyone https://www.project-everyone.org/
and Trollback and Company http://trollback.com/
The next section concludes our discussion on sustainability, by focusing on the future thereof.
2 The future of sustainable development

.8
At the time of writing this book, it has been 28 years since the official ‘launch’ of the term
‘sustainable development’. While the traction in accepting and understanding the concept has been
slow, perhaps it was unrealistic creating a time-frame to implement the needed changes on such a
challenging and complex issue. The needed systematic changes will require a revolution in the way
that the world does business. This will have an impact on lifestyles and consumption patterns – in
both developed and developing nations. A totally new development path is needed – one that is
truly concerned with equity, poverty alleviation, reducing resource use, and the integration of
economic, environmental and social issues in decision making. Moving to this new path will require
the following:
• Considering wider social, economic and geopolitical agendas. Many of the needed decisions and
actions will take place outside the environment/community in the fields of energy, security,
trade and investment, and development and co-operation. It will mean breaking down silos and
looking at growth in an integrated perspective.
• Fundamentally shifting how we develop and evaluate the health of economies. New metrics are
needed to measure and report on the interconnectedness of various agendas such as trade,
finance, environment and food.
• Moving to actual implementation with real accountability. Concrete action is needed that includes
measureable activities.
• Encouraging transparency and accountability in actions. The impact of actions should be
measured, not just what actions have been taken. A new path must be performance based.
• Using partnerships between government, business and civil society. These partnerships should be
used to identify and test new approaches, and to scale up promising ones.
• Effectively communicating sustainable development successes, policies and learning. A
communications vehicle that has effective access points will help kick-start and maintain
implementation of sustainable development.
The last section of this chapter looks at climate change within the context of sustainable
development.
2 Climate change in the context of sustainable development

.9
In section 2.3.1 of this chapter, the systems theory was discussed, highlighting the fact that
corporates can be viewed as open systems, utilising inputs from the environment, transforming it
into outputs in the form of products and services, which are then made available to customers.
Corporates are therefore dependent on the environment to be sustainable. Changes in the
environment affect corporates, governments, nations and individuals. Climate change is only one of
the changes that occur in the environment, affecting our lives as we know it. However, the effects of
climate change are so significant, that we need to single it out in terms of sustainable development.
In this section, we will first define climate change, followed by present day climate change facts. We
also explain strategies for addressing climate change, followed by a discussion of ways in which
corporates can participate in climate action.
2.9 Climate change defined
.1
A change in the average long-term weather conditions or weather patterns (such as average rainfall
and temperature), when these changes last for extended periods of time (typically decades or even
longer) is referred to as climate change. When changes in weather conditions and patterns occur
over shorter periods of time (such as a year or even a few years, but less than a decade), these do not
constitute climate change.
Changes in weather conditions and patterns are mainly caused by two factors – human activity
and changes that might have occurred as a result of the earth’s natural processes. However, the
term climate change is used to refer only to changes in weather conditions and patterns caused by
human activity. For this reason, climate change has become a synonym for the term ‘anthropogenic
global warming’, which refers to the production of greenhouse gases emitted by human activity. It is
important to note that the term ‘global warming’ refers to an increase of the earth’s temperature.
Climate change, on the other hand, refers to global warming and it includes all the other factors that
are causing increasing levels of greenhouse gas level effects. Swedish scientist Svante Arrhenius
(1859 – 1927) was the first person to conduct research into climate change caused by human
activity. In 1896, his research indicated that the onset of the Ice Age 2.5 million years ago can be
explained by human activity. His work was the first research that connected the levels of
atmospheric gases with the surface temperature of the earth.
2.9 Climate change facts

.2
Scientists agree on a number of facts pertaining to climate change. The following list provides an
idea of these points (and is certainly not an exhaustive list of facts):
(i) There is consensus on climate change. The scientific consensus in terms of climate change is that
the earth’s climate is changing and these changes are in large part caused by human activities,
and are largely irreversible. Many independent scientific organisations and individuals
worldwide also agree that the human activities causing climate change are posing significant
risks to a broad range of human and natural systems. There is also consensus that climate
change is primarily caused by excess greenhouse gases from human activities. Lastly, there is
also consensus that nations, corporates and individuals should take action in order to reduce
the future risks and consequences thereof. To curb climate change, countries have signed a
variety of agreements to try to reduce carbon emissions. The Kyoto Protocol, signed by 192
countries since 1997, aims to hold the average temperature increase below 20 C by cutting
carbon output.62
(ii) There is evidence that proves that the earth’s temperature is increasing and causing other changes
in the natural environment. This evidence indicates that (1) the global average temperature
increased by more than 0.8°C over the last century; (2) rising global temperatures have been
accompanied by other changes in weather and climate, for example, changes in rainfall and
more intense rain as well as more frequent and severe heat waves; (3) the planet’s oceans and
glaciers have also experienced changes, and oceans are becoming warmer and more acidic, ice
caps are melting, and sea levels are rising.63
(iii) Human activities are mainly responsible for the climate changes observed today. The earth goes
through natural cycles of warming and cooling, which are caused by factors such as changes in
the sun and volcanic activities. Scientists observed these changes closely and concluded that
the warming we experienced in the past 50 years cannot be explained by these natural forces
alone. In contrast, the warming that is observed is consistent with the warming properties of
four principal greenhouse gases that humans are adding to the atmosphere: carbon dioxide,
methane, nitrous oxide and the halocarbons (which is a group of gases containing fluorine,
chlorine and bromine). These gases accumulate in the atmosphere, causing concentrations to
increase over time. For example, carbon dioxide has increased from fossil fuel used in
transportation, building heating and cooling, and the manufacturing of cement. Deforestation
releases carbon dioxide and reduces its uptake by plants. An increase in methane is a result of
human activities related to agriculture, natural gas distribution and landfills. An increase in
nitrous oxide is caused by activities such as the use of fertiliser and the burning of fossil fuels.
Lastly, an increase of halocarbon gas concentrations is causing ozone depletion, mostly as a
result of refrigeration agents and in other industrial processes.64
(iv) Too much carbon dioxide can hurt us. Carbon dioxide is a necessary ingredient for plants to
perform photosynthesis. Carbon dioxide is also a critical element of our atmosphere. However,
if too much carbon dioxide is added to the atmosphere, global temperatures will increase,
leading to climate changes that can harm plants, animals and humans.65
(v) Climate change has an impact on society, the corporate sector, professions, industries and
individuals.66 As a society, we have structured our lives around historical and current climate
actions. We are accustomed to a normal range of conditions and may be sensitive to extremes
that fall outside of this range. Similarly, the corporate sector is structured in such a way as to
provide society with products and services that are needed, in the conditions to which we are
accustomed. Corporates are therefore also sensitive to extremes that fall outside this range.
Some types of professions may also face considerable challenges from climate change. For
example, professions that are closely linked to weather and climate, such as outdoor tourism
and agriculture, will likely be more affected than others. Climate change also has an effect on
industries, such as the insurance industry. Insurance is one of the primary mechanisms used to
protect people against weather-related disasters. We also rely on insurance to protect our
investments in real estate, agriculture, transportation, and utility infrastructure by distributing
costs across society. It is projected that climate change will increase the frequency and intensity
of extreme weather events, which will in turn increase losses of property and cause costly
disruptions to society. Individuals are affected by climate change in a number of ways. For
example, we have a great appetite for meat, which is a major driver of climate change.
Reducing global meat consumption will be critical to keep global warming below the danger
levels. Livestock accounts for 15% of global emissions, which is equivalent to exhaust emissions
from all the vehicles in the world. A shift towards lower meat-eating patterns could effect a
quarter of the emission reductions that we need. Some groups in our society will be affected
more by climate change than others. Climate change may especially impact on people who live
in areas that are vulnerable to coastal storms, drought, and sea level rise, or people who are
poor. Society, corporates, professionals, industries and individuals are also greatly affected by
changes in legislation pertaining to climate change. For example, new legislation requires
corporates to have policies and procedures regarding their manufacturing processes and
management of waste in place, and to actively aim to reduce greenhouse gases (as explained in
(iii) previously) released in the atmosphere through their everyday business activities. Society,
workers, clients and governments also scrutinise corporates to ensure that these policies and
procedures are implemented.
Since the first research conducted in 1896, science has made a huge contribution towards our
understanding of climate change, its causes, and the current and potential impact thereof on
humans, corporates and nations. This understanding will make it possible for decision makers to
factor it in other large challenges facing nations worldwide. One such challenge is sustainability or
sustainable development, and we need to investigate climate change in the context of sustainability.
In the following section, we investigate the various strategies that can be implemented to address
climate change in the context of sustainability.
2.9 Strategies for addressing climate change

.3
Climate change can be addressed by following two strategies: climate change mitigation and
climate change adaptation.
Climate change mitigation
By following a climate change mitigation strategy, the extent of climate change is limited through
reducing greenhouse gas concentrations. This mainly entails a reduction and conservation of oil,
gas and coal, which are the fossil fuels that are used in transportation, heating and cooling systems,
agriculture, and the generation of electricity by humans. The main aim of a climate change
mitigation strategy is to transform the global economy that is currently fuelled by carbon-based
sources of energy. How is this done? Renewable and alternative energy sources are used to replace
carbon-intensive fuels – which is the key to decarbonising the current energy infrastructure.
Alternative energy sources are already available. These sources produce energy at costs comparable
with coal and natural gas. For many corporates and nations, research in alternative energy sources
that will improve the effectiveness and availability of such technologies, is a priority.
Climate change mitigation strategies should be complemented by climate change adaptation
strategies. Climate changes that are already occurring (climate change facts were discussed in
section 2.9.2 of this chapter) are predicted to increase in future – forcing corporates and nations to
combine climate change mitigation with climate change adaptation strategies.
Climate change adaptation

A climate change adaptation strategy refers to changes in the way society lives in response to
climate change. Society can make changes regarding its ecological, social and economic systems.
Also, society can change traditional processes and practices as well as structures in order to (i) limit
the potential damages caused by climate change; and (ii) reduce the vulnerability of communities,
regions and individuals. Climate change does not only constitute threats – it can also lead to new
opportunities that individuals and corporates can benefit from.
Examples of climate change adaptation in various sectors, which may occur at the population,
community, corporate or personal levels of the sector, are provided below:67
• Human health. Many diseases and health problems may be exacerbated by climate change. These
can be effectively prevented with adequate financial and human public health resources,
including training, surveillance and emergency response as well as prevention and control
programmes. The effectiveness of adaptation to these changes will depend on the level of
financial resources, the effectiveness of governance and civil institutions, the quality of public
health infrastructure, and the pre-existing burden of disease. Therefore, it would be important to
conduct research in this field in order to understand the associations between climate, weather,
extreme events and diseases.
• Insurance and other financial services. Changes in the frequencies and intensities of extreme
weather events will have an impact on financial and insurance services over the short term. Over
the longer term, increasing risk due to climate change, may lead to a greater demand for
insurance and other financial services. However, it will require the development of new financial
risk management products. For example, the terms and conditions of insurance policies, the
structure of insurance premiums and the requirements needed to be insured, might need to be
changed. The variability of loss events would lead to greater uncertainty that will lead to higher
risks, leading to higher costs and insurance premiums. It may also lead to various other
adaptations on the part of the insurers, such as the non-renewal of policies, cessation of new
policies, limiting maximum claims and raising deductibles.
• Human settlements. Human settlements in developing countries are most affected by climate
change. Urban managers of corporates in these countries very often have little capacity to deal
with some of the issues they experience in these environments, such as lack of proper housing,
lack of sanitation, and intermittent access or complete lack of access, to water and electricity.
This creates an unfortunate situation in which dealing with climate change risks is simply
beyond their means or priorities seeing as they have more immediate issues to deal with. Lack of
financial resources, weak planning and weak institutions, and inadequate planning are all
barriers to adaptation in human settlements. Corporates can and should play an important role
in these human settlements – many of their employees and other stakeholders might live in
these communities. Corporates should administer citizenship rights to their stakeholders
through, for example, paying their employees a proper remuneration to improve their physical
living environments. Corporates can also play a role in organising and funding educational
programmes in these communities in order to empower their employees and the community in
which they operate as a whole, to improve their living conditions.
• Coastal zones. Coastal communities and marine-based economic sectors with either low exposure
or high adaptive capacity will be least affected by climate change. Communities with less
economic resources, poorer infrastructure, less-developed communication and transportation
systems, and weak social support systems, have less access to adaptation options and are thus
more vulnerable. Climate change adaptation strategies in this sector should be incorporated
into coastal zone management, disaster mitigation programmes, land-use planning, and
sustainable development strategies. The adaptive capacity of coastal systems to perturbations
(changes to the normal or regular state of the climate) is related to coastal resilience – including
the technical, institutional, ecological and socio-economic components. Enhancing resilience is
an appropriate adaptive strategy to implement, given future uncertainties and the desire to
maintain development opportunities.
• Ecosystems. There are possibilities for adaptation strategies in agriculture, including crop changes
and resource substitutions. Adaptations in agriculture will not happen without considerable
transition costs. Various studies reveal that climate change impacts on plant growth stages, it
affects migration patterns of animals, and it threatens the survival of many species and also the
quality of water. Strategies to protect our vulnerable ecosystems from climate change will be
costly. Researchers are, for example, working on the development of ways to assess the risk of
near-coastal species and their habitats, development of ways to predict vulnerability of wetlands
and water quality, the development of models to assess the effects of climate change on the
availability of water and watershed alterations.68 All of these interventions are very costly and
also time consuming.
• Commercial forestry. This is also adaptable, and adaptations are expected in both land-use
management and product management. Adaptations in developed countries will fare better,
while developing countries will fare worse, simply because developing countries do not have
thenecessary funding and infrastructure to make the required adaptations.
• Water resources. Water action is at the heart of climate action. Many techniques exist to assess and
implement adaptive options. In section 2.4.2 of this chapter, water conservation in Singapore
was discussed, highlighting various initiatives in this country that resolved their water supply
challenges. In South Africa, we face similar problems that require adaptation strategies. These
strategies can involve management on the supply side (for example, altering infrastructure) and
on the demand side (for example, decreasing the demand for water or the reduction of risks
associated with the availability of water). Water managers need research and management tools
aimed at adapting to uncertainty and change, rather than improving climate scenarios.
Corporates in particular, need to engage in research aimed at reducing their water consumption
in manufacturing and other processes. Waste water can also be recycled by corporates, adapting
to the effects of climate change.
The need and capacity for climate change adaptation strategies differ between different regions. In
Africa, for example, adaptive measures would enhance flexibility and have net benefits in water
resources (irrigation and water reuse, groundwater management and desalinisation), agriculture
(crop changes, technology and irrigation) and forestry (regeneration of local species,
energy-efficient cooking stoves and sustainable community management). Without climate
adaptation strategies, climate change will reduce the wildlife reserve network significantly by
altering ecosystems and causing species emigration and extinctions. A risk-sharing approach
between African countries (in other words, spreading the risk between the various countries) can
strengthen adaptation strategies, including disaster management, risk communication, emergency
evacuation, and co-operative water resource management. The enhancement of the adaptive
capacity in Africa, requires the incorporation of climate adaptation within the broader sustainable
development strategies.
Climate change mitigation and adaptation can significantly reduce the negative impacts of
climate change. These strategies are important parts of societal response to global climate change,
and require the commitment of nations, governments, professionals, corporates and individuals.
Planned, anticipatory adaptation has the potential to reduce vulnerability and realise opportunities
associated with climate change effects and hazards.
The last section pertaining to climate change focuses on how corporates can and should
contribute to climate change mitigation and adaptation.
2.9 Corporates taking climate action

.4
At the Paris climate conference (COP21) in December 2015, 195 countries adopted the first-ever
universal, legally-binding global climate deal. Political leaders demonstrated their ambition to hold
the global average temperature to well below 2° C above pre-industrial levels and pursuing efforts to
limit the temperature increase to 1.5° C. This clearly demonstrates the political will to address the
climate change threat. COP21 also highlighted the role of corporates in tackling climate change now
more than ever in history.
Corporates worldwide are putting measures in place to anticipate for, and adapt to, climate
impacts. If done properly, this process brings numerous benefits to corporates, as listed below:
• Business action improves corporate image. A corporate engaged in climate action will create a
favourable and positive image towards all its stakeholders.
• Business action better aligns corporate actions with the environmental interests of corporate
owners, employees, suppliers, customers, and all other stakeholders.
• Business action reduces costs. For example, adherence to changed legislation will result in no legal
costs. The recycling of waste water is also an example of reducing costs.
• Business action may increase a corporate’s return on investment. The adaptation of new and
innovative manufacturing processes, the goodwill of stakeholders, and the adherence to new
legislation will improve the financial performance of corporates, thereby increasing return on
investment.
• Business action reduces dependency on uncontrollable costs. The implementation of new
business models, minimising the negative effects of climate change, will reduce the corporate’s
dependency on uncontrollable costs. For example, solar energy will reduce dependency on
traditional energy suppliers.
• Business action leads to more effective management of corporate liabilities. The implementation
of new business models will also lead to more effective management of liabilities, since
corporates will be less dependent on uncontrollable costs, they will adjust their risk profile and
risk management strategies, to mention only a few.
• Business action expands market share through new products and/or services.
All the benefits listed above will lead to a corporate that will have the means and resources to
expand its market share through new (and innovative) products and/or services.
The question that now arises is how can corporates take climate action? Essentially, climate
action revolves around (i) business strategy integration; (ii) engagement of employees; and (iii)
greenhouse gas (GHG) reduction projects and targets. These are explained in more detail next.
Business strategy integration

