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Lesson 2: Concept of Corporate Social Responsibility

SPECIFIC LEARNING OUTCOMES

In this lesson, you are expected to:
1. explain the concept of corporate social responsibility;
2. elucidate the basic premises, arguments for and against CSR ;
3. reason out on the need of a CSR initiative;
4. enumerate and discuss the ethical decision making process;
5. describe the issue considered in social decisions making process;
6. exhibit understanding of corporate greenwashing.

PRE-ASSESSMENT

True or False
______1. Consumers and the public in general expect more from the companies who produce the products
and services they buy.
______2. Employees nowadays are gradually more concern not only on other benefits and take home pays
but also business philosophy that match their principles.
______3. Ethical leaders place importance in being kind, and act in a manner that is always beneficial to the
team.
______4. An ethical leader expects employees to do the right thing at all times, not just when it is convenient
for them.
______5. Employees nowadays are gradually more concern not only on other benefits and take home pays
but also business philosophy that match their principles.
______6. In business and political context, ethical leadership focuses on how leaders employ their business
and political power in the decisions they make and actions they engage into.
______7. Philanthropy is the practice of giving money and time to help make life better for other people.
______8. Some socially concerned investors deal with the problems inherent in absolute screening by using
the strategy of balance with benefit.
______9. Greenwashing, sometimes also called green sheen, implies that a corporation shows they are
adopting practices beneficial to the environment, but in reality, are not.
______10. As stakeholders are becoming more and more concerned in business dealings many
companies are taking steps to make certain that their partners do things in a socially responsible
approach possible.

LESSON MAP

Concept of
Corporate Social
REsponsibility

Ethical Decision
Ethical Corporate Philantropy and Social Screening Corporate
Making Process
Lealdership Citizenship social Initiatives of Investments Greenwashing
in Organizations

Figure 1 The chart indicted distribution of Corporate social Responsibilities

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CORE CONTENTS

ENGAGE: Article Analysis

Corporate Social Responsibility (CSR) – Prioritizing Positive Societal Impact
Corporate Social Responsibility (CSR) is a mechanism by which companies hold themselves to a set
of legal, ethical, social and ecological standards. It is a form of business self-regulation that has developed
alongside greater public awareness of ethical and environmental issues. But is it always a force for good?

We live in an ever-more globalised world. Not only have national economies become highly
intermingled and interdependent, but humanity’s most pressing problems are increasingly cross-border
issues. The capacities of individual governments to address these issues alone are limited, and there has
been a growing attention paid towards the role businesses have to play.

Activity 1: Writing activity

Base on the article above answer the following questions.
1. How social responsibilities contribute to the economy of business organization and the community?
___________________________________________________________________________________
___________________________________________________________________________________
__________________________________________________________________________________

2. Does social responsibility necessary for very organization to implement? If yes support your answer
and if no explain.
___________________________________________________________________________________
___________________________________________________________________________________
__________________________________________________________________________________

EXPLORE: Reading Concepts

A SHORT HISTORY OF CSR
Although definitions of Corporate Social Responsibility (CSR) vary, it is generally understood to be a
mechanism whereby companies take responsibility for the impacts of their decisions and practices by holding
themselves to a set of ethical, social and ecological standards - with the aim of contributing towards the
health, welfare and sustainable development of society. The term was coined in the 1950s, although the real
impetus came later on after a number of industrial disasters, such as the 1969 Santa Barbara oil spill, which
led to low public confidence in businesses and translated into massive public protests. These culminated in
the first Earth Day in 1970, and spurred a host of new environmental regulations in the USA, as well as the
founding of a number of businesses grounded in CSR norms.

In the 1990s, CSR began to gather steam on an international level. This decade saw high profile
international events such as the UN Summit on the Environment and Development and the signing of the
Kyoto Protocol on climate change, which, among other things, raised expectations on corporate behaviour.
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Moreover, it was a period of rapid economic globalisation, and as companies expanded internationally they
faced uneven regulatory frameworks and increased global visibility and reputational risk.

Responsible Companies in the Age of Globalisation

Over the past few decades, expectations on corporate behaviour have continued to rise alongside
greater public awareness around human rights, environmental protection and other issues. The
institutionalisation of CSR is stronger than ever, as many companies have sought to adapt to this more
socially-conscious customer base. There is strong evidence to suggest that highlighting responsible business
practices endows a company with clear competitive advantages. A study looking into the coffee industry, for
example, found that Fair Trade certified growers enjoyed higher sales, despite higher prices. Indeed, recent
studies have shown that a majority of consumers will choose to spend more money on a product from a
‘sustainable’ brand. Businesses seen as responsible also benefit from greater employee productivity and
retention. So savvy companies have sought to protect their corporate image, seeing the direct impact it can
have on relationships with investors, employees, and customers.