Climate action should form part and parcel of a corporate’s strategic planning, execution and
control processes. Business strategy should consider and connect climate change to risks,
opportunities, processes and procedures. One approach to factoring climate change into business
strategy is by establishing an internal price on carbon, known as carbon pricing. Carbon pricing
charges those who emit carbon dioxide for their emissions. That charge, called a carbon price, is the
amount of money that must be paid for the right to emit one ton of carbon dioxide into the
atmosphere. Carbon pricing usually takes the form of either a carbon tax or a requirement to
purchase permits to emit, generally known as cap-and-trade, but also called ‘allowances’. Putting a
price on carbon can encourage low-carbon growth and lower greenhouse gas emissions.
Corporates should advocate the importance of carbon pricing to all stakeholders through their
policies. Carbon pricing refers to putting a price on carbon emissions that helps shift the burden for
the damage back to those who are responsible for it, and who can reduce it. Instead of dictating who
should reduce emissions where and how, a carbon price gives an economic signal and polluters
decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue
polluting and pay for it.69 Progress over time (in other words, the corporate’s success in limiting its
carbon price (thereby limiting the amount and value of payments due to high carbon emissions), or
decreasing its carbon taxes and permissions should be communicated in public corporate reports.
Walmart, an American multinational retail corporation that operates a chain of hypermarkets,
discount department stores and grocery stores, is an example of a corporate successfully
implementing carbon pricing. When making key environmental business decisions, Walmart
needed to rethink the simple payback model of a specified number of years to ensure that they are
making the right decisions. Simply put, the payback model determines the number of years that it
will take a corporate to earn back the amount invested in a project. For example, if US$5 million is
invested in a project and Walmart calculates that the project will earn US$1 million per year, the
payback period is five years. The company was one of the first retailers to embed a shadow cost of
carbon in all carbon mitigation investment decisions. The actual carbon price that they set is
flexible to allow it to change over time as external factors change, thus ensuring their appraisal
model remains world class. Walmart acknowledges that the financial implications of an
international agreement on climate change depends greatly on its structure, scope and the way it is
carried out by the corporate. The structure may be taxation, where corporates need to pay a tax to
emit, or a cap-and-trade scheme, where corporates need to purchase a permit to emit. The scope of
the agreement refers to the industries that are regulated by the agreement. In order to calculate the
potential direct cost of carbon pricing to Walmart, the company applied a comprehensive carbon
pricing system across all of their markets and covered the entire retail industry. Walmart assumed a
carbon price of US$18 per ton, and concluded that the potential direct costs to the company will be
US$104 million. While this additional cost is primarily seen as a risk, Walmart’s early action on
emission reductions represents a competitive advantage over other retailers that have not
performed such projects.70
Engagement of employees
A top-down and bottom-up approach to engaging employees is recognised as an effective tactic for
addressing climate change. Corporates should have a board committee that oversees corporate
initiatives on climate and the environment. Employees could be incentivised to assess, manage and
implement corporate strategies and programmes (as formulated by top management) that have a
positive impact on the environment. BASF, the biggest chemical producer in the world, embraced
this approach by providing monetary rewards to executive officers and employees who reach
emissions and efficiency targets. Research and Development project leaders and marketing
executives at BASF are also compensated for developing or selling new products for climate
protection and adaptation. Intel, an American multinational technology company and one of the
world’s largest and highest-valued semiconductor chipmakers, is another example of a company
that embraces incentivising employees by linking the achievement of sustainability metrics to
employee salaries.
Create greenhouse gas reduction projects and targets
Lastly, corporates need to set tangible targets and significant greenhouse gas reduction projects.
PepsiCo is a multinational food, snack and beverage corporation, and a leader in greenhouse gas
reductions. Since 2010, PepsiCo’s delivery fleet has reduced greenhouse gas emissions by more
than 55 000 metric tons, while reducing its diesel fuel usage by 23%, partly through using more
energy-efficient trucks.
Microsoft, a multinational computer technology corporation, has pledged support for a new
project focused on greenhouse gas reduction, called the Climate Neutral Now Initiative. This
project allows corporations and individuals to set and track zero-impact targets for emitting gases
and increases the availability of renewable energy.
2.10 Conclusion
In this chapter, we took a brief look at the history of humanity’s rate of social and economic growth
and environmental destruction. This revealed that the current economic system, which has driven
development, has been doing so at an unsustainable rate. This prompted the call for the concept
‘sustainable development’. This chapter unpacked the concept and the interrelated elements of
society, the environment and the economy (people, planet and profit), and we set out to understand
the tensions and alignments between these elements. We then looked at the global response to
sustainable development highlighting the fundamental social need to pursue sustainability to
ultimately attain the future we want. Climate change was discussed in the last part of the chapter,
highlighting the facts surrounding climate change, strategies for addressing climate change and
corporates taking climate action. In Chapter 3, we will address the emergence of corporate
citizenship.
1. The systems theory can be applied to all disciplines, including studies pertaining to ‘sustainable
development’. Which one of the following is not a characteristic of all disciplines?
In all disciplines:
a. One needs to study the whole ‘organism’, where ‘organism’ refers to the whole that consists
of various parts.
b. Each part of the ‘organism’ has its own function, structure and relationship to the other
parts.
c. All systems are closed and can function independently.
d. The ‘organism’ has the tendency to strive for a steady state or equilibrium.
2. Sustainability organically connects the following dimensions:

A ecology
B economy
C politics
D laws and regulations
E social justice
a. AB
b. ABE
c. BCD
d. CDE
3. ‘Sustainable development’ is:

a. Primarily a characteristic of developed countries, where resources are enough to support
the wellbeing of these nations.
b. More important for developing countries and their need to improve their standards of
living.
c. Development that meets the needs of the present without compromising the ability of future
generations to meet their own needs.
d. Development that focuses on the goals of corporates to earn sustainable profits for their
owners.
4. Sustainable development has brought in additional drivers of economic growth that countries and
corporations should consider.
These drivers are:
a. energy, consumption and globalisation
b. technology, profit, social responsibility
c. changes in the world of work, privatisation, consumption and doing business across borders
d. advances in technology and the changing environment
5. The ____ view of sustainability sees _____; whereas the _____ view of sustainability points out that
_____.
a. strong; natural and human capital as substitutable with each other; weak; human capital
cannot substitute natural capital
b. weak; natural and human capital as substitutable with each other; strong; human capital
cannot substitute natural capital
c. weak; the replacement of humans with technology as a means to sustain diminishing
resources; strong; humans cannot be replaced by new technologies
d. strong; the economy, ecology and social environment are of equivalent importance; weak;
the economy is more important than the ecology and social environment in nations
1. Define the term ‘sustainable development’ and explain the different elements it comprises.
2. Explain the implications of society’s ecological footprint.
3. Define the term ‘climate change’ and explain the implications of climate change on sustainable
development.
Additional reading
• Ward, B & Dubos, R. 1972. Only one earth: The care and maintenance of a small planet. George J.
McLeod Limited: Toronto.
• Brundtland Report: http://www.un-documents.net/our-common-future.pdf
• Agenda 21: https://sustainabledevelopment.un.org/content/documents/Agenda21.pdf
• Elkington, J. 1997. Cannibals with forks: The triple bottom line of 21st century business. Capstone
Publishing Ltd: Oxford.
• Hopwood, B, Mellor, M & O’Brien, G. 2005. Sustainable development: Mapping different
approaches. Sustainable development, 13:38–52.
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33. Ibid.
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47. Ibid. Reproduced by permission of WWF. 2014. Living Planet Report. WWF International, Gland,
Switzerland.
48. Ibid.
49. Ibid.
50. Hopwood, B, Mellor, M & O’Brien, G. 2005. Sustainable development: Mapping different
approaches. Sustainable Development, 12:38–52.
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54. Ibid.
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chapter
Evolution of corporate citizenship
Tersia Botha and Tracey Cohen
3
LEARNING OBJECTIVES

• Explain the changing role of corporates
• Explain the variables influencing corporates to change
• Discuss the term ‘corporate citizenship’
• Explain the history of corporate citizenship
• Explain a framework for facilitating corporate citizenship

- citizenship
- civil rights
- consumer markets
- corporate philanthropy (corporate social investment)
- corporate power
- corporate responsibility
- corporate social responsibility
- corporation
- equivalent view of corporate citizenship
- extended view of corporation citizenship
- First Industrial Revolution
- Fourth Industrial Revolution
- globalisation
- intellectual capital and learning
- limited view of corporate citizenship
- misconduct
- political rights
- power and responsibility
- role and expectations of workers
- Second Industrial Revolution
- social rights
- sustainable development (sustainability)
- technological advances
- Third Industrial Revolution
- United Nations Global Compact
- citizenship
- civil rights
- consumer markets
- corporate philanthropy (corporate social investment)
- corporate power
- corporate responsibility
- corporate social responsibility
- corporation
- equivalent view of corporate citizenship
- extended view of corporation citizenship
- First Industrial Revolution
- Fourth Industrial Revolution
- globalisation
- intellectual capital and learning
- limited view of corporate citizenship
- misconduct
- political rights
- power and responsibility
- role and expectations of workers
- Second Industrial Revolution
- social rights
- sustainable development (sustainability)
- technological advances
- Third Industrial Revolution
- United Nations Global Compact
Unilever
Unilever, founded in 1930, is a British-Dutch multinational corporation with headquarters
in the Netherlands and United Kingdom. The corporate operates in the consumer goods
industry, offering food, beverages, cleaning agents and personal care products to its
customers. In South Africa, we are familiar with most of Unilever’s brands such as Axe,
Dove, Omo, Flora, Knorr, Lipton, Lux, Sunsilk, Rama, Magnum and Hellmann’s. It is listed
in London, trading as Unilever plc, as well as in Rotterdam, trading as Unilever N.V.
Although it is listed as two companies, Unilever operates as a single business with four
main divisions: foods, refreshment, beverages and personal care.
Unilever has operating companies and factories on every continent except Antarctica. It
has diversified its products numerous times, acquired other companies and also sold
some divisions. Unilever has always been an excellent example of a corporate that
changed in accordance with changes in its management environment. The corporate is
also a pioneer within the context of corporate citizenship, as evident from the following:
• Commitment to sustainable sourcing. In May 2007, Unilever became the first large-scale
corporate to commit to sourcing all its tea in a sustainable manner. The corporate
employed the Rainforest Alliance, an international non-governmental organisation
(NGO), to certify the corporate’s tea estates in East Africa. Rainforest Alliance was also
employed to certify other third-party tea suppliers in Africa and other parts of the world
(a third-party tea supplier is a supplier that is not owned nor controlled by Unilever).
Unilever’s aim was to have all Lipton Yellow Label and PG Tips tea bags sold in
Western Europe certified by 2010, followed by all Lipton tea bags sold globally by
2015.
• Commitment to using free-range eggs. In 2011, Unilever announced its intention to
switch to 100% free-range (cage-free) eggs for all products that it produces worldwide.
• Commitment to a ‘Sustainable Living Plan’. In 2010, Unilever launched its ‘Sustainable
Living Plan’, which unveiled its plan to decouple business growth from its impact on
the environment. The corporate published its plans to do the following:
– Halve the environmental footprint of its products by developing new ways of doing
business that will ensure that the corporate’s growth does not come at the expense
of the world’s diminishing resources.
– Help one billion people to improve their health and wellbeing, by taking action in
mostly developing countries over the next ten years. The corporate wants to
change the hygiene habits of one billion people in Asia, Africa and Latin America so
that they wash their hands with Lifebuoy soap at key times during the day – helping
to reduce diarrhoeal disease, the world’s second biggest cause of infant mortality.
The corporate is also engaged in making safe drinking water available to half a
billion people by extending sales of its low-cost in-home water purifiers from India
to other countries.
– Source 100% of its agricultural raw materials sustainably. Unilever was criticised in
2008 by Greenpeace UK, for buying palm oil (used in the production of food and
non-food products) from suppliers that are damaging Indonesia’s rainforests.
Unilever, as a founding member of the Roundtable for Sustainable Palm Oil,
responded by publishing its plan to obtain all of its palm oil from sources certified
as sustainable by 2015. Unilever claims to have met these goals in 2012 and is
encouraging the rest of the industry to become 100% sustainable by 2020.1
– Halve greenhouse gas emissions, water and waste used, not just by the corporate
and its direct operations, but also by its suppliers and customers.
• Commitment to use degradable particles in personal care products. A large number of
personal care products contain micro plastics. A position paper published in August
2012 by the North Sea Foundation, the Marine Conservation Society, Seas at Risk and
the Plastic Soup Foundation, indicated that micro plastics are in the sewage of water
treatment installations. From there, they can reach the marine environment. Micro
plastics are found in all seas and oceans of the world.2 They can enter organisms such
as fish, lobster and oysters, and thereby enter the food chain. Eventually, this could
affect human health. The presence of micro plastics in personal care products, such as
facial cleaners and toothpaste, are a new source of pollution and producers of such
products should return to using organic degradable particles, exactly what Unilever
committed to do in 2012.
• Commitment to boost smallholders’ livelihoods, strengthening their supply chain. Unilever
relies on a network of thousands of smallholder farmers to supply many of the
ingredients that make their products. The corporate acknowledges that the success of
these smallholders is as vital as their own success. Unilever is committed to helping
smallholders improve their yields and transform their livelihoods as part of the
corporate’s overall ambition of ensuring that it has a successful business with a
positive social impact. In 2015, Unilever developed the Enhancing Livelihoods Fund, to
enable investment in innovative projects in their supply chain that improve agricultural
practices and the livelihoods of smallholder farming communities, with a specific focus
on empowering women.3
• Commitment to deliver world-class capabilities in Africa. Unilever’s commitment to Africa,
is to accelerate innovations that drive growth and continuous improvement in quality
and service for consumers. Unilever has agreed to new partnerships with several
global packaging suppliers, bringing global capabilities and investment to South Africa
specifically. The partnership will enable Unilever to accelerate the introduction of
product innovations with world-class quality and create new jobs.4
Source: Reproduced with kind permission of Unilever South Africa Proprietary Limited and group
companies.
3 Introduction
.1
The opening case scenario illustrates Unilever’s commitment to sustainability and the corporate’s
concern for a better future for all. Building a sustainable organisation in the twenty-first century has
become a progressively more important and complex necessity. As presented in Chapter 2
(Sustainable development and climate change), societal complexities, environmental destruction,
the drive for economic growth and the intricacies between the elements have always been present.
However, the threats to a sustainable future have only become a priority on business agendas in the
last three or so decades, and momentum has slowly gained traction in the last fifteen years as the
threats and their consequences for businesses and the economy have become increasingly evident.
Chapter 2 revealed some shocking realities pertaining to the state of society, the environment
and the economy – the three broad elements of sustainable development. Although businesses
contribute to the economy, society and the environment in a multitude of positive ways, it would
appear that much of this positive impact has occurred alongside some negative trade-offs. This has
been evident in the form of corporate scandals and misconduct involving unethical and
irresponsible business practices, heavy pollution, exploitation of human rights and, sometimes,
through practices with good intent, but with ill-fated and unintended consequences. Examples of
misconduct by corporates in the environmental, social and governance spheres are given on the
next page.
While there is a growing awareness that corporates have an important role to play in meeting
society’s need for sustainable development, it needs to be understood within the context of an
important point – corporates are both part of the solution (contributing to the wealth of the society),
and the problem (negative effects on society and the environment). Unfortunately, the manner in
which corporates have been contributing to the problem, has been on the rise in recent decades.
The (mostly unintended) negative consequences form the basis of an important question: Is the way
in which corporates operate in the current economic system and current natural environment
occurring at a sustainable rate? Corporate citizenship is a means of responding to the challenge of
unsustainable development. It is a means of linking corporates, society, the economy and the
environment to ensure that corporates operate in a sustainable manner. Furthermore, corporate
citizenship also addresses ethical conduct by corporates.
In this chapter, we will first explain the changing role of corporates from the First Industrial
Revolution to the current one. The environments in which corporates performed their business
activities underwent huge changes and management needed to adapt to those changes. We also
focus on the variables that influenced corporates to change in the past and that are still forcing
corporates to change now. As corporates responded to the changes, the need to conceptualise the
term ‘corporate citizenship’ arose. We therefore define the term ‘corporate citizenship’ and provide
an overview of the history of the concept. Lastly, a global framework is provided for facilitating
corporate citizenship.
Example
The BP oil spill (environmental sphere)
On 20 April 2010, an explosion on the Deepwater Horizon Macondo oil well drilling platform started the
largest marine oil spill in US history, releasing millions of barrels of oil into the Gulf of Mexico.
The fallout from this catastrophe included the tragic loss of 11 workers’ lives, harm to the health of
many Gulf coast residents, and an ecological and economic disaster that is still unfolding. We are still
learning the full extent of the environmental damage, but federal agencies have estimated that the
harm will last for generations.
On 4 April 2016, the court approved a settlement with BP for natural resource injuries stemming
from the Deepwater Horizon oil spill. This settlement concludes the largest natural resource damage
assessment ever undertaken.5
Groundwater contamination poisoning the health of a community (social sphere)

You may have watched the 1990s movie called Erin Brockovich, starring Julia Roberts. Roberts acted
as Erin Brockovich, who fought for justice for people living in the town of Hinkley (California, USA), as
they did not have the know-how or resources to fight for themselves. The Erin Brockovich movie is
based on a true story that revealed how Pacific Gas & Electric’s (PG & E) unethical practices poisoned
the community of Hinkley. For over 30 years, the groundwater in Hinkley had been contaminated
through leakages and the poor conduct of PG & E’s operations. The people of Hinkley were drinking
this contaminated water, resulting in many life- threatening medical conditions amongst them.
Brockovich helped expose the malpractices of PG & E that was forced to pay out an injury settlement
of US$333 million (almost R5 billion) in damages to over 600 Hickley residents.6
African Bank (governance sphere)

African Bank Limited (ABL), commonly referred to as African Bank, is a commercial bank in South
Africa. On 10 August 2014, ABL was placed under curatorship by the South African Reserve Bank,
after it warned of massive losses and said it needed about R8,5 billion in new capital to save the bank.
Shortly after the announcement of this requirement, the share price fell to one-twentieth of the value it
held a month earlier, in July 2014. Over and above financial losses, redeployment and the
retrenchment of staff became a reality for the bank. The reason for the bank’s collapse was poor
governance. In the few years before 2014, African Bank had been providing loans that were not
backed by assets, as well as providing loans to people who could not afford them, resulting in a fine of
R300 million imposed on ABL in 2013.7
3 The changing role of corporates

.2The world is changing – climate change is a reality, temperatures are rising, water shortages are
more frequent, and food supplies are increasingly scarce. Furthermore, populations are growing
rapidly, increasing the challenges pertaining to basic hygiene and sanitation, and stretching the
planet’s resources even further.
There is no ‘business as usual’ anymore. The old economic systems are no longer fit for purpose,
the way that corporates are managed and the role of corporates in society has changed
tremendously. But why? Why do corporates change? Why is there a fundamental shift away from
the traditional models of doing business to a new kind of model that did not exist a decade or two
ago?
In Chapter 2 of this book, we explained the systems theory and how it relates to corporates. Let us
recap briefly. According to the systems theory, the corporation is an open system because it does
not operate in isolation – it depends on its external environment to provide inputs and resources.
Furthermore, the external environment depends on corporates to provide products and services, to
create jobs and to contribute to the wealth of society. There is a particular and complicated
interaction between the system (the corporate) and its external environment. In this context, the
‘external environment’ refers not only to the natural or physical environment, but it includes all
sub-environments and variables surrounding the corporation that have an influence on it. For
example, the economic, technological, political/governmental, natural, social, cultural and
competitive sub-environments. The latter refers to competition, suppliers, labour unions and all the
intermediaries in corporates’ competitive environments. Therefore, any changes in the external
environment will affect the corporation. In order to survive and be sustainable, corporates need to
anticipate environmental changes, respond to and adapt to them. The reason why corporates
worldwide are changing is that the environments in which they operate have changed.
Furthermore, the pace of change is accelerating. As corporates are changing, managers need to
adapt their managerial styles and approaches in the management of these corporations.
Many corporate leaders and executives worldwide believe that we are today on the cusp of a
Fourth Industrial Revolution. Let us briefly look at revolutionary changes since the 1700s:
• First Industrial Revolution. The First Industrial Revolution, which began between 1760 and 1820
and ended in 1840, was spurred on by the use of water and steam to power machinery.
• Second Industrial Revolution. The Second Industrial Revolution (also known as the Technological
Revolution) began between 1840 and 1870, and lasted until the beginning of World War I
(1914–1918). The second revolution replaced water and steam with electrical power. Between
the second and third revolutions, World War II took place (1939–1945). After World War II, much
of what had been destroyed during the war needed to be reconstructed. This development took
place at a rapid rate and resources were being extracted from the earth and used for
construction as though they were infinite or neverending. This was done as quickly and cheaply
as possible, without taking into account the social consequences of the process. Corporations
and industries flourished, the rich were in a position to get richer, while the poor got poorer;
gaps in wealth inequalities between countries and within countries widened.
• Third and Fourth Industrial Revolutions. The Third Industrial Revolution is the Digital or
Information Technology Revolution (which began in the late 1950s until the late 1970s). The
Fourth (current) Industrial Revolution is described as an extension of the third, using a
combination of computer hardware, robotics and massive computing power to expand
information technology beyond just computer software. Developments in previously disjointed
fields such as artificial intelligence and machine learning, robotics, nanotechnology, 3D
printing, and genetics and biotechnology are all building on and amplifying one another. Smart
systems in homes, factories, farms and entire cities are helping to overcome challenges, ranging
from supply chain management, to sustainability and climate change.8 The example box below
provides an example of a change occurring in the digital revolution, affecting all countries,
including South Africa.
The developments and changes from the First Industrial Revolution to the current one, forced
corporations and management to also change. The changes and transformation brought about by
the third and fourth revolutions were so swift in pace, and so profound in social, geographical,
cultural and economic implications, that it also raised serious problems, not only for corporations,
but also for individuals in our society. Look at the example pertaining to the switch from analogue to
digital terrestrial television worldwide. This not only affects the government, who is responsible for
managing the change process, but also corporations and individuals. The example box on the next
page provides another example of the impact of the changing environment on the workplace.
Example
Digital terrestrial television in South Africa
Currently, terrestrial broadcasting in South Africa is broadcasting in an analogue format. The country
has started the process of migrating broadcasting signals from analogue to digital. The broadcasting
of terrestrial television in digital format is known as digital terrestrial television (DTT). The migration
process is the result of the International Telecommunications Union resolution, which states that
countries in Region 1 (including Europe, Russia, Africa, the Middle East and the Islamic Republic of
Iran) should migrate their broadcasting services from analogue to digital.
Terrestrial television uses a network of transmission towers to relay the signal across the country.
Each transmission tower has specific area coverage, and it is the network of coverage that provides
television signals across the country. The broadcast signal is sent to the various towers and if one is
within the area covered by a tower, one will be able to receive the broadcast services via a terrestrial
aerial. In analogue television, one channel (SABC 1 in South Africa) uses a dedicated frequency to
broadcast, due to the large amount of bandwidth that the analogue signal requires. In digital television,
the signals are compressed. The fact that signals can be compressed, allows more channels to be
broadcast in the same bandwidth that one current analogue channel uses.
The main reason why South Africa and other countries all over the world are migrating from
analogue to digital television is to release valuable bandwidth that can be used for other services, for
example broadband mobile services. Bandwidth is, like all other resources, needed by nations,
corporations and individuals. Bandwidth is scarce and needs to be utilised in the best possible way.
Source: South African Government. 2015. Digital migration. [Online]. Available: http://www.gov.za/about
-government/government-programmes/digital-migration; http://doc.gov.za [8 April 2015].
Example
The impact of robots replacing humans in the workplace
More and more corporations are utilising robots, which replace humans, in the workplace today.
Industries that are most likely to be affected by this technology are health care, transportation and
logistics, customer service and manufacturing (especially in the car manufacturing industry). Robotics
is also used widely in the medical industry, where it has been used to conduct neurological,
orthopaedic and general surgery. This trend is expected to increase in future, due to the various
benefits thereof. Examples of the benefits of this technology are that robots could assist with dirty, dull
and dangerous tasks, leading to an increase in productivity and worker safety. However, there are also
many risks involved and being a ‘good corporate citizen’ requires that corporates also investigate and
address the risks associated with robots in the workplace. Robot technology could increase
productivity in the workplace. This increase could give rise to higher employer expectations of human
workers and, in turn, to increasing injury risk. The biggest risk in using robots is probably when robots
replace workers, and employers are forced to give workers notice of layoffs, pay severance and retrain
employees.
The discussions and examples provided above highlight the fact that it has become more and more
important to focus on the relationship between corporates and the (changing) environment in
which they operate. What is needed, is a shift in business thinking. Although corporates are, and
should be, profit-seeking institutions, they now also have a greater purpose and a sense of
responsibility towards society, the environment and the economy(ies) in which they operate (not to
mention that these responsibilities should assume good ethical practices and sound governance).
Corporates need to respond to the challenges of unsustainability and the opportunities presented
on the road to achieving sustainable development.
The Unilever opening case scenario illustrates a few of the innovative changes that the corporate
underwent since it started in 1930. Some of these innovations have been a reaction to changes in its
business environment. For example, Unilever’s decision to source 100% of its agricultural raw
material sustainably was made after it was criticised by Greenpeace UK for buying palm oil from
suppliers that are damaging rain forests. Other changes were proactive. For example, Unilever
develops new ways of doing business that will ensure that the corporate’s growth does not come at
the expense of the world’s diminishing natural resources. In the 1930s during the First Industrial
Revolution, the corporate may have been less concerned with regards to their effect on the physical
environment (nature) and therefore sourced natural resources in the quickest and cheapest
manner. However, seeing as the environment started to change, the effects of climate change
became more prevalent, their consumers became more concerned about the environment and
government started to take action against companies who source their resources in an irresponsible
manner. Unilever made some necessary and positive changes to the manner in which they conduct
business to ensure that they do not inflict unnecessary harm on the environment or their employees
and customers.
As the world moved from the First Industrial Revolution, through the second and third to the
current one, various factors influenced corporates to change. These variables are discussed in the
next section.
3 Variables influencing corporates to change

.3
A number of variables have a definite influence on corporates to which they need to adapt. In this
section, we will focus on the following variables: (i) globalisation; (ii) advances in technology and
radical transformation of the world of work; (iii) increased power and demands from customers; (iv)
the growing importance of intellectual capital and learning; (v) changing roles and expectations of
workers; (vi) increased corporate power and responsibility; and (vii) political changes.
3.3 Globalisation
.1
Today, corporations operate under increased pressure to do things faster, in greater quantities and
at cheaper prices. Consequently, there exists tremendous pressure to cut costs, increase profitability
and give their shareholders (investors) higher returns. Because of these pressures, businesses have
grown, not just within their own national borders, but also beyond it. Operating beyond borders
offers corporations additional opportunities to keep costs low, for example, by operating in
countries where labour costs are significantly lower. These actions, although cost effective and
profit inducing, could have a downside – globalisation may also come at the cost of social and/or
environmental elements, as evident from the example below.
In our opening case scenario, we saw that Unilever has operating companies and factories on
every continent except Antarctica. The influence that Unilever has on the wellbeing of many
consumers globally is immense. Apart from a global consumer base, its operating activities,
especially in factories, have a profound influence on the natural, economic and social environments
in the countries that it operates in. One of the corporate’s goals is to improve the health and
wellbeing of one billion people by taking action in especially developing countries over the next ten
years.
3.3 Advances in technology and a radical transformation of the world of work

.2
The Second Industrial Revolution is also known as the technological revolution. Since this
revolution, technological advances have been the primary force in transforming the world of work
– as indicated in section 3.2. In section 3.2, we also discussed replacing humans with robots in the
workplace. This advance, and many other technological advances, force employers and employees
to change. For example, there might be a need for employees to retrain in order to adapt to these
changes. Employers may need to adapt their expectations of employees, they may need to change
production and manufacturing processes, and they may need to change their policies in terms of
the management of injuries in the workplace.
Over and above changes required from corporates, management and employees, industries will
also be affected by technology, forcing them to change. The World Economic Forum (WEF)
published an analysis on the technological and sociological drivers of employment. The report
entitled The future of jobs validates the accelerating power of technology on global employment
trends, and also highlights concerns that job growth in certain industries is still outpaced by
large-scale declines in other industries. Furthermore, the report highlights specific technologies
that will, over the short term, have the biggest impact on the transformation of the world of work,
namely mobile internet, cloud technology, cheaper computing power and large-scale data storage.
Over the longer term, hardware and physical technologies like robotics are expected to contribute
most to the transformation – forcing industries to adapt to these changes. The World Economic
Forum report provides us with an indication of the changes in the actual jobs per job family
(indicated in thousands) for all countries surveyed.9
The changes per job family, indicate that job opportunities in certain industries will decline. In
these industries, workers and corporates will be affected and they need to adapt to this. The table
also indicates that the actual jobs that workers perform are changing. Jobs related to office and
administrative work; manufacturing and production; construction and extraction; arts, design,
entertainment, sports and media; legal; and installation and maintenance are expected to decrease.
Jobs related to business and financial operations, management; computer and mathematical work;
architecture and engineering; sales and related jobs; and education and training are expected to
increase. It is imperative for workers to update their knowledge and skills to enable them to perform
new jobs. Corporates need to adapt to these changes and constantly reorganise to support workers
and to adapt to changes in jobs that need to be done.
In our opening case scenario, Unilever illustrated its adaption of new technologies. Unilever was
a pioneer in the adaptation of new technology in its industry. Since the corporate was founded in
1930, it has diversified its products numerous times, acquired new companies, and sold some of its
divisions in order to adapt to new technology. For example, Unilever is engaged in making safe
drinking water available to half a billion people by extending sales of its low-cost in-home water
purifiers from India to other countries.
3.3 Increased power and demand from customers

.3
Technological advances, especially in terms of new communication, transportation and
information technologies, allow customers to compare prices, quality, availability and modern
features between various corporates and their product/service offerings. Moreover, consumers are
increasingly using social media platforms, such as Facebook, Twitter and even SnapChat, to
communicate real-time reviews of services or products of different corporates, which are of either a
positive or negative nature. As corporate misconduct is unveiled, it is exposed via these platforms,
bringing it to the immediate attention of a potential customer or interested stakeholder. Consumers
are more educated than ever, they ask questions such as where their clothes come from, how
products are made, how their food is produced and where their pension funds are being invested. A
significant and important survey, The Nielsen Global Survey on Corporate Social Responsibility, was
conducted in 2014 to assess, among other things, how passionate consumers are about sustainable
practices when it comes to purchasing considerations. The outcomes of the survey unequivocally
showed that consumers across 60 countries say that they prefer, and are willing to pay more for,
products and services provided by corporates that are committed to positive social and
environmental impact. The survey indicated that ‘It is no longer a question if consumers care about
social impact. Consumers do care and show they do through their actions. Now the focus is on
determining how your brand can effectively create shared value by marrying the appropriate social
cause and consumer segments’.10
Looking at Unilever, the corporate implemented various plans to address the increased power
and demand from its customers. For example, the corporate is committed to sustainable sourcing,
to decrease its environmental footprint and to contribute to the social wellbeing of various
countries, especially developing nations. In 2010, the corporate also unveiled its plan to decouple
business growth from its impact on the environment.
3.3 The growing importance of intellectual capital and learning
.4
During the First and Second Industrial Revolutions, the critical factors of production were mostly
land, labour and raw materials. The challenge to corporates during these times, was to use these
production factors to create products and services that were more valuable than the sum of their
parts. The key factors of production have, however, changed drastically since the Third Industrial
Revolution – intellectual capital has become a critical resource of corporates. Fewer people are
doing physical work and more people are engaged in knowledge-based work. We indicated in
section 3.2 that robots can replace many tasks previously performed by humans. We also suggested
that retraining of employees will be a priority of corporates, and as such, retraining must focus
increasingly on the development of the intellectual capital of employees, and less on doing jobs that
computers and robots can perform. Also, it has become increasingly important for corporates to
ensure high staff retention levels – when employees resign, they take their intellectual capital with
them, leaving a gap that needs to be filled and trained. Nothing can impede the performance of a
work team more than low retention levels. Sir Richard Branson (business magnate, entrepreneur,
investor, philanthropist and founder of the Virgin Group that consists of more than 400 companies)
stated the following: ‘Train people well enough so they can leave; treat them well enough so they
don’t want to’.11 This quote exemplifies the challenge to corporates and it also encapsulates its
corporate citizenship responsibility towards employees.
3.3 The changing roles and expectations of workers