How "Socially Responsible" is Companies in Reality?

While it may be true that companies are increasingly sensitive to reputational damage, this does not
necessarily imply they will actually improve their business practices. In some cases companies have instead
engaged in elaborate PR campaigns designed to manipulate the public’s perceptions of those practices. As
environmental concerns have taken centre-stage in public discourse in recent years, “greenwashing” has
become a particular problem, as many corporations have sought to market themselves as ecologically
responsible whilst continuing to behave in fundamentally damaging ways, were investigated by the FTC they
could not provide any reliable scientific data to prove it.

BASIC PREMISES OF CSR

 Business Leaders understand that long-term company value is based on the capability of the
enterprise to respond to society’s changing needs.
 Consumers research for products and services of companies they believe are doing the right’ in
terms of consumer protection, human rights and the environment.
 Employees have a preference to work for companies whom thy share similar mission and value, and
where they can make a contribution to society.
 Investor looks for companies that recognize and manage their risks, and are entrepreneurial in term
of attitude in identifying emerging ad promising business opportunities.
 Local communities want to know that businesses are being good citizens
 Media expose some examples of best or worst practices to spotlight, in this way companies with good
practices are given incentive in the form of free mileage, companies performing worst practice are
given disincentive through exposure.
 NGOs expose these examples of irresponsible corporate conduct and campaign for greater corporate
accountability and transparency.
 Regulators want to make certain that business activities not only generate business opportunities,
jobs and economic growth but also help serious problems such as climate change and environment.
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SPECIFIC RELEVANCE OF CSR

CSR as an approach is becoming progressively more relevant for business today because of
following identifiable trends:
Changing Social Expectations
Consumers and the public in general expect more from the companies who produce the products and
services they buy. These expectations resulted from the corporate scandals, which partially eroded
the public trust of corporations and reduced public confidence in the ability of regulatory agencies and
organizations to control the corporations’ unrestrained behaviour.

Competitive Labor Markets

Employees nowadays are gradually more concern not only on other benefits and take home pays but
also business philosophy that match their principles. For the company to hire and retain this
employee with promising potentials, companies, working environment must be competitive. Failure
will cause the company some concerns about its human capital.

Disclosure Demands by Stakeholders

Stakeholders now know their roles and rights which includes the right to be informed on how the
corporation does its business. There is an increasing insistence for corporate disclosure now from
stakeholders than in the past. The public, employee, customers, suppliers and activist organizations
can now demand information about corporate conduct with more pressure than before.

Dwindling Government Role

Governments in the past rely on strict legislation and regulations to deliver special and environmental
services and objectives in tandem with the business sector, unfortunately this not hoe things are done
at present, there is now what we can call as “the government disconnection” or failure of regulations.
Due to limited government resources, corporations though subjected with so many regulatory filings
still have the upper-hand when ranged against the regulators. We must less in a deteriorating, corrupt
one.

Globalization
Borderless transaction and the increasing of the media on a global perspective is a serious thing to be
considered. When informed consumers’ see wrongdoing by companies, the immediately bring to the
attention of the public by capitalizing on the use of technology. For example, social media can fuel
instant communications among compatible groups and consumer’s and empowers them to spread
their “concern”. There is power in numbers. A ‘concern” may spread like wildfires which may cause
damage to the company. Consumers can easily initiate collective action like a product boycott
campaign via cyber space.

Pressure from Investors

Ethical conduct is part of the system in assessing company’s performance. Reports showed that
about $2 trillion worth of assets in 1999 were invested is companies that screen and has links to
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social responsibility environment, and more than 25% of shareholding businessmen buy and sell
stocks by taking into account ethical aspects of companies that deal on “green technology” The
foregoing fact set new directions for companies into the future.

Supplier Relations
As stakeholders are becoming more and more concerned in business dealings many companies are
taking steps to make certain that their partners do things in a socially responsible approach
possible. Some customers, consumer groups, and treaties are even setting conducts and standard
that their supplier as requisites has to meet as requisites of business relation. An example to this not
buying products who used child labour, boycott campaign on product from manufacturer that did not
follow International Labour Organization (ILO) standards, and the growing patronage on product is
produced from facilities are certified by international standards setting body like the ISO.