.5
As society moved from the First Industrial Revolution to the current one, the roles and expectation
of workers also changed and continue to do so. In the previous section, we indicated that
intellectual capital became a critical resource for corporates. The ‘knowledge workers’ discussed in
the previous section, actually ‘own’ the means of production – if they leave the corporation, they
take the knowledge with them. Another side of the same coin is that the actual job that workers
perform is constantly changing.
The expectations of workers are also changing, which emanate from the different generations of
people working in most corporations. The different generations of society can be broadly
categorised as follows:
• The ‘Silent Generation’. This generation was born between 1925 and 1942, which was also when
World War II occurred. One of the theories for the title ‘silent’ is that the children who grew up
during this time worked very hard and kept quiet. Also, it was commonly understood that
children should be seen and not heard. This generation did not ‘rock the boat’. The conditions
in which these children grew up were complicated by war and economic downturn. They
experienced the Great Depression (1929–1939) and their attitude towards life and work differs a
lot compared to all other generations. This generation has been described as being highly
ambitious and having a great need for achievement, power and status.
• The ‘Baby Boomers’. This generation was born between 1943 and 1960. Baby Boomers were
responsible for major social changes worldwide while they were teenagers and many are
nearing retirement now. This generation grew up in a wealthier environment than the previous
generation, and they challenge traditional ways of doing things – this also includes challenging
traditional ways of doing things in the workplace. Baby Boomers tend to think of themselves as a
special generation – even in the workplace, and that they are very different from the previous
generation.
• ‘Generation X’. Generation X was born between 1961 and 1980 during the digital revolution. This
generation grew into adulthood with a sense of world-weariness and many of them earn more
than their parents and are active, happy and family orientated. They require a work-life balance
and a fair remuneration from employers.
• The ‘Millennials’, also known as ‘Generation Y’. This generation was born after 1980 and are now in
their early careers in the midst of a slow economy and high unemployment rates. Generation Y
workers have a different approach to and different expectation of their work and employers than
any of their predecessors. Generation Y workers are empowered by their ability to master the
newest technology. Generation Y workers challenge the conventional way of doing things and
they are constantly seeking new and better ways of doing things. Attracting and retaining young
talent is critical to the success of any corporate. Furthermore, engagement and retention will
become even more important than it is today. In order to become a corporate that young people
choose to work for, corporates need to understand what Generation Y workers expect from their
employers. The Harvard Business Review published the results of a recent online survey
conducted amongst global corporate leaders to determine their views on organisations
becoming an employer of choice. The results indicated that 82% of the respondents agreed that
a corporate’s greatest asset is its talent; 79% agreed that a high level of employee engagement
has a direct influence on the bottom line (in other words the profits generated by the
corporation); 70% indicated that the key to a sustainable business model is relying on shared
values and benefiting society, the environment, customers and shareholders, whilst 59% agreed
that good corporate citizenship is good business.12 These findings confirm the importance of
corporates engaging in sustainable matters in order to attract and retain skilled employees, and,
at the same time, attract customers. This brings us to the next variable that influences corporates
to change, namely an increase in corporate power and responsibility.
3.3 Increasing corporate power and responsibility

.6
More often than not, we view the daily news headlines only to read about yet another large
corporate, business or political leader being exposed for unethical practices or for breaking the law.
Unethical practices lead to harsh consequences. Millions, if not billions worth of revenue is lost,
fines are received and legal costs are encountered, the corporate’s image is tarnished and its share
value significantly decreases. In some instances, unethical practices may even lead to the demise of
the corporation.
In Chapter 2, we illustrated the immense influence corporations have in society – especially
multinational corporations. As corporates grow and get bigger, their revenues and returns become
bigger. With increased returns, comes an increase in power. With that power comes a bigger
responsibility. Furthermore, corporations are acting beyond their own national borders, with
operations in countries all around the world, having tremendous geographical reach and often
power not too dissimilar to the states in which they operate. As such, corporations are powerful
entities who need to be part of the solutions, if effective solutions are to be found. They can be a
force for good in driving socio-economic development; or, they can be a hindrance if they are only
interested in pursuing profits, which often come at a social and/or environmental cost.
Unfortunately, instead of seeing corporates exercising their power responsibly, what we usually
see is the opposite. Even well-known and respected corporations, whom we trust with our personal
information, our health and our money, let us down. Why is this? Is it true that corporations, no
matter the nature, are only seeking to make a profit, despite the social and environmental costs? Is it
more important to take short cuts to achieve efficient revenue creation and cost cutting, without
considering what the implications for society or the environment are?
Milton Friedman (the economist and Nobel Laureate) published an essay titled ‘The Social
Responsibility of Business is to Increase its Profits’. The essay was published in The New York Times
Magazine in 1970 and came to be one of the most famous pieces of work debating the notion of
corporate social responsibility, which is still referred to today. Friedman’s main argument was that
the social responsibility of a business is to make a profit (full stop). If the business succeeded in
making a profit, it would then be able to fulfil its social responsibility of employing people in society
with a decent wage and it would be able to pay taxes to the state that could provide the services
required by society.
Let us consider Friedman’s argument. Is the responsibility of a corporate to make profit for its
owners? The answer is yes! Is it the responsibility of a corporate to engage in philanthropic activities
with their owners’ (shareholders’) money? It depends. While responsibility in the corporate sense
can seem ambiguous, and mean different things to different types of organisations, we like to think
of responsibility being everything that a corporate does and how it does it. For example, Unilever’s
products are used by two billion consumers around the globe on any given day, and the corporate
sees this as a great opportunity to create change with its sustainable business model, while at the
same time, making the best profit possible. The model ensures that workplace rights and
opportunities are improved and women get a fair deal; people’s health and wellbeing are a priority;
all their agricultural raw material come from sustainable sources; and the environment is
safeguarded for future generations. Good practices are seen in the design of their products, the
selection of their suppliers and ensuring sound quality and governance structures. With Unilever’s
vast operating scale and global presence, it is a benchmark of a corporate using its influence and
power responsibly.
Two simultaneous and seemingly contradictory trends are evident when it comes to corporates
and their influence. On the one hand, corporates are criticised for what is deemed as excessive
business power, to such an extent that the rights of citizens and the powers of governments are
weakened. On the other hand, corporates make assertions that they are taking on greater
responsibility for society, for example by creating job opportunities, in line with the expectations of
citizens and governments. The following factors contribute to an increase in corporate power and
responsibility:
• Increasing privatisation. Although governments have in most instances retained their regulatory,
fiscal and organisational capacities, corporations have become responsible for more facets of
citizens’ lives than they were previously. For example, services such as energy, mass or public
transportation and telecommunications which, in many countries, were once delivered by
governmental organisations are now being delivered by private corporations. Increasing
privatisation has had the effect of increasing the corporate sector’s share of gross national
product and employment, as well as the corporates’ pivotal role in policy areas, which were
previously regarded as fundamentally political. For example, the investment in and
performance of transport and utility companies; and access to and use of natural resources such
as water, oil and gas. In South Africa, water privatisation is a contentious issue, due to the history
of the denial of access to water and poverty. Nonetheless, water privatisation is taking various
forms. For example, municipalities are involving the corporate sector in the provision of water
and sanitisation services through, among other things, short-term contracts and specific services
such as wastewater treatment.
• Creating new consumer markets. Consumers do not always dictate what is or what should be
available in consumer markets. Corporations often create new consumer markets. Steve Jobs,
founder of the Apple Company, believed in a simple fact: ‘Everything around you was made up
by people that were no smarter than you. And you can change it. You can influence it. You can
build your own things that people can use.’ Jobs definitely practised what he preached – the
Apple Company set out to change the world with innovative computers and gadgets, again and
again and again – creating new consumer markets that the consumers themselves never even
imagined. Apple products revolutionised the way we work and play and listen to music. It
transformed entire industries and created new kinds of computing.13
• Increasing cross-border activities. Corporations operating locally are moving from small or medium
in size, to large and have grown more conspicuous (visible or noticeable) as they operate on an
international platform in other countries. This has become more apparent with vast increases in
national foreign direct investment. With globalisation and the liberalisation of trade,
corporations can experience opportunities to increase growth, stabilise performance, exploit
new investment opportunities and increase their market power.
• Assuming greater roles in the delivery of public goods. Internationally, corporates are assuming
greater roles in the delivery of public goods and services. Examples of such goods and services
are education, pensions and security. Governments are encouraging corporations to contribute
to wide governance activities. The example box in section 3.2 about the migration from an
analogue terrestrial television to a digital one, provides a good example of governments that rely
on corporates for certain products and services. When migrating to digital terrestrial television,
the current plan is that a set top box will decode the digital signal to enable the channels to be
displayed on television sets. The set top box will be plugged into television sets, and is also
referred to as a decoder. The South African government will provide free decoders to more than
five million television household owners of lower income, and have contracted corporates in the
private sector to manage the installation of these decoders.14
From the discussion above, it is evident that the power of corporates is increasing at an accelerating
rate. However, with greater power corporates are taking on greater responsibility for society, in line
with the expectations of citizens and governments. Governments are reducing some of their modes
of exercising authority (especially in developing countries). An example can be found in the oil
industry in Nigeria where Nigerian oil corporates are undertaking responsibilities that would
typically be offered by the Nigerian government. However, these corporates contribute to the social,
economic and environmental problems of Nigeria, when they should be exercising their
responsibilities such as the protection of worker rights and the environment. This phenomenon is
often seen in other developing countries. Lax governments and legislation in these countries are
often seen by foreign corporations as an opportunity to save costs and maximise their profits.
However, these corporations should not abuse their power. Instead, they should pursue their profit
goals not at the expense of the environment, neither at the expense of society. In other words, these
corporations should pursue their corporate goals while contributing towards sustainable
development. They should act in ways that serve the best interest of society and act with precaution
when considering the impact on the environment; which brings us to the notion of ‘being a good
corporate citizen’.
In our opening case scenario, Unilever is illustrated as a corporate that certainly does not
contribute to the social, economic and environmental problems, but rather a corporate that
exercises its responsibilities and that serves the best interests of society. There are numerous
examples of this: Unilever is committed to sourcing all its tea in a sustainable manner; they
switched to 100% free-range eggs for all products that they produce worldwide; they are developing
new ways of doing business that will ensure that the corporate’s growth does not come at the
expense of the world’s diminishing resources; they source all agricultural products sustainably; and
they limit greenhouse emissions, water and waste, not just by corporate’s direct operations, but also
by its suppliers and customers.
3.3 Political changes

.7
The government of a country is a major role player in the management environment of corporates,
since it influences corporations primarily as a regulating force. The policies and laws of the ruling
political party, and the changes to these policies and laws, have a direct influence on the way that
corporations operate. In the example box on the next page, an example is provided pertaining to
changes in the political landscape of South Africa affecting all South African corporations as well as
any other corporation abroad conducting business in South Africa.
The changing role of corporates as we have discussed in this section, leads to the important point
that corporates should exercise their responsibilities as corporate citizens, contributing to the
answers and solutions of social, economic and environmental problems of society. We focus on the
conceptualisation of the term ‘corporate citizenship’ in the next section.
3 Corporate citizenship
.4
In this section, we will first define the term ‘corporate citizenship’. Thereafter, the emergence of
corporate citizenship will be discussed.
3.4 Defining corporate citizenship
.1
Before we present the concept of corporate citizenship, let us break down the two key words (
corporation and citizenship) which, when merged, present the concept of corporate citizenship:15
• The corporation. Generally, corporations are regarded as the most prominent organisations of
contemporary capitalism, partly because of the employment, production, investment and
wealth for which they account. They are generally understood to be (but not limited to)
non-governmental profit-making businesses with the following characteristics:
» Ownership. Corporations are owned by shareholders who have a financial interest in the
corporation. Owners have the potential to share in the profits made by the corporate, but are
also at risk of losing money should the corporate not do so well.
» Management. Corporations are managed by managers who act as agents of the owners of the
corporation. Management is responsible for co-ordinating the efforts of employees to
accomplish the goals of the corporation by using the available resources as efficiently and
effectively as possible.
» Legal identity. A corporation is authorised to act as a single entity (legally a person) and
recognised as such in law. The legal identity of the corporate is distinct from that of its
owners.
» Governance. The term ‘governance’ refers to all the processes of governing, whether
undertaken by government, a family or a corporation. A variety of entities (known as
governing bodies) can govern. A corporation is a governing body, recognised as a legal entity
by a government. A corporation’s governance is the way the rules, norms and actions are
produced, sustained, regulated and held accountable.
The above characteristics are generally applied to traditional corporations. However, a number of
big corporates are known as privately owned (in other words, the shares in the corporates are not
traded through stock exchanges such as the Johannesburg Stock Exchange). In South Africa,
Reutech Radar Systems is the largest private company, developing and manufacturing ground and
naval search and tracking radar systems and subsystems for the South African National Defence, as
well as for clients in the defence export market. Mining radar sensor systems, utilised in open-cast
mining operations, are also supplied internationally.16 Other big corporations are exclusively
institutionally owned, for example, by banks or governments. In South Africa, Telkom is an example
of a state-owned corporation. For the use of the term ‘corporate’ or ‘corporation’ in this textbook,
we also refer to corporations as privately and institutionally owned businesses devoted to making a
profit. The key thing to note here is to make a financial profit for its owners.
Example
Political landscape
Prior to 1994, the National Party was the ruling political party in South Africa and it implemented an
apartheid policy. After the transition from apartheid in 1994, the new South African government, with
the African National Congress as a ruling party, created an entirely different landscape influencing the
way that corporates operate. The new government decided that a direct intervention in the
redistribution of assets and opportunities was needed, and developed an integrated Black Economic
Empowerment (BEE) programme. The main aim of the BEE programme was to resolve the economic
disparities created by the previous government’s apartheid policy. In its 2001 report, the BEE
Commission stated that the Integrated National BEE strategy will launch South Africa on a course of
sustained economic growth. The commission also stated that the domination of business activities by
white business and the exclusion of black people and women from the mainstream of economic
activity, are causes for great concern for the reconstruction and development process in South Africa.
The BEE policies therefore aim to make it easier for black people to gain access to capital for business
development. Furthermore, the BEE Commission stated that (i) the democratic government must
ensure that no discrimination occurs in financial institutions, and that state and parastatal institutions
should provide capital for the attainment of BEE objectives; (ii) the democratic government must also
introduce tender procedures, which facilitate BEE; and (iii) special emphasis must be placed on
training, upgrading and real participation in ownership. The BEE programme was implemented in
2003, and has been criticised for benefitting only a narrow spectrum of previously disadvantaged
groups. This led to the introduction of a modified BEE programme, called the Broad-Based Black
Economic Empowerment (or B-BBEE) programme. It is important to note that the term ‘black’ is used
as a generic term in the B-BBEE programme, referring to black Africans, coloureds and Indians. The
government also gazetted sector scorecards (whereby corporates are rated based on their
performances in terms of the implementation of the B-BBEE programme) for various sectors of the
economy. Legislation in terms of B-BBEE was developed through numerous task teams. Codes of
Good Practice were developed as a standard framework for the measurement of broad-based BEE
across all sectors of the economy.
Source: Dti. Nd. Economic empowerment. http://www.thedti.gov.za/economic_empowerment/docs/Inside.pdf [6
April 2016].
What are the social responsibilities of corporates? Carroll17 developed a widely cited corporate
social responsibility model conceptualising four types of corporate responsibilities:
1. Economic responsibility to be profitable
2. Legal responsibility to abide by the laws of society
3. Ethical responsibility to do what is just, right and fair
4. Philanthropic responsibility to contribute to various kinds of social, educational, recreational or
cultural purposes.
• Citizenship. The dominant understanding of citizenship in most industrialised societies is located

in the liberal tradition, where citizenship is defined as a set of individual rights. Liberal
citizenship comprises three different aspects of entitlement: social, civil and political rights.
Social rights consist of those rights that provide the individual with the freedom to participate in
society, such as the right to education, health care and various aspects of welfare. Civil rights
refer to those rights that provide freedom from abuse and interference from third parties, such
as the right to own property, exercise freedom of speech and engagement in free markets.
Political rights refer to an individual’s active participation in society, and include aspects such as
the right to vote. ‘Citizenship’ as explained by these rights, refers to the rights of an individual. At
first glance, it is hard to make sense of ‘corporate citizenship’ from this perspective. However,
Matten and Crane, who are regarded as pioneers in conceptualising the term, established the
relationship of corporations to citizenship in the context of the recent (Fourth Industrial
Revolution) shifts in business-society relations, where corporates take over many of the roles
and actions previously associated with governments.
• Corporate citizenship. The history of corporate citizenship will be explained in more detail in the
next section. As indicated in Chapter 1, we have elected to follow Matten and Crane’s18 seminal
conceptualisation of corporate citizenship and define it as the role of the corporation in
administering citizenship rights for individuals. The depiction of citizenship for corporations is
rather contested. For many, the association of corporations with human virtue (citizenship) is
unacceptable because corporations are not people and therefore cannot be citizens. Such
sceptics’ fears of the corporation and citizenship association will lead to inappropriate
expectations being made of business. Others argue that the concept of citizenship is appropriate
for consideration of the power and responsibility of corporations for several reasons, such as:
» Corporations use the term ‘corporate citizenship’ as one of the several synonyms for their
greater social responsibility.
» ‘Citizenship’ is a concept that is specifically concerned with social relations of power and
responsibility (by which many of the current debates about contemporary business-society
relations are surrounded).
» The notion of citizenship is at the core of extensive debates about societal governance of which
corporations form a key part.
Based on these arguments, corporate citizenship (CC) has emerged as a prominent concept in
management literature, addressing the evolved business-society relationship and the changing role
of business. The history of corporate citizenship is addressed in the next section.
3.4 The history of corporate citizenship

.2
The idea of using the citizenship metaphor emerged as early as 1886, when the US Supreme Court
ruling attributed equivalent rights to corporations as to natural persons in relation to the Fourteenth
Amendment of the US Constitution. Researchers such as Melé19 made reference to papers
addressing corporate citizenship dating back to the 1960s and 1970s. One of the earliest articles
suggesting the metaphor was published in 1943 in the Journal of Marketing entitled ‘Are chain
stores good citizens?’ Matten and Crane, renowned authors in the field of corporate citizenship,
stated in a world-renowned article in 2005, ‘Corporate citizenship: Toward an extended theoretical
conceptualisation’, that the term has emerged as a prominent term in management literature
dealing with the social role of corporates, especially since the 1980s, in other words, during the
Fourth Industrial Revolution. A landmark in this process, has been the joint statement on ‘Global
Corporate Citizenship – The leadership challenge for CEOs and Boards’ that was signed during the
World Economic Forum in New York, in January 2002, by CEOs from 34 of the world’s largest
multinational corporations. These included, for example, Coca-Cola Company, McDonald’s
Corporation and Philips.
As corporates become more and more aware of the significant changes in their roles and
responsibilities in society (as highlighted in the preceding sections in this chapter) and as more and
more questions arose in terms of the nature of these changes, the need to sharpen our conception of
what corporate citizenship is and what it is not, became a big need in management research and
literature. Also, corporate citizenship has been introduced into the corporate social responsibility
discourse (which we explained in the previous section) in the last few years, and corporate
citizenship has been added as a new term to the debate surrounding the social role of businesses. In
what follows, we will examine the conventional views of the term, followed by the extended view
thereof as developed by Matten and Crane.
Conventional view of corporate citizenship

This view comprises two approaches, which Matten and Crane20 called the limited and the
equivalent view:
• Limited view of corporate citizenship. According to this view, corporate citizenship is regarded as a
discretionary activity of corporates, making a choice to ‘put something back into the
community’ (which brings us back to the systems approach as explained in Chapter 2 of this
book). For corporations, corporate citizenship is depicted as motivated by self-interest –
corporations recognise the fact that their contributions towards building a stable social,
environmental and political environment, ensures profitable business. This view focuses mainly
on the direct physical environment of corporations, resulting in a focus on the local community.
The limited view also sees the contribution of corporate citizenship to the processes and rules of
its social environment – thereby maximising the corporates’ self-interest. Proponents of the
limited view, ultimately see the contributions of corporate citizenship to the debate on
business-society relations in its economic character as an approach to long-term maximisation
of self-interest through corporate investment in the processes and rules of the corporates’ social
environment. The biggest criticism of the limited view of corporate citizenship is that it has not
explained, nor conceptualised, the notion of citizenship involved in philanthropy.
• Equivalent view of corporate citizenship. This view does not address nor define any new role for the
corporation, and it is more general in scope. Essentially, this view defined corporate citizenship
in the same way that corporate social responsibility is defined, consisting of four aspects:
economic, legal, ethical and philanthropic, as highlighted in the previous section. In the
equivalent view of corporate citizenship, there again tends to be little, if any, serious reflection
on the notion of ‘citizenship’ and explaining the reasons for this phraseology in a business
context.
Due to the limitations and critique against the conventional view of corporate citizenship, Matten
and Crane developed an extended theoretical conceptualisation of the term, which helps us to
understand the significant changes in the corporate role and the nature of these changes.
Extended view of corporate citizenship

The purpose of the extended view of corporate citizenship is to establish the relationship of
corporates to citizenship in the context of the recent shifts in business-society relations, where
corporations take over many of the roles and actions previously associated with government. In our
opening case scenario, Unilever took over some of the roles of governments. For example, Unilever
is taking action in mostly developing countries to improve the health and wellbeing of these
nations. The corporate is also committed to helping smallholders to improve their yields and
transform their livelihoods as part of the corporate’s overall ambition of ensuring that they have a
successful business with a positive social impact. The corporate is also committed to Africa, and
aims to accelerate innovations that drive growth and continuous improvement in quality and
service for consumers, and to create new jobs.
At this point, it is important to note that the extended view of corporate citizenship is not simply
about corporate social policies and programmes that might (or might not) be adopted in the same
vein as corporate social responsibility (as discussed in section 3.4.1). The extended view aims to
focus on the effective functioning of liberal citizenship – where we define liberal citizenship as the
corporate uptake of governmental functions to render corporate involvement in ‘citizenship’.21
There are various reasons why corporates need to take up functions traditionally performed by
governments, of which globalisation (as discussed in section 3.3.1) is probably the most important
reason. Another reason is that corporations have tended to partly take over (and are sometimes
expected to take over) certain functions with regard to the protection and facilitation of the rights of
citizens, formerly expected of governments. An example in the South African context is the various
security corporations providing protection at private homes and offices.
Matten and Crane22 suggest three ways in which governmental and corporate roles in
administering citizenship are changing:
1. Governments cease to administer citizenship rights. An example of this is corporates improving
poorly resourced schools and neighbourhoods.
2. Governments have not as yet administered citizenship rights. Examples of this are corporates that
improve the working conditions of labourers or finance the schooling of child labourers.
3. Where the administration of the citizenship rights may be beyond the reach of the government. An
example can be found in pension funds and life insurance that are linked to international
capital markets. Investors that invest their money in such products, rely on these markets to
protect their property – which is beyond the control of governments.
Against all the arguments listed above, the extended view of corporate citizenship defines the
concept as follows:
‘Corporate citizenship describes the role of the corporation in administering citizenship rights
for individuals, where these rights refer to the social, civil and political rights of individuals’.23
This definition reframes corporate citizenship away from the notion that the corporation is a citizen
in itself (as individuals are), and towards the acknowledgement that the corporation administers
aspects of citizenship for other constituencies. The latter refers to stakeholders (such as employees,
owners, customers and so on), as well as wider constituencies with no direct relationship with the
corporate. An example of such a wider constituency is Unilever that aims to help reduce diarrhoea,
which is the world’s second biggest cause of infant mortality in Africa, Asia and Latin America.
There are two features of the extended view, the definition which we will use for this book (as
presented in the introduction of the textbook) that are important. These include:
• First, the extended view is grounded in a thorough consideration of the notion of citizenship with a
specific emphasis on the liberal political tradition that characterises most industrialised
societies (in other words, citizenship characterised by three dimensions of civic rights – social,
civil and political rights).
• Second, the extended view specifies emphatically and clearly that corporate citizenship is not
about corporates as citizens, but rather that it is about the roles which corporates might play in
administering citizenship rights to citizens. Implicit in the understanding of ‘roles’ is that
corporate citizenship encompasses much more than corporate philanthropy and social
investment – corporate charity if you like – which tended to be the focus of earlier manifestations
of the term.
The last section of this chapter focuses on providing a framework for facilitating corporate
citizenship. In other words, we provide a framework for corporates administering the rights of
individuals.
3 Facilitating corporate citizenship: A framework 24, 25

.5
The United Nations Global Compact (UNGC) was initially proposed in 1999 by Kofi Annan, the
former UN Secretary-General, as a call to companies around the world to align their strategies and
operations with ten universal principles. These principles are themed into the four broad areas of
human rights, labour, the environment and anti-corruption, and are presented in detail in the
example box on the next page.
The Global Compact has provided a leadership platform for the development, implementation
and disclosure of responsible and sustainable corporate policies and practices. It does so by
supporting companies to:
‘1. do business responsibly by aligning their strategies and operations with the ten principles on
human rights, labour, the environment and anti-corruption; and’
2. take strategic actions to advance broader societal goals, such as the UN Sustainable
Development Goals, with an emphasis on collaboration and innovation.’26
Since the official launch of the UNGC in the year 2000, almost 8 500 companies (both small
enterprises and multinationals) from 162 countries have become signatories to the Global Compact,
committed to integrating the ten principles into their strategies and operations.
As a voluntary initiative, the UNGC sees itself as more of a guide dog than a watch dog and as
such, therefore relies on public accountability, transparency and disclosure to complement
regulation and to provide a space for innovation and collective action.
Since businesses have been a key driver to globalisation, they can, facilitated by the UNGC, help
ensure that markets, commerce, technology and finance advance in ways which benefit economies
and societies everywhere, as well as contribute to a more sustainable and inclusive global economy.
Furthermore, participation in the UNGC has the following benefits linked with it (as cited by the
UNGC):
Example
The ten principles of the UNGC
Human rights
• Principle 1: Businesses should support and respect the protection of internationally proclaimed
human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses.
Labour
• Principle 3: Businesses should uphold the freedom of association and the effective recognition of the
right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labour;
• Principle 5: the effective abolition of child labour; and
• Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
• Principle 7: Businesses should support a precautionary approach to environmental challenges;
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
• Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Anti-corruption
• Principle 10: Businesses should work against corruption in all its forms, including extortion and
bribery.
Source: United Nations. Nd. United Nations Global Compact. The ten principles of the UN Global Compact.
[Online]. Available: https://www.unglobalcompact.org/what-is-gc/mission/principles [8 February 2016].
• Adopting an established and globally recognised policy framework for the development,
implementation and disclosure of environmental, social and governance policies and practices
• Sharing best and emerging practices to advance practical solutions and strategies to common
challenges
• Advancing sustainability solutions in partnership with a range of stakeholders, including UN
agencies, governments, civil society, labour and other non-business interests
• Linking business units and subsidiaries across the value chain with the UN Global Compact’s Local
Networks around the world – many of these in developing and emerging markets
• Accessing the United Nations knowledge of and experience with sustainability and development
issues
• Utilising UN Global Compact management tools and resources, and the opportunity to engage in
specialised workstreams in the environmental, social and governance realms.
DILEMMA
The UNGC in Africa: Thinking globally and acting locally
While the business landscape in sub-Saharan Africa is marked by great opportunities, it is also
affected by a complex set of challenges, for example, the basic development issues such as poverty,
corruption and education. Awareness of these issues is growing and the private sector is realising that
it can play a pivotal role in Africa’s development. The private sector can fulfil this role by contributing to
core development needs, thereby supporting market development, which the business needs to thrive.
The UNGC has adopted a long-term strategy to better connect with the growing private sector in
Africa, and has done so in collaboration with African CEOs. As an outcome of this collaboration, a
strategy document was released in 2014, titled ‘Partners in Change: UN Global Compact Advancing
Corporate Sustainability in Africa’. This document has become the foundation of the UNGC’s work in
sub-Saharan Africa, with the objectives quoted as follows:
• Build greater awareness of responsible business practices in sub-Saharan Africa;
• Align business needs and objectives with UN development goals, such as poverty alleviation,
anti-corruption and infrastructure development; and
• Provide opportunities to innovate business solutions that address Africa’s key development issues.
A Global Compact Local Network (GCLN) was launched in South Africa in 2007. GCLNs represent a
platform for the participating stakeholders to advance the UNGC principles at a local level. South
Africa’s GCLN is housed and facilitated by the National Business Initiative (NBI), which is a voluntary
coalition of corporates operating in South Africa and working towards sustainable development.
South Africa has 75 signatories of the UNGC. Included in this list of corporates are: Discovery
Limited, Sun International, Woolworths Holdings, Cliffe Dekker Hofmeyr Inc, Royal Bafokeng Platinum
Limited, South African Airways, Investec Group, MTN Group Limited, Edcon, Mondi, Pick n Pay,
Richards Bay Coal Terminal Company Limited, Sappi Limited, Sanlam Ltd, Unilever South Africa Pty
Ltd, Coca-Cola Sabco Pty Ltd, Exxaro Resources Ltd., Deloitte South Africa, Nedbank Group, and
Sasol Ltd.
Of the list of signatories in South Africa (or your country of residence), select one or two of the
corporate participants. Is there evidence on the corporate’s website indicating their commitment to the
UNGC? Is the participant practising corporate citizenship fundamentals?
Source: United Nations. Nd. United Nations Global Compact. [Online]. Available: https://www.unglobalcompact.org
/engage-locally/africa; https://www.unglobalcompact.org/engage-locally/africa/south%20africa [8 February 2016].
The UN believes that corporate sustainability begins with a corporate’s value system and a
principled approach to doing business. What this means is to operate in ways in which the essential
responsibilities (at the bare minimum) in the areas of human rights, labour, the environment and
anti-corruption are met.
The UN Global Compact is a global framework that facilitates global thinking and local action.
The dilemma box above outlines the UNGC’s presence in Africa with questions for you to research.
3 Conclusion
.6
Sustainable development is considered a vital aspiration of society, which we have referred to as the
social case for corporate citizenship. This chapter presented the increasing power and responsibility
of corporations and the consequential impact on society and the environment, a force for good or a
force for bad. We presented the emergence of corporate citizenship as a response to the changing
business-society relations and as a mechanism to drive the sustainable development agenda. We
laid the conceptual foundation of corporate citizenship, elaborating upon Matten and Crane’s27
definition of corporate citizenship, where corporate citizenship is defined as the ‘role of the
corporation in administering rights for individuals’. We presented the UNGC as a global framework
and facilitator of corporate citizenship; we opted to use this framework as it is one of, if not, the most
widely recognised facilitator of corporate citizenship. We also looked at Milton Friedman’s famous
New York Times Magazine article as an example of an opposing view of corporate citizenship, which
was instrumental in the development of debate and conceptualising the rationale for corporate
citizenship. This brings us to Chapter 4, the rationale for corporate citizenship, where the business
case for corporate citizenship will be presented.
1. Business leaders worldwide believe that we are today at the cusp of a Fourth Industrial
Revolution, with the following characteristics:
a. Artificial intelligence and machine learning, robotics, nanotechnology, 3D printing and
genetics and biotechnology are all building on and amplifying one another.
b. Smart systems are used in homes, factories, farms and entire cities.
c. Resources are extracted from the earth for construction as quickly and cheaply as possible.
d. Water and steam are used to power machinery.
2. Which one of the following variables does not have a definite influence on corporates to which
they need to adapt?
a. globalisation
b. a radical transformation of the world of work
c. decrease in the demand and power of customers
d. intellectual capital and learning are becoming more and more important
3. Corporates have employees from various age generations. The _____ workers are empowered by
their ability to master the newest and latest technology, they challenge the conventional way of
doing things and they are constantly seeking new ways of doing things.
a. Silent Generation
b. Baby Boomers
c. Generation X
d. Generation Y
4. Various factors contribute to an increase in the power and responsibilities of corporates. Which
one of the following is not such a factor?
a. decreasing privatisation
b. new consumer markets
c. increasing cross-border activities
d. assuming greater roles in the delivery of public goods
5. The extended view of corporate citizenship defines the concept as follows:

a. ‘Corporate citizenship is a discretionary activity, making a choice to put something back into
the community’.
b. ‘Corporate citizenship consists of four aspects, namely economic, legal, ethical and
philanthropic’.
c. ‘Corporate citizenship is the efforts of corporates towards building a stable social,
environmental and political environment’.
d. ‘Corporate citizenship describes the role of the corporation in administering the citizenship
rights of individuals’.
1. Explain the changing role of corporates.
2. Explain the various factors that influence corporates to change.
3. Provide an overview of the history of corporate citizenship.
Additional reading
• Friedman, M. 1970. The social responsibility of business is to increase its profits. New York Times
Magazine, 13 September 1970.
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22. Ibid.
23. Ibid.
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%20Business.pdf [8 February 2016].
chapter
Rationale of corporate citizenship
Ireze van Wyk
4
LEARNING OBJECTIVES

• Understand the moral drive for corporate citizenship
• Define ethics and morality
• Understand the most prominent ethical theories
• Understand that adage ‘doing good to do well’
• Explain the role of legislation in corporate citizenship
• Explain the relationship between corporate citizenship and profitability

- consequential theory
- discourse ethics
- egoism
- ethics
- ethics of duty
- ethics of justice
- ethics of rights
- feminist ethics
- modern ethical theory
- morality
- non-consequential theory
- post-modern ethics
- regulation
- utilitarianism
- virtue ethics
Corporate citizenship at Nedbank