Wealth and Vulnerabilities

In developing and developed countries, consumers can afford to be choosy and picky on the products
they buy, corporations therefore has to operationally align itself with this consumer tendencies. On
the other hand, we can expect less strict enforcement and regulation when a country or a society is in
need of job which can be answered by inward investments. These companies which operate here are
good for the people in terms of economy and employment but we have to understand that they go
home better with profit. This is the kind of phenomenon is the one that is propelling the unity of
stakeholder groups in crying on an more holistic and responsible corporate operation and
philosophies.

10 ETHICAL LEADERSHIP CHARACTERISTICS

Ethical leaders always know how to do the right thing. It may be difficult to define exactly what “right”
is, but a leader who is ethical is not afraid to do what they truly believe to be right – even if it is unpopular,
unprofitable, or inconvenient. Here are 10 ethical leadership characteristics:
Justice
An ethical leader is always fair and just. They have no favourites, and treat everyone equally. Under
an ethical leader, no employee has any reason to fear biased treatment on the basis of gender,
ethnicity, nationality, or any other factor.

Respect others
One of the most important traits of ethical leadership is the respect that is given to followers. An
ethical leader shows respect all members of the team by listening to them attentively, valuing their
contributions, being compassionate, and being generous while considering opposing viewpoints.

Honesty
It goes without saying that anyone who is ethical will also be honest and loyal. Honesty is particularly
important to be an effective ethical leader, because followers trust honest and dependable leaders.
Ethical leaders convey facts transparently, no matter how unpopular they may be.
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Humane
Being humane is one of the most revealing traits of a leader who is ethical and moral. Ethical leaders
place importance in being kind, and act in a manner that is always beneficial to the team.

Focus on Teambuilding
Ethical leaders foster a sense of community and team spirit within the organization. When an ethical
leader strives to achieve goals, it is not just personal goals that they’re concerned about. They make
genuine efforts to achieve goals that benefit the entire organization – not just themselves.

Value Driven Decision-making

In ethical leadership, all decisions are first checked to ensure that they are in accordance with the
overall organizational values. Only those decisions that meet this criterion are implemented.

Encourages Initiative
Under an ethical leader, employees thrive and flourish. Employees are rewarded for coming up with
innovative ideas, and are encouraged to do what it takes to improve the way things are done.
Employees are praised for taking the first step rather than waiting for somebody else to do it for them.

Leadership by Example
Ethical leadership is not just about talking the talk, this type of leader also walks the walk. The high
expectations that an ethical leader has of employees are also applicable on the individual level.
Leaders expect others to do the right thing by leading from example.

Values awareness
An ethical leader will regularly discuss the high values and expectations that they place on
themselves, other employees, and the organization. By regularly communicating and discussing
values, they ensure that there is consistent understanding across the organization.

No tolerance for ethical violations

An ethical leader expects employees to do the right thing at all times, not just when it is convenient for
them. Don’t expect a leader of such high values to overlook or tolerate ethical violations.

ETHICAL LEADERSHIP
Ethical leadership is a leadership that is concerned in leading in a manner that respect the rights,
dignity and stake of others. In business and political context, ethical leadership focuses on how leaders
employ their business and political power in the decisions they make and actions they engage into. Leaders
who are ethical demonstrate a level of integrity that is essential for stimulating culture of honesty and
accountability. The character and integrity of the leader provide the basis for personal characteristics that
direct a leader’s ethical beliefs, values, and decisions. Individual values and beliefs impact the ethical
decisions of leaders.
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Leaders who are ethical are stakeholder oriented, and conscious of how their decisions affect others.
They use their power to serve the greater good instead of self-serving interest. In ethical leadership it is
important for the leaders, more specifically for corporate leaders in business arena to consider how their
decisions impact the internal stakeholders, the industry, customer and ultimately to the public.

ETHICAL DECISION MAKING PROCESS IN ORGANIZATIONS

Ethics in an organization refers to system, values, philosophies and principles that govern the
behaviour of organizational members which are the consequences of organizational pronouncement. Ethical
decision making is the process of trying to established organizational value from which ethical decisions will
be based from. Part of the requisite of ethical decision making process in organization in answering the
following questions whenever confronted with any instance that requires decision. On the managerial side,
did the leader provide leadership and oversight? In the operational corporate context, will it facilitate
improvements more especially on compliance requirement?