Nedbank recognises the vital role that it, as a bank, plays in building a strong and thriving
nation. It believes that improved success and future business prospects depends on a
flourishing society. Therefore, Nedbank commits itself to good corporate citizenship,
contributes to building a strong South African nation, ingrains a culture of diversity and
transformation, and leads as a green bank.
Nedbank’s citizenship is reflected in its social and relationship capital. It has a strong
relationship with its stakeholders – including the community that it operates in. During
2014, Nedbank engaged with its communities in a number of key elements, requirements
and pressing issues, namely:
• Strengthening the social fabric of South Africa. South Africa’s social fabric constitutes the
country’s state of health and education, employment, feeding, housing, sport, public
transport, labour relations, religion, policing and crime. Nedbank encourages a culture
of active citizenship and, during 2014, 28% of its staff members participated in
voluntary programmes. These programmes deliver a direct positive impact to
communities across South Africa. Nedbank has eight programmes in which staff can
volunteer. Programmes include the ‘Angel Tree’ and the ‘Caring for Communities’. The
‘Angel Tree’ programme collects Christmas gifts from staff which are re-distributed to
community-based charities, while the ‘Caring for Community’ programme assists
identified schools to build vegetable tunnels, rain-harvesting tanks, and solar cooking.
• Rebuilding trust in the financial industry. The 2008 US financial crisis, as well as past
corporate scandals in general, have had a negative effect on consumer and investor
trust. In 2014, reckless lending was exposed at African Bank, causing further damage
to consumer and investor trust in financial institutions – and the industry as a whole.
Nedbank’s continuous research indicated that trust in the financial industry is gradually
being rebuilt. In order to build trust, Nedbank has focused on driving ethical behaviour
in staff, giving appropriate financial advice to clients, providing excellent client service
and stringently protecting client information. By 2014, 97% of Nedbank’s staff
members acknowledged their Code of Ethics and Code of Conduct policies.
• Playing a meaningful role in society. During 2014, Nedbank advanced R54 billion to retail
clients, lent R1,5 billion into affordable-housing projects and R113 million to enterprise
development. Nedbank ensured that 80% of its procurement spend in 2014 was local.
• Funding corporate social investments (CSI). Nedbank makes a significant contribution
towards many issues (in the social, environmental and economic realm, such as
inequality and social upliftment) facing SA. During 2014, Nedbank spent a total of R151
million on CSI across all of its community-support focus areas. Nedbank, for example,
addresses unemployment through its commitment to skills development and job
creation. It has skills development programmes focusing on hospitality, winemaking,
electrical engineering, plumbing, carpentry and furniture-making as well as a
small-enterprise development programme.
Nedbank also recognises the importance of ethics and good governance in entrenching
good corporate citizenship. The key notes from the chairman’s review, Dr Reul Khoza,
continuously highlighted the importance of ethics and governance. He maintains that
Nedbank’s strong performance and positioning in 2014 have been reinforced by strong
ethical principles and benchmarking themselves to world-class governance standards. He
added that a greater focus on governance and ethics is required to create a better life for
all South Africans.1
4 Introduction
.1
As highlighted by Nedbank’s chairman, ethics play an important role within the bank and in
corporate citizenship. One of its key community engagement elements includes managing the
ethical behaviour of employees and having a Code of Ethics and Code of Conduct policy. An
analysis of the integrated reports of other corporations (for example Absa, FNB and Standard Bank)
reveal a similar situation. More and more corporations are communicating with their stakeholders
regarding what they are doing in terms of corporate citizenship activities – which include reporting
on ethical drives within the corporation and investing back into the communities in which they
operate.
In this chapter, we focus on the rationale for corporate citizenship, by first explaining the moral
drive for corporate citizenship. We define ethics and morality, and differentiate between the most
prominent ethical theories, namely the consequential, non-consequential and contemporary (or
modern) ethical theories. Having a clear understanding of ethics and morality, we then move on to
explain the adage ‘doing good to do well’. Legislation plays an important role in the ethical conduct
of corporates, therefore we also explain the relationship between corporate citizenship and
legislation. The last part of this chapter focuses on the relationship between corporate citizenship
and the profitability of corporates.
4 The moral drive for corporate citizenship

.2
Encouraging a culture of active citizenship amongst employees and playing a meaningful role in
society are two examples of how Nedbank is contributing towards society, as well as contributing
towards issues facing South Africa (such as Nedbank’s commitment to skills development and job
creation, which addresses South Africa’s high unemployment problem). Some organisations get
involved with community upliftment (such as providing basic sanitation or basic farming and
health education to communities and previously disadvantaged individuals) or development
programmes, while others contribute towards disaster relief or charities. All of these actions are
based on a moral ground that justifies an ethical result. These actions are considered the ‘right’ or
‘moral’ thing to do.2
In Chapter 3 (The evolution of corporate citizenship), the concept of corporate citizenship was
categorised according to the Matten and Crane3 analysis, namely the limited view, an equivalent
view and the extended view, which we are using throughout this book. The moral (or philosophical)
justifications for ethical results are also evident within these three views of corporate citizenship.
The limited view of corporate citizenship defines an organisation’s philanthropic role and
responsibilities, whereas the equivalent view of corporate citizenship aligns corporate citizenship
with corporate social responsibility (CSR). According to Carrol, philanthropic responsibilities
(giving back to the community) are desired by society, while ethical responsibilities (within CSR)
are expected by society.4 The notions of both of these responsibilities are grounded in ethics and
morality – as it is considered as the right or moral thing to do.
The extended view of corporate citizenship, as defined by Crane and Matten, highlights the
ethical foundation more effectively. This perspective clarifies the ethical expectations that are
increasingly placed on corporations and provides a more critical view on the social role of
corporations. In addition, the political role of corporations emphasises the demand for corporate
accountability – a more modern business ethics thinking.5
However, the strongest motivation for organisations to integrate ethics into their business
practices originates from pressure coming from various stakeholders – which includes society and
shareholders. Malpractice has led to an increased focus on the ethics and the ethical behaviour of
organisations.6 Having a responsibility towards multiple stakeholders, managers of an organisation
need to take the organisation’s and all these parties’ interests into account.7 Moreover, stakeholders
are concerned with the ethics of organisations.8 Therefore, an organisation should not just behave
ethically towards society and the community that they operate in, but they should also have an
internal drive to build an ethical organisation. In essence, ethics must become part of the DNA of an
organisation – while operating within society.
In the following section, we look at the moral foundations of corporate citizenship, focusing on
fundamentals such as morality, ethics and ethical theories. This is not a book on philosophy,
however, ethical theories provide a foundation in the development of business ethics. It has an
important role and practical relevance in evaluating ethical issues that modern organisations may
need to face and manage9 – both internally and externally.
4 Defining morality and ethics

.3
Morality concerns individual or collective behaviour and how individuals should behave – in their
own capacity and towards one another. Morality is the underlining values (or an individual’s
principles) on which decisions are based on. Examples of underlying values include integrity,
honesty, fairness and consideration towards others. Waiting one’s turn in a queue, rather than
‘jumping the queue’, and not cheating on a spouse are indications of an individual’s underlying
values and principles.
Ethics, on the other hand, is the philosophical study of morality; therefore it involves the
application of morals to decisions.10 Ethics (or moral philosophy) is defined as a set of moral
principles, norms or standards that directs individual behaviour.11 In the business setting, ethics
provides moral principles, norms or standards that direct business conduct. Business ethics will be
discussed more comprehensively in Chapter 9 of this textbook.
What makes ethics and morality complex in the business environment, especially within a global
economy, is that moral standards can differ from society to society.12 In the case of Bolivia (see
dilemma box below), there are conflicting standards – in one society child labour is acceptable,
while in another it is illegal.
It raises the question as to what is considered ‘ethical’ in the business world specifically, and
which corporate behaviour is appropriate – especially when an organisation wants to develop and
maintain good corporate citizenship status. For centuries, ethical theories were developed and
refined by philosophers and economic politicians. These theories attempt to determine what is
‘right’ or ‘ethical’. We will now take a closer look at some of these theories.
4 Ethical theories
.4
Various ethical theories – or approaches – can be used to examine moral issues in business and
society.13 Ethical theories offer explanations that connect acting justly with the achievement of a
‘good’. The ‘good’ is taken as the ultimate ‘end’ of a right and wise action – or the summum bonum.
14 In this book, we’ll focus on consequential, non-consequential and modern ethical theories that
can assist in reaching the summum bonum. Consequential and non-consequential theories are
western modernist (or normative) theories and generally provide a rule of principle that can be
applied in a given situation. Hence they are absolute. Modern, or contemporary ethical theories,
tend to be relativistic and claim that morality is context-based and subjective.15
DILEMMA
According to the 2015 World Report on Child Labour, 168 million children are trapped in child labour,
while 75 million young adults (aged 15 to 25) are unemployed. In 2014, Eritrea, Somalia, Democratic
Republic of Congo, Myanmar, Sudan, Afghanistan, Pakistan, Zimbabwe and Yemen were identified as
countries where child labour is most prevalent. In these countries, children work to supplement their
family’s income. However, child labour is also evident in countries with strong economies such as
Russia, due to a lack of properly enforced child labour laws.16
In 2014, Bolivia legalised child labour. Children as young as 10 years of age are allowed to work if they
are (1) enrolled for school and (2) have consent from their parents or guardians.17
Consider the following three questions:
1 Child labour is legal in Bolivia – is it still unethical for Bolivia to employ children even though it is
. legalised? Answer this question from a Bolivian perspective (where child labour is legal), and from
a South African perspective (where child labour is illegal).
2 A brick distributor firm, operating in countries where child labour is illegal, buys bricks from Bolivia.
. The brick distributor is not employing the children directly and only purchasing from countries that
do make use of child labour, so is the brick distributor violating the laws of its country?
3 What rights are being limited considering the extended corporate citizenship perspective?
.
4.4 Consequential ethical theories

.1
What makes an action or decision right or wrong? A common answer is ‘its consequences’.
Consequentialists believe that the ‘good’ is determined by the consequences that follow the specific
behaviour. Therefore, consequential theories are primarily concerned with the consequences of a
decision or action. The consequences determine whether a decision or action is right or wrong. The
questions now are: ‘Which consequences are morally important?’ and ‘Which are good consequences
and for whom?’18 Whose good are we looking at? We have two answers – the egoism’s and
utilitarianism’s answer.
Egoism
The egoism theory states that one should maximise one’s own good and happiness.19 This theory
equates morality with self-interest and maintains that an act is morally right if it best promotes the
decision maker’s interest. The theory further states that one can indirectly have interests in others
and promote their wellbeing, if such actions or behaviours would maximise what is good for
oneself.20
Thought processes such as ‘I will not steal, as I will get a criminal record’ and ‘I will not lie about
a particular matter, as it will negatively impact how my community sees me’ are basic examples of
reasoning within this theory’s parameters. This theory receives the most criticism – especially since
it aligns morality with self-interest. What is best or good is defined by each individual, and their
self-interest. Self-interest could include physical wellbeing, power, pleasure, fame, career
satisfaction, a good family life and wealth. Criticism of this theory holds that egoists are inherently
unethical, short-term oriented and will take advantage of opportunities.21 Furthermore, a problem
occurs when the good for one person directly conflicts with what is good for another.22
One can argue that it is within an individual’s best interest to act ethically, when considering the
long-term impact of one’s decisions. To ensure ‘ultimate happiness’ one will avoid unethical
behaviour because of the consequences. Fraudulent activity can result in lawsuits, fines and
deterioration in company reputation – something that takes a long time to rebuild. The decision
maker will then avoid such consequences. Ultimate happiness could also involve charitable deeds
or helping others – as it may make an individual satisfied. The long-term perspective, and allowing
for the wellbeing of others – in maintaining one’s own self-interest – is referred to as enlightened
egoism.23
Utilitarianism
The utilitarianism theory is concerned with the overall good or happiness of an action or
behaviour for the greatest number of people.24 Hence, behaviour or an action can be considered
good or right if the consequences result in the greatest overall good, for the largest number of
people. This theory involves identifying the parties that will be affected by a decision, and then
determining the possible costs and benefits for each party (in essence, conducting a cost-benefit
analysis). Table 4.1 on the next page illustrates a cost-benefit (or pleasure-pain) analysis on the use
of child labour in Bolivia.
In our simplistic example, decision 2 would be considered the most ethical decision as it
provides the greatest amount of good for the greatest amount of people. However, the main
problems with this theory are:25
• Subjectivity. This theory requires creativity, and assessing consequences such as pleasure and pain.
These consequences depend mainly on the subjective perspective of the individual who carries
out the analysis. An individual might identify more ‘pleasures and pain’ (of benefits and
disadvantages) associated with a particular decision, than what another individual would, hence
the problem of subjectivity. Our cost-benefit analysis (Table 4.1) included the party
‘government’. Facing the same dilemma, and conducting the same cost-benefit analysis, an
individual might have overlooked ‘government’ as a party involved in the decision.
• Quantification challenges. It is difficult to assign costs and benefits to every situation. In a business
transaction, costs and benefits may be easily identified. However, cost and benefits in assessing
pain and pleasure pose challenges. For example, with child labour it is easy to determine ‘costs’
(cost of child labour versus cost of adult labour) and benefits (access to cheap labour, lower
costs per units, and additional income for poverty stricken families). However, how would one
quantify the costs and benefits when considering, for example, the morale of the workforce in
brick manufacturing firms or the psychological impact of child labour on the children and
families?
• Distribution of rights. Assessing the greatest good for the greatest number of people can overlook
the interest of minorities. Democracy is perhaps the best way to illustrate this challenge. A ruling
party will always act in the best interest of the majority, however, it does happen that the
minority’s (in the form of language, culture and nationality) interest can be overlooked. In
schools, English as a teaching language will be decided upon if the majority of children use
English as their first language, overlooking those children who do not use English as their first
language.
Table 4.1: Utilitarian analysis (or cost-benefit analysis)
• Act and rule utilitarianism. Due to the limitations of the theory – especially considering the
challenge of ‘subjectivity’, the theory was refined and act and rule utilitarianism emerged. Act
utilitarianism focuses on a single action and/or situation. The moral judgement is then based on
the amount of pleasure and pain that the single action or situation causes. It therefore looks at
the single situation. Looking at child labour (the act) in Bolivia (the specific situation), one can
argue that it will be good for the families if their children are allowed to work given their
circumstances – it is legal, children must still go to school, and it would provide income relief for
poverty-stricken families. Without the additional income, the families could perhaps no longer
pay for school fees, food and necessities. Therefore, act utilitarianism can argue that child labour
is morally correct in Bolivia. Rule utilitarianism focuses on classes of action. The question asked
is: ‘What is the underlining principle of action that will produce more pleasure than pain for
society over the long-term?’ The rule utilitarianism looks at the situation in principle – allowing
the possibility to establish principles that one can apply to all situations.26 Considering the
long-term consequences, the rule utilitarianism approach will look at, for example, a company’s
reputation, fines, psychological effects on children and possible ramifications for Bolivia’s
economy (for example, boycotts from around the world). This approach can argue that these
long-term considerations outweigh the benefits, making child labour morally incorrect. Hence,
a principle (child labour is incorrect in principle) can be established and applied in similar
situations.
This theory closely aligns itself with the notions of stakeholder theory. The utilitarianism theory
requires that one must identify ‘parties’ affected by the decision, and evaluate how the decision
‘affects identified parties.’. It allows for the inclusion of broader society and ask how business
operations, activities and conduct impact society (including considering the environment and
society). The stakeholder theory (discussed in more detail in Chapter 8), maintains that
organisations should take into consideration the interest of stakeholders (affected parties) and not
just shareholder interest, as organisational processes, decisions and transactions affect stakeholders
(either positively or negatively).27 Stakeholders include shareholders and extend towards parties
such as the government, customers, employees, society and suppliers.28 Examples of how
stakeholders are affected are:
• Customers are negatively affected by harmful products, or products that do not have the correct
labelling (for example, a warning that the product contains peanuts traces is missing).
• Society and employees are negatively affected if an organisation should shut down (products and
services are no longer available, and the resulting unemployment), or engage in heavy pollution.
• Society and employees are negatively affected if an organisation engages in heavy pollution or
waste.
• The government (and tax payers) are negatively affected if an organisation (involved in unethical
dealings) must be bailed out. The South African Reserve Bank (SARB) bailed out African Bank in
2014.
Therefore, this theory also substantiates the social role and responsibilities of an organisation in
their pursuit of maximising profits. In governing citizenship rights, and scrutinising their own
conduct, organisations should engage in those activities that will lead to the greatest amount of
good for the greatest number of people.
4.4 Non-consequential ethical theories

.2
Non-consequential (or deontological) ethical theories are based on basic universal ethical rules or
moral principles that determine right and wrong.29 The two non-consequential theories are ethics of
duty and ethics of rights and justice.
Ethics of duty
This theory is based on moral duties that specify certain ways in which individuals should act. Kant,
who pioneered this theory, saw humans as rational actors, implying that they are independent
moral agents capable of making their own rational decisions regarding right and wrong. He also
viewed morality as the same for everyone everywhere. For Kant, morality concerned certain eternal,
abstract and unchangeable principles (or a priori moral laws) and used three imperatives to
highlight what ought to be done by individuals.30
The first imperative is to act as if the maxim of one’s action by one’s will would become a
universal law (will for yourself what you would like to will for others). This imperative checks if the
action could be performed by everyone, universally, and reflects the aspect of consistency. If a
person decides to break a promise because it no longer suits him or her – can that be a universal law
(can people be allowed to just break promises when it suits them?) Such a rule (to break promises
when one pleases) will dilute the very nature of a promise. Murdering can also not be made a
universal rule as there will be a possibility of no people left on earth. Therefore these actions are
seen as immoral. The second imperative is to act in a way that treats humanity fairly. Humans have
value, and should be treated as an ‘ends’ and never as ‘a means to an end’. This imperative checks
that human dignity is not ignored. For example, human resources are used by companies to
produce and provide goods and services. This doesn’t mean that their staff can work in immoral
working conditions and environments. This imperative would also object to using people in
medical trials or experiments and research studies without their consent. The third imperative is to
act in a way that is regarded as universally lawgiving (would ‘your law’ also be universally accepted).
This maxim’s aim is to ensure objectivity. For example, an individual has decided to end his
mother’s life. It is her last wish (to die) and it would relieve her from her painful and terminal illness
(also known as assisted suicide). The individual has decided that, under these specific and dire
circumstances, this can be applied universally (maxim 1), and that it would be more humane to end
her life (which is also her wish) (maxim 2). Hence, for this individual, assisted murder passed
maxim 1 and maxim 2. The last maxim asks the question: Can it be universally lawgiving? In other
words, would other individuals, universally, come to the same conclusion (maxim 3)? A ‘test’ (for
maxim 3) is to ask oneself: ‘Would you like it if your family and friends find out about your decision?’
and ‘Would you feel comfortable if your deed is the headline in tomorrow’s news-paper?’ The ‘ethics
of duty’ theory has certain problems associated with it, namely:31
• Undervaluing outcomes. Consequences, or outcomes, are not properly assessed in this theory, as
it’s not a fundamental part of the theory. It may be included, or maybe not. Child labour can be
argued by an individual as immoral as it should not be applied universally (maxim 1); it deprives
children of their dignity (maxim 2); and other societies (globally) feel the same about child
labour as a practice (maxim 3). However, there are consequences of banning child labour – for
argument’s sake, the additional income had previously paid for the child’s education, food
and/or necessities. These consequences are sometimes not considered by individuals in the
decision-making process.
• Complexity. The imperatives formulated by Kant can be difficult to apply, and requires some
abstraction. This level of intellectual analysis required to apply Kant’s imperatives, should not
be taken for granted in every case.
• Optimism. Kant’s theory is optimistic. His view of individuals as rational actors and morality is seen
more as an ideal than a reality.
Ethics of rights and justice

Ethics of rights
Closely associated with ethics of duty is ethics of rights and justice. This theory concerns the notion
of ‘natural rights’. It is concerned with basic rights, such as the right to life, freedom and privacy to
which individuals are entitled. It is therefore a decision maker’s duty to respect these rights. The
theory states that a decision or action is right when it respects the rights of individuals. Although a
very common and important ethical theory, the main problem with this theory is that it is based on
western views, or western morality. Applying or imposing these views on societies with a different
cultural and religious belief could cause friction.32
Ethics of justice
When considering individual’s rights – especially within a social context – one must also address
and respect fairness. Justice concerns fair treatment of individuals with a fair end result (everybody
gets what they deserve). The theories of justice seek to achieve fairness in terms of procedures and
outcomes. It has been a key feature in debates on globalisation and sustainability – with the main
concern being on social and economic justice. However, the biggest challenge with this theory is
balancing fair procedures and fair outcomes.33 For example, in South Africa, broad-based black
economic empowerment (B-BBEE) is aimed to fairly distribute the employment of previously
disadvantaged groups in the workplace. However, this could impose an unfair procedure on the
employment practices of companies – since ‘over-representative’ groups could be excluded in the
screening process.
4.4 Contemporary ethical theories

.3
Due to the various challenges and limitations of the western modernist theories, more
contemporary (or modern) perspectives regarding ethics emerged. The contemporary ethical
theories discussed in this book are virtue ethics, feminist ethics, discourse ethics and post-modern
theories.
Virtue ethics
Virtue ethics seeks to comprehensively describe character traits (or virtues) that constitute a good
human life.34 Central to this theory, for Aristotle, was ‘happiness’ – virtuous behaviour is an internal
part of a good life. For example, a happy sales representative would be happy about meeting his or
her target sales for the month when this success was obtained in a virtuous manner.35
Virtues are the traits that allow individuals to behave in ways that would develop their highest
potential, lead to happiness and enable them to pursue the ideals they have adopted.36 Honesty,
truthfulness, tolerance, integrity, patience, courage, self-control, fairness and reliability are
examples of virtues (traits). An individual would, for example, stand for and believe in fairness
(hence, they have adopted the virtue of fairness). They would in all areas of life promote fairness
and act accordingly.
Virtue ethics shifts the focus towards who an individual is – as opposed to how an individual
should act (it claims that individuals act in and from character – based on traits that have been
deeply ingrained and conditioned). For example, former and late president Nelson Mandela was
seen as a man of virtue – standing for and promoting selflessness, forgiveness, peace and justice.
Traits become ingrained and conditioned through a variety of factors. Over the years adults’
character and traits are formed by parents, schools, religion, friends, society and working
environments. If the virtue ‘integrity’ is deeply ingrained, a person with integrity will act, for
example, according to these traits.37 This theory looks at the character and integrity of an individual,
making an action as right (or good) based on the kind of person or the person’s virtues. Hence,
virtue ethics claims that good behaviour comes from good people.38
One of the challenges is that this theory requires a fuller description of an individual and his or
her life before one can decide if his or her action is ethical. Another challenge concerns which
society’s or community’s (or person’s) ideals of good practice to consider and consult.39 When
reasoning within this theory’s parameters, two questions should be asked: ‘What actions will make
me a better and happier person?’ and ‘What will a virtuous person do in this situation?’
Feminist ethics
The previous theories have a predominantly male influence – meaning that males pioneered those
schools of thoughts.40 It is said that males and females have different attitudes towards social life
(for example, females tend to be more ‘caring’).41 Hence, the feminist theory of ethics, views ethics
from a more feminine perspective. This theory argues that woman (females) have different attitudes
towards organising social life, compared to men. These differences affect how ethical issues and
dilemmas are handled. It views moral issues as conflicts of responsibility in relationships to be
resolved through personal and subjective assessment.42 A moral decision is therefore one that
nurtures and maintains relationships (or connectedness), and acts or decisions that could harm a
relationship pose a moral issue. A lie, for example, will harm the relationship between two business
partners, and therefore lying is seen as unethical. Rather than using principles or rules (for example,
ethics of duty, which is more objective) to solve a moral problem, this theory states that care (which
is more personal and subjective) is needed for others and in relationships.43 These relationships
include corporate, social and personal relationships or networks.
This theory stresses the importance of emotions, intuition and feeling in solving moral issues. As
opposed to the more traditional theories (which focus on fair results), the feminist theory’s goal is to
achieve harmony, empathy and integration – and to maintain healthy relationships with regards to
ethical issues.44
Applying this theory to moral issues, involves considering the relationships of affected parties,
and how one can maintain harmony in those relationships. In the Bolivian case, feminists might not
argue against child labour based on the rights that the practice violates (which is based on western
morals) – as long as the relationships in the families and in the business setting (between supplier,
buyer, customers and society) are still in harmony (meaning it still functions well). Feminists,
however, might object to child labour due to the suffering and distress of the children – in forcing
them, exploiting them or if they are pushed beyond their physical or mental capacities (being
‘caring’ toward the children). Hence, from a feminist perspective, if no relationship is harmed, but
there is suffering, then the action is unethical. In our example, and given the limited information,
there must be a healthy relationship (which is in harmony), and the welfare of children must be
kept intact (no exploitation, no distress, no forcing) for child labour to be argued as ‘ethical’.
Discourse ethics
All of the previous theories discussed so far looked at human behaviour from different perspectives
– the values that direct their behaviour and decisions, and assumptions that are prescriptive (of
what is considered as right or wrong). The utilitarian perspective looked at, for example, behaviour
that would result in the greatest amount of good, and considers that as moral. The ethics of duty
perspective emphasises universal principles that guide human behaviour, while the feminist
perspective emphasises care and connectedness. The problem is that not all individuals share the
same perspectives on various issues.45 This is particularly evident in organisations with a diverse
workforce – where individuals from different cultures have different perspectives and ideals. For
example, a marketing team decided to include a mascot in the new product campaign and an
animated dog was suggested. Based on religious beliefs, a Christian team member might have no
problem with the chosen mascot, while a Muslim team member might object, as dogs are seen as
unclean in their specific Muslim community. Due to this challenge, discourse ethics emerged.
According to discourse ethics, there should be a process of norm generation through rational
reflection. Norm generation refers to the process of establishing a rational ideal discourse about a
specific problem.46 It is the procedure of parties getting together to settle a conflict, solve a problem
and provide a solution for a specific situation that is accepted by all parties. Therefore it involves the
time and energy taken to interact with one another and for each affected party to share their
argument – and to then reach a mutual agreement on a specific norm that will be applied in the
situation (norm generation).
Jurgen Habermas, who pioneered discourse ethics, stated that for discourse ethics to be effective,
parties need to be sincere in their efforts, willing to find truth and remain open towards achieving a
consensus. This would bridge the different values, cultures, traits and ideas that individuals would
otherwise strongly regard as right and wrong. As soon as a difference of opinion or
misunderstanding occurs, then the agreements are called into question. 47
Discourse ethics closely aligns itself with the stakeholder theory. Within the business setting,
there are numerous parties that are affected by business decisions. Society, customers, suppliers,
investors and shareholders are all affected by decisions – both good and bad. Conflict arises when
business decisions are not accepted by all parties – and discourse ethics could be used to solve the
problem. Shareholders of a Bolivian firm would, for example, not find wrong in buying goods from
another firm that employs children (given that they meet the requirements, for example, children
must still go to school). However, it has come to their attention that their stakeholders (employees,
investors and customers – both local and international) have concerns regarding this practice.
Discourse ethics would want these shareholders and stakeholders to meet and discuss the matter to
reach mutual agreement. With regards to openness, it would mean that parties who are against
child labour rethink this matter, as it is legal in Bolivia, and those who are in favour of child labour
rethink this matter, as it illegal in other parts of the world. A mutual agreement between both parties
for this possible contract to exist, for example, could be that (i) only children, 16 years and older,
may work; (ii) numbers of work hours may not exceed two hours per day and (iii) the work must be
age-appropriate and not cause physical harm. These three ideals are the ‘generated norms’.
The challenge with applying this theory is that norm generation can be a very time-consuming
process. In addition, if one party objects and a mutual agreement cannot be made, then a moral
decision hasn’t been reached.
Post-modern ethics
Post-modern ethics encourages individuals to question everyday practices and rules. They should
rather listen to, and follow their own emotions and inner convictions about what is right or wrong in
a particular situation.48 This theory is best understood when thinking of the world, the nature of
truth and claims by different communities to truth, and then to scrutinise or challenge beliefs on
what is reality and what is knowledge. In essence, this theory questions what is widespread ‘belief’.
Therefore, any truths or beliefs are partial and local.49 The notion behind this theory is to follow your
own emotions, inner convictions and gut feelings about what is right and what is wrong.50
The challenge inherent in this theory is that one needs to be in the situation or have experience
of the situation in order to truly tap into one’s emotions and feelings and question the practice.51 It
is easy to merely form an opinion about, for example, abortion (based on one’s beliefs, religion or
culture), but to truly question whether it is to be regarded as moral or not, would be to go to an
abortion clinic and talk to the women and families in those situations. If an individual has not been
exposed to child labour, then that individual needs to travel to Bolivia and talk to the communities,
families, children and firms affected by this practice.
The ethical theories discussed in this section can guide organisational behaviour, however, they
are contradictory. Looking through the discourse, feminist and the utilitarian ethics lens, child
labour might be regarded as moral (depending on the individual’s reasoning), while the ethics of
duty lens might regard it as immoral. So there are contradictory results and singling out a theory will
result in a bias decision. So what is an organisation to do? For example, to buy or not buy from
Bolivian firms who employ children?
These theories provide different views on what is right. In addition, the ‘end’ (or what is
considered as ‘good’) of various theories differs from one ethical theory to another.52 Therefore, the
best approach would be to evaluate and take into consideration all the theories, as opposed to
singling out a specific theory. This would assist in better insight, and a better variety of
considerations, when facing ethical problems, issues and dilemmas.53 In Chapter 9, a
decision-making model is provided that illustrates how all of the ethical theories assist a decision
maker to apply ethical reasoning and judgement.
This process and reasoning (on the various ethical theories) is particularly necessary to develop
the ethical sensitivity and moral development of any decision maker – and to ultimately engage in
behaviour and actions that are considered ‘more ethical’. Ethical theories are meant to encourage
decision makers to think about ethics and the various perspectives of each lens – in order not to
‘miss’ or ignore aspects that a decision maker would otherwise not have thought about, such as
thinking about human dignity/rights, universal principles (ethics of duty), and not just looking at
consequences. Ethical theories are guidelines towards reaching a ‘more’ ethical decision within a
business. Sometimes this would involve choosing between two wrongs, with your choice being ‘the
more ethical option’ of the two wrongs.
In the Bolivian child labour example, we could argue two wrongs: The one camp argues this
practice as wrong, based on the basic rights of children and their dignity. The other camp argue that
stopping child labour in Bolivia is also wrong as it affects the dignity of the families involved
negatively (limits poverty stricken families even more from basic necessities such as food, health
and education). Using the ethical theories, we can argue the morality of this practice from a
consequential viewpoint (looking at the outcomes concerning everyone involved) and
non-consequential viewpoint (looking at the correctness of actions and human right and dignity, for
example). This would ultimately allow a decision maker to make a ‘more ethical’ decision – or to
take a more ‘ethical stance’ regarding a matter. Chapter 10 will discuss the implication of ethical
theories in organisational decision making in more detail.
Table 4.2 provides a summary of the ethical theories discussed in this section.
Table 4.2: Ethical theories
Consequential ethical Non-consequential ethical Contemporary ethical

theories theories theories
Egoism Ethics of duty Virtue ethics
Utilitarianism Ethics of rights and justice Feminist ethics
Discourse ethics
Post-modern ethics
4 Doing good to do well

.5
Unethical conduct and numerous corporate scandals, harm the trust of customers and investors. It
can also have negative consequences for organisations, such as fines or penalties, and a detrimental
impact on a company’s reputation.54 Unethical conduct also has an impact on society.55 In 2014,
African Bank was accused of reckless lending, which ultimately led to South Africa’s Reserve Bank
bailing it out. The repercussions of this ethical scandal on society includes several furniture stores
closing down (aggravating the already high unemployment rates in South Africa), investors losing
money, and cancelled bond sales. In addition, Moody Corporation lowered South African
institution’s creditworthiness (which increases borrowing costs for banks).56
On the other hand, society is increasingly applying pressure on organisations to be ethical in the
way in which they conduct business. Consumers’ and supplier’s purchasing decisions are
influenced by the ethics of organisations. For example, some consumers will not purchase a
product from a firm, where there are concerns about the way the products were made.57 According
to an ethical consumer website, current and/or past boycotts were called on Adidas for the use of
kangaroo skin in some types of football boots, Amazon for its tax avoidance practices and KFC for
animal welfare reasons.58 In 2004 and 2005, religious groups called for boycotts on Proctor and
Gamble and Microsoft over their support for gay rights and marriages.59
Business activities would be difficult, or nearly impossible, if corporate directors were unethical
in their conduct or deceitful, if buyers and sellers could not trust each other and if employees
refused to help each other.60 Business activities should therefore maintain basic ethical standards
such as honesty, trust, collaboration, reliability and fairness.61 In principle, and for profit and
survival, good behaviour (or ethics) is good for organisations.62 See how unethical practices led to
boycotts, which in return impacted these corporations’ bottom line (sales) and investments in the
example box on the next page.
The example box emphasises that doing what is good (ethically and morally correct) means
doing well (or to succeed or to prosper in a certain area – such as profitability, culture, productivity
and competitive advantage). The best way to elaborate this viewpoint (doing good to do well) is to
look at it from a variety of perspectives. Below, we will discuss the following perspectives: (i) the
financial and economic perspective; (ii) the reputation, relationship, morale and productivity
perspective; (iii) the corporate culture perspective; (iv) the customer trust and loyalty, investor
confidence and public acceptance perspective; and (v) the investor decision perspective.
(i) The financial and economic perspective. According to this perspective, doing good means saving
money on lawsuits, settlements, fines and consumer boycotts associated with illegal and/or
unethical behaviour.63 In South Africa, Pioneer Food, Tiger Brands, Premier Food and
Foodcorp were found guilty of bread price fixing in 2007 for the period 2003–2004. Pioneer
settled on a penalty of nearly R1 billion. Premier Food, Foodcorp and Tiger brands co-operated
and were fined over R195 million, R45 million, and R90 million respectively.64 Some
organisations (such as Enron and Worldcom) went bankrupt due to unethical behaviour.
Organisations can avoid boycotts (which secures sales and profit margins) when they act
ethically. For example, if managers know that child labour or apartheid is an ethical issue, and
regarded as undesirable by their customers, then avoiding business transactions with firms
engaging in those practices would avoid possible boycotts. Uzbekistan (see dilemma box on the
next page), for example, avoided further boycotts by prohibiting child labour. Unethical
practices can also have an effect on an economy. During 2008–2009, the USA experienced a f
inancial crisis that was the starting point of a global economic crisis. The main cause of this
crisis was that 44% of all home mortgages were susceptible to default. Above-prime loans were
issued to individuals who did not qualify for loans at traditional lenders and hence had a
reasonable chance of defaulting, but could repay the loan over a longer period (loans referred
to a sub-prime loans). Furthermore, the two government-sponsored initiatives, known as
Freddy Mac and Fanny Mae, which offered affordable housing loans to members of the public,
failed to inform investors about the sub-prime loan risks they faced (the high risk of these loans
defaulting). In 2007, the credit boom ended and the housing bubble burst, which led to the
world’s worst financial crisis.68
Example
Uzbekistan cotton
There was a time when child labour was practised in Uzbekistan – however, it is no longer permitted.
In 2014, Uzbekistan made efforts to eliminate the worst forms of child labour, but was also complicit in
the use of forced child labour in the cotton sector. While the central government made concerted
efforts to prevent forced child labour in cotton production, Uzbekistan received an assessment of no
advancement by the US Department of Labor in its Child Labor and Forced Labor Reports because of
government complicity in forced child labour, particularly at the local level. Although there was no
evidence of a large-scale, centrally co-ordinated, forced mobilisation of children, some local officials,
in more than an isolated incident, continued to mobilise children during the cotton harvest. This has
led to calls for boycotts on cotton produced in Uzbekistan.65
Products from Israel