Decision making is an essential process for organizational effectiveness. Decision making is nearly
universally defined between choices. It is closely related to all the traditional management functions. In the
context of ethical decision making process, the following, may help decision makers of organizations lay
down decisions aligned with their CSR principles:

Withdraw
Before you look at it objectively, step back first. Have a calibrated response for thrilling, rushed and
demanding scenarios whether self –impose of outside – source. It is not popularity and power nor
winning on high drama; its fairness. As much as possible it should not be a “winner takes it all”
ending. Solutions should spring instead of imposing decisions which might make some parties and
stakeholders unhappy.

Be an Archivist
Organizational history may have much to learn from. Review how previous situations were handled;
this would reduce the risks of making horrendous mistake. Some of the fundamentals in this world are
not really new despite how distinctive you believe your situation to be. History is also a good
warehouse of already invented wheels, which can often save you the time and pain of trying to
ineffectively invent a new one.

The Option of Doing Nothing

Gather the facts from all available standpoints. More often a thought issue offers three main
alternatives: first, personal view; second, the main alternative option; and the third, the normally
under-estimated, ever-available option of doing nothing. Doing nothing in times of real emergency can
be catastrophic, but for an incredibly large number of circumstances doing nothing is the only truly
wise way.
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Be conscious of Long-Term Effect

Realize the long-term consequences. Do some base-case modelling and tweaking, think of the “what
–if scenarios”. History can again be a good source for models for any given situations.

Consider Legalities’ and Ethics

There might be parties or stakeholders inside and outside of the firm that might be affected by your
decision, it is basic to check the law first. Once you are cleared on the legal bar, check its ethical
issue. In a sincere CSR practice, what is legal can just be the minimum and not all legal are ethical.

Ask Around
Consult with people, more importantly to the ones you consider crucial. Get out from your close circle;
be conscious, you are not looking for a friendly advice that is most of the time bias and confronting.
Consult with people or party most affected by the situation, when you do some examination and
assessment analysis, make sure your instrument is balanced and objective.

Be Comprehensively Sensitive
Be concern about the effect as deeply as possible. Any business decision big or small will have an
effect in one way or another or indirectly to stakeholders. Some may affect a lot of people and on the
environment now far into the future.

Do not be a Dangerous “Alpha Male”

Decision-makers should defy the illusion and arrogance that power and authority tends to be
associated with. This is particularly essential to safeguard against if you live and work in a protected,
insulated or isolated situation. Being a leader for a long time, or for any duration in a culture of
arrogance, comfort and privilege, nourishes personal delusion. A good number unethical decision is
products of arrogance and delusion.

Find a Win –Win Solution

Decision-makers should detach him from the different partialities of the issue for him to arrive at an
objective decision. Never be carried by the pressure are of swelling expectation from any group or
party who believe they are at the finer end of the issue and thus, they should be favoured. Find a
Solomonic decision, if possible.

MYTHS ABOUT ORGANIZATIONAL ETHICS

Let's see what business and ethics have in common.
1. Myth: Business ethics is more a matter of religion than management. It means that altering
people's values or souls isn't the aim of an organizational ethics program - it is managing values and
conflict among them.

2. Myth: Business ethics is superfluous -- it only asserts the obvious: "do good!" The code of ethics is
such a notion that changes according to the organization's needs. Example: it’s obvious that all
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people should be honest. However, if an organization is fighting with a constant fraud, the priority on
honesty is very timely - and honesty should be listed in that organization’s code of ethics.

3. Myth: Business ethics is a matter of the good guys preaching to the bad guy’s. Good leaders
sometimes can take bad actions, particularly when stressed or confused. (Stress or confusion are not
excuses for unethical actions -- they are reasons.) Managing ethics means that we all work together
helping each other through confusion and stress in accordance to ethics.

4. Myth: Business ethics in the new policeperson on the block. Many believe business ethics is a
recent phenomenon because of increased attention to the topic in popular and management
literature. However, business ethics was written about even 2,000 years ago -- at least since Cicero
wrote about the topic in his "On Duties". Business ethics has gotten more attention recently because
of the social responsibility movement that started in the 1960s.

5. Myth: Ethics can't be managed. Actually, ethics is always "managed" -- but, too often, indirectly. For
example, the leader of an organization influences the behaviour of the employees. Strategic decisions
such as costs cuts, profit increase can influence the behaviour as well.

6. Myth: Business ethics and social responsibility is the same thing. The social responsibility
movement is one aspect of the overall discipline of business ethics. Madsen and Shafritz refine the
definition of business ethics to be:

1) an application of ethics to the corporate community,

2) a way to determine responsibility in business dealings,
3) the identification of important business and social issues, and
4) a critique of business.

7. Myth: Our organization is not in trouble with the law, so we're ethical. An organization can be
unethical. However, breaking the law often starts from unethical behaviour which has not been
noticed. Interestingly enough, the "boil the frog" phenomena fits in this situation well: if you put a frog
in hot water, it immediately jumps out. If you put a frog in cool water and slowly heat up the water, you
can eventually boil the frog. The frog is unlikely to notice a rapid change in its environment.

8. Myth: Managing ethics in the workplace has little practical relevance. Managing ethics in the
workplace is necessary for setting up behavioural policies and procedures. It is also important in other
management practices such as strategic planning.

MYTHS ABOUT ORGANIZATINAL ETHICS

Being Ethical Is easy
From the business standpoint, being ethical is not easy considering that to be ethical means that
business conduct most of the time has to be beyond the minimum legal requirement. Second, there is such
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thing as cost-free compliance effort. Third being ethical could mean being a bee flying towards huge web
unethical entities that can easily overwhelm the company.

It is hard to withstand the pressure when almost everybody deviates and their deviation is already
part of the system. The tendency of being carried into this bandwagon mentality may entice the decision
makers of corporation to cross the line and start to find justifications for some acts unethical; it is like a
quicksand, the next thing you know, you cannot get off from it anymore. Just like in politics, some of them are
clean prior to getting involved then stories change when they are already part of the system.

Being Ethical Is Not part of doing Business

Being ethical is part and parcel of doing business. It should be something that comes with the
existence of the enterprise. When the state grants the business the authority to, operate, it is implied that
long with the mandate comes the responsibility to comply with ethical standards.

Being Ethical Brings No benefit

It is not true that being ethical has no reward. Arguably, the only investment without any loss is being
ethical. Ethical companies are standouts. They have the confidence of the investors, the support of the
community and other stakeholders, and most importantly, the trust of their members. These along with a
great vision can definitely bring success and stability.

WHAT ETHICS IS NOT

Ethics Is Not the Same As Feelings
Feeling provide important information for our ethical choices. Some people have highly developed
habits that make them feel bad when they do something wrong but many people feel good even though they
are doing something wrong. And often our feelings will tell us it is uncomfortable to do the right thing if it is
hard.

Ethics Is Not Religion

Many people are not religious but ethics applies to everyone. Most religions do advocate high ethical
standard but sometimes do no address all the types of problems we face.

Ethic Is Not Just Following then Laws

A good system of laws does incorporate many ethical standards but law can deviate from that is
ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law may have difficult
time designing or enforcing standards in some important areas and may be slow to address new problems.

Ethics Is Not following Culturally Accepted Norms

Some cultures are quite ethical but others become corrupt or blind to certain ethical concerns (as the
US was to slavery before the Civil War). “When in Rome, do as the Romans do” is not a satisfactory ethical
standard.
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Ethics Is Not Science

Social and natural science can provide important data to help us make better ethical choices, but,
science alone not tell us what we ought to do. Science may provide an explanation for what humans are like.
But ethics provides reasons for how humans ought to act. And just because something is scientifically or
technologically possible, it may not be ethical to do it.

CORPORATE CITIZENSHIP
Corporate citizenship refers to the acceptance by business of a conscious effort in focusing and in
satisfying the economic, legal, ethical, philanthropic anad social responsibilities and the acts expected from
the corporation to do its stakeholders. This focus covers the areas of business ethics, social responsibility,
corporate volunteerism, religious compliance and reputation management.

Corporate citizenship recognizes that a company or organization is not and should not act in
separation of the community or communities within which it operates. Companies and organizations
worldwide are recognizing the extensive benefits of a more determined move of attaining balance between
their organization goals and important social, cultural and environmental responsibilities.

This explain why some model organizations are trying to win multiple stakeholders to make certain
that their corporate success goes side by side with improving broader stakeholders, which in turn become an
undeniable factor for their long-term success and stability .Striving to become a good corporate citizen is now
considered a responsible and legitimate business objective, a trend most now considered and proudly
declaring as one of their best practice. Corporate citizenship has the flowing key elements.
 Commitment to quality
 Ethical legal compliance
 Stewardship and governance
 Superior Employee Relation
 Social Advocacy
 Environmental Advocacy
 Community Involvement

PHILANTHROPY AND SOCIAL INITIATIVES

Philanthropy is the practice of giving money and time to help make life better for other people. It is a
manifestation of love for mankind. Corporate philanthropy refers to the giving of the company’s profit directly
to charitable organizations or to individual in need with the intention of helping and improving the quality of
life of the different corporate stakeholders. Corporate philanthropy is a key component of a corporation’s
broader social responsibilities. It can be in form of cash, product donations or employee volunteerism.
Corporate philanthropy serves as a major link between the corporation and the communities.