The Boycott, Divestment and Sanctions movement called a boycott against Israeli products and firms
supporting the country. It claims that the Israeli government is guilty of practising racism and has
discriminatory policies. The movement aims to exercise economic pressure on Israel until they
conform to International Law and Universal Principles of Human Rights.66
Woolworths trades with Israel, and this has led to South African unions speaking out against the
corporation. South African unions such as the education and health workers’ union Nehawu, teachers’
union Sadtu, police and prison civil rights union Popcru, communication workers’ union CWU and the
metalworkers’ union Limusa and Saccawu threatened to lobby, through the Government Employees’
Pension Fund (GEPDF) and the Unemployment Insurance Fund (UIF) for the Public Investment
Corporation, to divest from Woolworths. The DEPF accounts for nearly 90% of assets managed by
PIC, and PIC hold a 16.4% stake in Woolworths.67
(ii) The reputation, relationship, morale and productivity perspective. Doing good means avoiding
costs associated with deterioration in relationships, damaged reputations, decline in employee
productivity and an increase in absenteeism.69 A poor reputation is probably the most obvious
consequence of unethical behaviour – and it deters prospective customers and business
partners.70 Literature and research studies emphasise that organisations with good morale
have less absenteeism compared to those organisations with poor or fair morale.71 Unethical
behaviour also impacts employee productivity negatively. One American study in particular
indicated that 36% of employees in America indicated that ethical lapses caused them
distractions.72
(iii) The corporate culture perspective. According to this perspective, doing good also ensures
integrity and fosters a better corporate culture.73 Ethical behaviour and integrity from managers
and leaders (managers doing what is good) fosters a strong ethical culture, which in return
promotes ethical behaviour within organisations. This is also evident within Nedbank. In its
Integrated Report for 2014, Nedbank stated the following:
‘with a focus on building a unique and appropriate culture, starting with our executive
leadership team and cascading to management across the organisation. This has resulted in
staff morale and culture metrics today being close to world-class levels’.74
Hence, it recognises that in building a unique and appropriate culture (which include ethical
values), starts with their executive leadership team. Numerous studies have found that a strong
ethical culture has a positive effect on employee behaviour and decision making. Chapter 9
discusses this in more detail. The benefits of ethical behaviour in the workplace (which will
also lead to areas of success) include the protection of organisational reputations, maintaining
public acceptance and investor trust, minimising loss of productivity levels and lowered
absenteeism.75
(iv) The customer trust and loyalty, investor confidence and public acceptance perspective. Ethics have
an impact on customer trust and loyalty, investor confidence and public acceptance.76 In the
opening case scenario, one of Nedbank’s focuses is to ‘rebuild trust in the financial industry’.
This is because the 2008 financial crises (and the unethical conduct of the corporations
involved) have negatively affected consumer trust and investor confidence. Organisations need
to build trust with their stakeholders – they need to build trust, for example, with their
customers and business partners, alliances and society and it’s essential for the operations of
any market.77 Trust also has a positive impact within an organisation, as trust is important for
effective communication, team work, and the general relationship between managers and
subordinates. Trust also enhances employee commitment and productivity.78
(v) The investor decision perspective. Ethics influence investor decisions. Doing good and engaging in
socially responsible practices can lead to investments from prospective investors. Chapter 14
will elaborate more on this. ‘Ethical investing’ is an example of ethics influencing investor
decisions. Some investors choose not to invest in ‘sin industries’ (for example, the tobacco
industry). These investors would actively seek out companies who are involved in social
responsibility initiatives to invest in. In the opening case scenario, Nedbank’s engagement with
its communities makes it a favourable investment decision for these types of investors.
Nedbank is a good example of a company that is doing well while doing good. Its good corporate
citizenship status is evident when looking at its ethical business activities and community
engagement. The latter (community engagement) goes well beyond what is legally required of
Nedbank. In this section, we focused on various perspectives that justifies our argument that doing
what is ethically and morally correct, means doing well. In the following section, we turn our focus
to the relationship between corporate citizenship and legislation, specifically legislation that
provides the ground rules for sound and responsible business activities. The following section will
look into the role of legislation in guiding ethical corporate behaviour.
4 Corporate citizenship and legislation

.6
In addition to the ethical foundation of corporate citizenship, the extended view of corporate
citizenship, as defined by Crane and Matten,79 also highlights a ‘legal’ foundation. Organisations are
‘legal entities with rights and duties’. Crane and Matten80 emphasise that organisations should
administer civil rights, social rights and political rights (it is their duty). There is legislation that also
assists organisations to (and ensure that they do) administer these rights. The following sections will
address legislation and its relation to corporate citizenship.
4.6 The role of legislation in business
.1
Established by governments, legislation is the minimum standards for responsible behaviour.
Legislation is society’s codification of what is right and wrong.81 Simply put, legislation is the body of
rules that governs and directs individuals or groups of people’s (for example, in an organisation)
behaviour and the relationships between individuals. Within these rules, basic freedom (relates to
civil and social rights), rights and protections are stipulated.82 An example where legislation governs
a relationship (or behaviour) between individuals is South Africa’s labour law (governing certain
behaviour between an organisation and employees).
There are also laws that specifically regulate business conduct, as it is believed businesses cannot
always be trusted to do what is right in certain situations (such as consumer safety and
environmental protection). This is evident when looking at the news on issues concerning
consumer protection, boycotts, petitions, and environmental issues (such as pollution). See the
example box below for a practical example of consumer protection issues.
Many laws have subsequently been passed in response to business abuse (for example,
fraudulent activities, excessive pollution, and exploitation of human and environmental resources)
and consumer demands (for more ethical products, behaviour and conservation initiatives).86
These laws establish the basic ground rules for sound and responsible business activities and they
serve five basic purposes. The purpose of legislation is summarised in Table 4.3. These purposes
inherently would lead to sound and responsible business (and individual) conduct and activities.
Example
Labelling
There have been numerous label-related scandals in the past. In South Africa, the Foodstuffs,
Cosmetics and Disinfectants Act 54 of 1972 controls the sale, manufacture, importation and
exploitation of food products, cosmetics and disinfectants. It makes provision for food safety and
hygiene, and restricts products that are harmful or injurious to human health or products that contain
prohibited substances. The Act also ensures that products are correctly labelled, and an analysis of
foodstuffs.83
In 2013, major South African supermarkets were exposed in a ‘meat-label’ scandal when a study
found that nearly 60% of 139 meat products tested included DNA of animal species not listed on the
food labels.84 In 2015, Woolworths recalled certain ice-cream products as the products were not
labelled with a necessary peanut allergen warning.85
Sources: FAO. FAOLEX. Foodstuffs, Cosmetics and Disinfectants Act. 2016. [Online]. Available: http://faolex.fao
.org/cgi-bin/faolex.exe?database=faolex&search_type=query&table=result&query=ID:LEXFAOC085626&format
_name=ERALL&lang=eng [29 June 2016]; News24. 2015. Woolworths recalls ice-cream products. [Online].
Available: http://www.health24.com/Medical/Allergy/Allergy-triggers/Woolworths-recalls-ice-cream-products-over
-incorrect allergy-labelling-20151013 [15 January 2015].
Table 4.3: Purpose of legislation pertaining to sound and responsible business activities
Purpose Explanation
Maintaining order Imagine the chaos and confusion if there weren’t legal boundaries. Laws
maintain order – and prevent unlawful conduct.
Influencing conduct In preventing unlawful conduct, laws therefore influence individual and
business conduct. Laws either enforce or prohibit conduct. In South Africa,
anti-competition tactics are prohibited by law, while companies are required,
by law, to disclose financial statements.
Honouring When entering into a contract, businesses and individuals make
expectations commitments in terms of resources, time and capital. Laws honour and
enforce these contracts.
Promoting equality Due to unfair employment practices, laws were written to promote equality.
Examples of laws that promote equality in South Africa are the Promotion of
Equality and Prevention of Unfair Discrimination Act 4 of 2000 and the
Employment Equity Act 55 of 1998.
Being the mediator Not all individuals agree on matters and share the same ideas on how
individuals, business and societies should be managed. Laws, therefore, act
as a mediator, or compromiser, and combine the different views of
individuals into one united view. The aim is to either partially of completely
satisfy all parties, and to reach a compromise between conflicting ideas.
Source: Compiled from Jennings, MM. 2012. Business: Its legal, ethical and global environment. 9th edition.
Stamford, CT: Cengage Learning; South Africa. Department of Justice and Constitutional development.
Equality for all. [Online]. Available: http://www.justice.gov.za/EQCact/docs/2011eqc-a5-booklet.pdf [01 July
2015].
Through legislation imposed on business, not only is the correct behaviour stipulated, but the
rights of citizens are administered. Legislation plays a role in managing the relationship between
individuals (citizens) and corporates as administrators of individual rights. Regulation sets out the
minimum rules and boundaries that makes a corporate into a provider (of social rights), enabler
(civil rights) or channeller (political rights) of citizenship rights. The legislation mainly encompasses
four categories of laws and regulation that govern corporate activities, namely:
1. Regulation of competition
2. Protecting of the consumer
3. Promotion of equality
4. Safety and protection of the natural environment.87
We will now look at each of the categories in more detail.
4.6 Categories of laws and regulations that govern corporate activities

.2
1. Regulation of competition
Rivalry amongst corporations for customers and profits can, in certain cases, lead to questionable
practices. Large corporations also have more advantage over others – especially over the smaller
business. Large corporations have access to more resources, and can capitalise on economies of
scale (cost per units are lower as they produce on a larger scale, compared to a small business who
produces on a smaller scale, and therefore smaller business’s products can’t always compete with
larger organisations). In addition, some corporations’ competitive strategies focus on weakening a
competitor – thereby weakening competition in the market. Competition deteriorates when firms
limit healthy competition (for example, raising entry barriers so that new competition can’t enter
the market). See the example box above for a practical example.
Example
Price fixing in the oil industry 88
In 2012, it was reported that South African oil companies were accused of price fixing. You can read
more about the story at: http://www.newstatesman.com/business/business/2012/10/shell-and-bp
-accused-collusion-south-africa. This one example highlights the power and advantage large
corporations have, the questionable practice they engage in for profits and how that can weaken
competition.
As a result, laws have been passed to regulate competition. These laws were established to
prevent anti-competition practices aimed at reducing or restricting competition among
corporations.89 Reducing or restricting competition is to, in some way, hinder healthy competition
deliberately. These practices are known as anti-competitive behaviour and include price fixing,
predatory pricing (a firm setting their prices so low as to force a competitor out of the market) and
rigging bids (to agree in advance who to award a contract to). Rigging is achieved by setting a
pre-determined price on a tender, limiting other firm’s chances of competing.90
Based on international best practices, South Africa has a regulated competition regime. The
Competition Act 89 of 1998 provides for various prohibitions on various anti-competitive conduct.
The Act’s main purposes are to promote (i) economic efficiency, adaptability and development; (ii)
employment and general socio-economic welfare; and (iii) a greater spread of ownership within the
economy. The Act also provides consumers with competitive prices and product choices; it ensures
equitable opportunity to participate in the economy for small business and aims to increase
opportunities for South Africa to participate in world markets. The Competition Amendment Act 1
of 2009 introduces measures such as criminal sanctions against top managers who participated in
or consented to cartel conduct and leniency provisions that protect whistle-blowers.91 Penalties
(fines) and prison sentences are examples of criminal sanction (it is a form of punishment when a
corporation did not abide by the law). Leniency provisions are made towards corporations (also
involved in the unlawful act) who blow the whistle on the other parties involved.92 In the price-fixing
scandal, Premier Food, Foodcorp and Tiger brands co-operated and were fined less than Pioneer
Foods (who did not co-operate). This is a form of leniency for the retailers who co-operated.
2. Protection of consumers
By law, businesses are required to provide consumers with accurate information about products
and services. For example, warning against possible peanut ingredients assists consumers who are
allergic to peanuts, and the indication of halaal products assists specific religious consumers with
better (and safer) purchasing decisions. Businesses also need to follow safety standards.93 The South
African Bureau of Standards (SABS) is an example of a statutory body that promotes and enforces
national standards in South Africa. The SABS was established in terms of the Standards Act 24 of
1945.94
There are various laws that protect consumer’s rights in South Africa, of which one is the
Consumer Act 68 of 2008. This Act mainly promotes a fair, accessible and sustainable marketplace
for consumer products and services, promotes national standards relating to consumer protection
and prohibits unfair marketing and business practices. Other laws aimed at protecting consumers
are the Electronic Communications and Transactions Act 25 of 2002 and the Protection of Personal
Information Act 4 of 2013:95
• The Electronic Communications and Transactions Act focuses on, for example, the promotion of
universal access to electronic communications, promotes transactions and the use of electronic
transactions by SMMEs, and prevents abuse of information systems. The Act also prevents
barriers to electronic communications and transactions.
• The purpose of the Protection of Personal Information Act of 2013, for example, is to ensure the
safeguarding of personal information and regulate the manner in which personal information
may be processed.96
In the opening case scenario, Nedbank emphasises that it is ‘stringently protecting client
information’. In its 2014 Integrated Report, Nedbank discusses the Protection of Personal
Information Act and its intention to meet with the requirements of this Act.97

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Part 4 Critical perspectives and conclusion

At the end of this chapter, you should be able to:

KEYWORDS AND CONCEPTS

OPENING CASE SCENARIO

Woolworths leading the way as a responsible retailer – responding to sustainability

Woolworths: South Africa’s poster child for retail sustainability? 10, 11

1 Corporate citizenship defined

‘role of the corporation in administering citizenship rights for individuals.’

There are two features of this definition that appeal to us:

‘24. Everyone has the right—

(a) to an environment that is not harmful to their health or wellbeing; and

(i) prevent pollution and ecological degradation;

(ii) promote conservation; and

1 Corporations, companies and business

1 Corporate citizenship with a capitalist stance

1 Our approach in this textbook

1 Structure of this book

2. In the capitalist sense, the primary purpose of a business corporation is to:

At the end of this chapter, you should be able to:

KEYWORDS AND CONCEPTS

OPENING CASE SCENARIO

Shaping the future we want

2 The emergence of sustainable development

2.2 1968 – Club of Rome

2.2 1969 – International Union for the Conservation of Nature (IUCN)

2.2 1972 – United Nations Conference on the Human Environment

2.2 1974 – World Council of Churches (WCC)

2.2 1980 – World Conservation Strategy

2 Conceptualising sustainable development

2.3 What is sustainability?

2.3 What is development?

2.3 Defining sustainable development

2.4 The core elements of sustainable development

2.4 Interconnections of the elements of sustainable development

Figure 2.1: Interconnectedness of elements of sustainable development

2 Society’s ecological footprint

Demand for water

In his inaugural address in 1961, USA President JF Kennedy said:

2 Responses to the challenge of unsustainable development

2.7 The Millennium Declaration

‘Humanity stands at a defining moment in history. We are confronted with a perpetuation of

2.7 World Summit on Sustainable Development (WSSD), Johannesburg 200256

2.7 Rio+20 (The Future we want)57

The 5 Ps The Agenda is determined to…

2.7 United Nations Sustainable Development Summit (the post-2015 Agenda)

Table 2.2: Sustainable Development Goals

2 The future of sustainable development

2 Climate change in the context of sustainable development

2.9 Climate change facts

2.9 Strategies for addressing climate change

Climate change adaptation

2.9 Corporates taking climate action

Business strategy integration

Create greenhouse gas reduction projects and targets

2. Sustainability organically connects the following dimensions:

3. ‘Sustainable development’ is:

2. Explain the implications of society’s ecological footprint.