BENEFITS OF CORPORATE PHILATPHROPY

Corporate philanthropy can benefit the companies in a number of ways:
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Benefits to Business
 Enhance corporate reputation
 Improves relations with the government, the community and the key stakeholders.
 Support a company’s strategic business goals

Benefits to Stakeholders
 Build employee morale and engagements
 Enlarge sense of community and social obligations
 Develops future workforce contributing to sustainable company

Benefits to the Company

 Improves quality of life of the community members
 Provides human and capital resources to non-profit organizations

SOCIAL SCREENING OF INVESTMENT

While we cannot define or describe ethical business in an absolute sense and terms, it is possible to
give some modern examples in order for us outline ethical considerations based on scenarios that are
generally acceptable as reference in trying to screen investment. For social screening of investments, the
following strategies might corporate decision makers. They differ in the extent of their intricacies and thus
vary also as far as to the degree of difficulty of implementation. It is not necessary that they individually are
exclusive because some can be combined in various ways.

“SCARE OFF FROM” STRATEGY

This is considered as the most rigid way screening of investment. It can be characterized by hard
policies such as no investment to those companies with questionable environment records, those engaged in
child labour, discrimination (sex, racial, religious, cultural, etc.), those who use animals in product testing and
many other anti-earth r anti-green policies.

It is worthy to note that while the above strategy is hard to implement from the investor’s point of view,
some companies (investees) do find some ways to appear as appealing to the investors by employing some
mitigating features on the way they do business. For example, some industries such as pharmaceutical are
inherently environmentally polluting, and an absolute screen would bar some investment opportunities into
these companies. Some drug companies, for example, have made serious effort to drastically reduce the
number of animals used in the testing of products but they still using animals for drug testing purposes. Some
companies are even willing to share the technological advances that could have been to their favour in
exchange image to the eyes of the investors.

IMPACT MITIGATION
Some socially concerned investors deal with the problems inherent in absolute screening by using the
strategy of balance with benefit. This approach is founded upon the idea that for everything the company
does there is always an impact to the stakeholders. For example, fisher folks are given alternative livelihood
by companies doing some seismic testing a d eventually drilling for oil exploration in their fishing area. Other
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companies give priority in terms of employment to those who are immediately affected by the company’s
operation.

WHOEVER IS THE BEST

This strategy involves a kind of free market model where companies within the same industries
compete with one another for the best records on a variety of social issues. For example, environmental
awareness and best social practices like best records for the recruitment, training and promotion of women
and family-friendly practices. Awards such as employer of the year, best in community extension program,
most disable-friendly company. In the last several years, books have been publishes that companies to work
for, the best companies for African Americans and other minorities. Business magazine frequently carry
features on such companies as well.

MAIN OR DERIVATIVE CONNECTIONS

This strategy requires investors to decide whether or not they are concerned if an investment has a
secondary involvement with a social problem. It involves asking how far back in the industrial process one
wants a particular social screen to go. For example is it acceptable if coal utilities purchase coal from a
mining company with a bad environment record? The hamburger connection is an example of this strategy.
Fast-food companies, such as Burger king, have been citizen for purchasing beef from around the world. The
problem is that vast amount of rainforest land are being cleared to provide range land for cattle. The clearing
not only destroys thousands of potentially valuable plants and animals but is also contributing to the
greenhouse \effect. In addition, slash-and-burn clearing adds pollutant to the air. In contrast to the usual
pattern. McDonalds outlets in the U.S. use only beef purchase from the American Southwest ranches.

CORPORATE GREENWASHING
A term used to describe how big businesses use deceptive marketing tactics masked as corporate
social responsibility. The term combines “green” meaning environmentally-friendly and “whitewash” meaning
cover-up. Greenwashing, sometimes also called green sheen, implies that a corporation shows they are
adopting practices beneficial to the environment, but in reality, are not.

Greenwashing (a compound word modelled on "whitewash"), also called "green sheen", is a form of
marketing spin in which green PR (green values) and green marketing are deceptively used to persuade the
public that an organization's products, aims and policies are environmentally friendly and therefore ‘better’;
appeal to nature. Common examples present in the marketing of food products, alternative medicine and
natural medicine.

Evidence an organization is greenwashing often comes from pointing out the spending differences:
when significantly more money or time has been spent advertising being "green" (that is, operating with
consideration for the environment), than is actually spent on environmentally sound practices.[5]
Greenwashing efforts can range from changing the name or label of a product to evoke the natural
environment on a product containing harmful chemicals to multimillion-dollar marketing campaigns portraying
highly polluting energy companies as eco-friendly. Greenwashing is therefore a "mask" used to cover-up
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unsustainable corporate agendas and policies. Highly public accusations of greenwashing have contributed
to the term's increasing use.

While greenwashing is not new, its use has increased over recent years to meet consumer demand
for environmentally friendly goods and services. The problem is compounded by lax enforcement by
regulatory agencies such as the Federal Trade Commission in the United States, the Competition Bureau in
Canada, and the Committee of Advertising Practice and the Broadcast Committee of Advertising Practice in
the United Kingdom.

Critics of the practice suggest the rise of greenwashing, paired with ineffective regulation, contributes
to consumer scepticism of all green claims, and diminishes the power of the consumer in driving companies
toward greener solutions for manufacturing processes and business operations.[9] Many corporate structures
use greenwashing as a way to repair public perception of their brand. The structuring of corporate disclosure
is often set up so as to maximize perceptions of legitimacy. However, a growing body of social and
environmental accounting research finds, in the absence of external monitoring and verification,
greenwashing strategies amount to corporate posturing and deception.

Sins of Greenwashing
Greenwashing is the act of misleading consumers regarding the environmental practices of a
company or the environmental benefits of a product or service. There are more green products than ever
before, and our Sins of Greenwashing tips can help you sort out the truly green products from the not-so-
green ones. 2007, in an effort to describe, understand and quantify the growth of greenwashing, TerraChoice
(acquired by UL), developed and launched a study of environmental claims made on products carried on
category-leading big box store shelves. Based on the results of the original study and subsequent studies,
the Seven Sins of Greenwashing were developed to help consumers identify products that made misleading
environmental claims.

Today, the Sins of Greenwashing remain a popular learning tool to help consumers evaluate
sustainability claims. Contact us for permission to highlight the Sins of Greenwashing in publications and
media.
1. Sin of the hidden trade-off
A claim suggesting that a product is green based on a narrow set of attributes without attention to other
important environmental issues. Paper, for example, is not necessarily environmentally preferable
because it comes from a sustainably harvested forest. Other important environmental issues in the
paper-making process, such as greenhouse gas emissions or chlorine use in bleaching, may be equally
important.

2. Sin of no proof
An environmental claim not substantiated by easily accessible supporting information or by a reliable
third-party certification. Common examples are facial tissues or toilet tissue products that claim various
percentages of post-consumer recycled content without providing evidence.
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3. Sin of vagueness
A claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the
consumer. All-natural is an example. Arsenic, uranium, mercury, and formaldehyde are all naturally
occurring, and poisonous. All natural isn’t necessarily green.

4. Sin of worshiping false labels

A product that, through either words or images, gives the impression of third-party endorsement where no
such endorsement exists; fake labels, in other words.

5. Sin of irrelevance
An environmental claim that may be truthful but is unimportant or unhelpful for consumers seeking
environmentally preferable products. CFC-free is a common example, since it is a frequent claim despite
the fact that CFCs (chlorofluorocarbons) are banned under the Montreal Protocol.

6. Sin of lesser of two evils

A claim that may be true within the product category but that risks distracting the consumer from the
greater environmental impacts of the category as a whole. Organic cigarettes or fuel-efficient sport-utility
vehicles could be examples of this sin.

7. Sin of fibbing
Environmental claims that are simply false. The most common examples are products falsely claiming to
be ENERGY STAR® certified or registered.

7 Ways to Spot Greenwashing

According to the Greenwashing Index, greenwashing is when a company or organization spends
more time and money claiming the be “green” through advertising and marketing than actually implementing
business practices that minimize environmental impact. It’s essentially the same thing as whitewashing,
which is a coordinated attempt to hide unpleasant facts, just with a green brush.

As being “green” is becoming more and more of a norm, companies are using the opportunity to claim
they are green to improve their image and increase their sales. While the importance of being green is
common knowledge, it is also beginning to become common to see fake “green” companies. This is an issue,
however, because while companies are lying about being green, the companies who are actually green are
losing credibility.

Here are 7 ways you can spot greenwashing:

1. Vague or ‘fluffy’ language, using words with no clear meaning (ex. “eco-friendly”)
This may be one of the most basic, and definitely one of the oldest, tricks in the game. Just because a
product is “natural” does not mean the product is green. There are specific certifications required to be
green, and slapping “all natural” on your products does not cut it. Example of a company claiming to have
an all-natural product:
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2. Green products vs. dirty company (ex. energy efficient light bulbs that are made in a factory
that pollutes local rivers and uses child labour)
Although it may not be what you want to hear, sometimes you have to do a little research. If you are truly
interested in going green, doing background research on the companies you are going to invest in
shouldn’t be too much of a drag. Helpful hint: Try Googling the company’s name with “environment” and
see what pops up.

3. Irrelevant claims
Emphasizing one tiny green attribute when the rest of the product and how it is made is not ‘green’. This
is a pretty common mistake made among the fakers. Just because one tiny portion of your product was
created in a factory that also produces truly “green” products, it does not mean that your product or the
process of creating it was “green.” It’s all or nothing in the green world.

5. Claiming to be the best in their class…

It’s not uncommon to see someone claiming to be the “best” or most “green” in their class. What you
need to do is check their class. Chances are, the “best” of their class is still subpar.

6. Does the product label include jargon or overly complex information?

One of the most common ways organizations try to trick their customers into thinking they are green is by
using overly complex terms on their labels that only scientists would understand. Whether it's in the
ingredients or the product description, green terms are easy to understand. If the product packaging has
you scratching your head, put it down.

7. Does their label offer proof?

A company may claim to be environmentally friendly, and even provide label statements claiming to be
green, but, without evidence and a third party verification, it is not trustworthy and should not be
considered true.

Does the product label include fake seals of approval?

When companies lie about being environmentally friendly, they often do so by slapping a fake stamp
of approval on their packages. It is meant to look like a third-party enforcement, but in reality it is just a fake
seal.

In the end, you’re going to run into multiple fake “green” companies over time. The best thing you can
do is educate yourself on what it truly means to be green, and how to spot those who are faking their way to
the top. In order to learn more about greenwashing, check out the Greenwashing Index for more information.

TOPIC SUMMARY
In this lesson, you have learned that …
 Corporate Social Responsibility (CSR) is a mechanism by which companies hold themselves to a set of
legal, ethical, social and ecological standards. It is a form of business self-regulation that has developed
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Shareholders and Corporate Social Responsibility

alongside greater public awareness of ethical and environmental issues. But is it always a force for
good?
 Philanthropy is often defined as using wealth to bring about social change. A ‘philanthropist’ is a bit like
a venture capitalist in the not-for-profit sector; they make a decision to invest a portion of their wealth to
bring about social change in something they believe in. There may be an investment of their time and
knowledge, but more often than not, the support is financial.
 Corporate citizenship refers to the acceptance by business of a conscious effort in focusing and in
satisfying the economic, legal, ethical, philanthropic and social responsibilities and the acts expected
from the corporation to do its stakeholders. This focus covers the areas of business ethics, social
responsibility, corporate volunteerism, religious compliance and reputation management.
 Ethical leadership is a leadership that is concerned in leading in a manner that respect the rights, dignity
and stake of others. In business and political context, ethical leadership focuses on how leaders employ
their business and political power in the decisions they make and actions they engage into. Leaders
who are ethical demonstrate a level of integrity that is essential for stimulating culture of honesty and
accountability. The character and integrity of the leader provide the basis for personal characteristics
that direct a leader’s ethical beliefs, values, and decisions. Individual values and beliefs impact the
ethical decisions of leaders.
 A term used to describe how big businesses use deceptive marketing tactics masked as corporate
social responsibility. The term combines “green” meaning environmentally-friendly and “whitewash”
meaning cover-up. Greenwashing, sometimes also called green sheen, implies that a corporation
shows they are adopting practices beneficial to the environment, but in reality, are not.
 Greenwashing is the act of misleading consumers regarding the environmental practices of a company
or the environmental benefits of a product or service. There are more green products than ever before,
and our Sins of Greenwashing tips can help you sort out the truly green products from the not-so-green
ones

REFERENCES

 Author. Madison Perrin. Retrieve on July 25, 2020. Retrieve from http://blog.springfieldprinting.com/7-
ways-to-spot-greenwashing
 Author. Olga Myshenkova. Retrieve on July 25, 2020. Retrieve from
https://sites.google.com/site/olgamyshenkovaaccountability/accountability-and-ethics/10-mythes-
about-business
 Ballade, Win, et all. Good Governance & Social Responsibility. DomDane Publishers. 2015.
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