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Corporate Social Responsibility - Introduction

CSR: responsibility, society and corporations - Historical origins - Possible definitions - Arguments for and against CSR - Areas of concern

Corporate Social Responsibility – uses of term

By businesses as a statement of intent or marketing device By governments and international organisations to exhort ‘good’ conduct By NGOs as a standard to measure business activity - how meaningful is it?

Historical pressures for CSR
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1930s - Economic depression and poverty 1960s - Race and gender discrimination 1990s - Environment and global warming 2000s - Financial bubble and bust Major companies perceived as ‘part of the problem’ – in US and UK, legislative requirements followed in ’30s/’40s, ’60s/’70s (future prospects…?)

Business response to CSR
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Philanthropy – donations, community work (1960s) Responsiveness – communications, stakeholder engagement (1970s) Commitment – Codes of Conduct, management/reporting (1980s) Embeddedness – reexamining business processes (1990s-) Why might this development have been from the top down of the ‘responsibility pyramid’?

CSR: narrow or tall?

Milton Friedman – “the business of business is business” (making maximum profit, subject to obeying the law) Archie Carroll – making a profit, obeying the law, meeting society’s ethical expectations and contributing to the social good

CSR: what and why?

voluntary decision (beyond what law requires?) to respect and protect varied stakeholders (such as?) and contribute to wider social and environmental improvement (how far?) - is it a matter of sound business or moral imperative or both?

UK Government

“The [UK] Government sees CSR as the business contribution to our sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates… Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.”

European Union

“Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing ‘more’ into human capital, the environment and the relations with stakeholders. The experience with investment in environmentally responsible technologies… suggests that going beyond legal compliance can contribute to a company’s competitiveness. Going beyond basic legal obligations in the social area… can also have a direct impact on productivity.”

International Chamber of Commerce

CSR “is the voluntary commitment by businesses to manage their roles in society in a responsible way”

World Business Council for Sustainable Development

CSR “is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large”

Arguments for CSR
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Corporations granted existence by society through law – ‘licence to operate’ needed Legal requirements are a floor for behaviour, not the whole story Ethical case - emerging and evolving global norms should concern companies Business case – improving reputation, avoiding threats, seizing opportunities

Arguments against CSR
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Only real human beings can sensibly be ‘responsible’ (or ‘irresponsible’) ‘Shareholders’ money’ – should not be spent on others, except as law demands Businesses should not do or try to do Governments’ job for them Inefficient and too vague – accountable to all really means accountable to none

Disasters and dilemmas

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Nike and ‘sweatshops’ – cheap labour versus basic development; child labour and family survival… Shell and Nigeria – complicity in oppression; engagement with governments Union Carbide and Bhopal Nestle and infant formula

Key areas of concern

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Labour standards and human rights issues – especially in developing world (ILO) Bribery and corruption issues (OECD) Environmental protection – especially climate change and industrial pollution Financial risk and reward

Corporate Social Responsibility – Good Business or Good Ethics (or both? or neither?)

The ‘Business case’ for CSR - The ‘Ethical case’ for CSR - Profits and principles, compatible or conflicting?

Business Case for CSR 1 stakeholders

Consumers may boycott ‘irresponsible’ companies (Nestle, Shell…) Employees may choose alternative workplaces Investors may avoid companies seen as short-termist/ unethical

Business case for CSR 2 strategy

‘Brand premium’ may suffer as a result of bad publicity Prescriptive regulation may be imposed if business or industry fails to act Avoidable costs may be incurred such as compensation ot later remedial action

Proof of profits?
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Difficult to find comparable ‘responsible’ and ‘irresponsible’ companies Not easy to establish a connection between ‘responsibility’ and results JC Collins and JI Porras, ‘Built to Last’, Century, 1998 – ‘visionary companies’ outperform competitors: about ‘more than profits’ M Goyder, ‘Living Tomorrow’s Company’, Gower 1998 – having clear values, building strong relationships key to lasting success

Building a brand
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Marks & Spencer: fair trade ‘Plan A’ on sustainability Health What is the market? What is the benefit?

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Limits of the business case

Not all businesses are directly consumer-facing Businesses may operate in different markets e.g. value/ middle/ premium Without regulation the ‘irresponsible’ may undercut the responsible

CSR: Ethical case – social

Companies are powerful actors in society whose resources can have major effects Companies rely on many stakeholder groups, not only shareholders

CSR: Ethical case - responsible

Corporate systems and structures (rather than individual will) can result in harm Is it ethically justifiable to ‘exploit’ other stakeholders to benefit the shareholders?

Ethics and effects

Stakeholder treatment – maximising utility (Mill); treating people as ‘ends in themselves’ (Kant); basic virtues justice, benevolence (Adam Smith) Social context – how much is relative to a particular place and culture? Does the role of business vary depending on its location?

Engagement and withdrawal

Burma boycott – companies that have withdrawn Should some regimes/locations be excluded from investment? Are boycotts right? Why?

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Objections to ethical case

Lack of focus on profit reduces business effectiveness (general disutility) Managers should not make sociopolitical judgments beyond obeying the law Whose morals count here, e.g. high labour standards or more jobs?

Profit and Principles

Often, the two may support each other (at least over the long term): e.g. using less energy saves money; better-trained workers are more productive; Sometimes, however, cutting costs may be at the expense of, e.g., labour and environmental standards. What should be the bottom line?

Summing up…

Business case important and often persuasive but not always solid; Ethical case tenable but increasingly complex to elaborate; Link to next point: to what extent is there a need for more regulation?

Possible synthesis

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Instrumental (profit-driven) view of business is too narrow? Putting all stakeholders on same footing is too broad? Special (fiduciary) duty to shareholders? Different responsibilities to other groups?

CSR: crossover with law
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Labour issues Environmental concerns Consumer protection Finance and accounting policies What rules should apply - to all businesses? - in all locations? Further action a matter for CSR?

Government: balancing varied demands

Is business too powerful (at the expense of the less wealthy/organised)? Are NGOs given an appropriate hearing (considering their specific agendas and expertise)?

In favour of legislation

Democratic political concerns should come before business profit Some issues are simply too serious to be left to voluntary action Business has too often failed to live up to standards it proclaimed Law creates a level playing field for all businesses in a sector

In favour of voluntarism

Major companies are the real leaders in good CSR practice Legislation restricts beneficial innovation Different sectors and sizes of business will vary in approach Market forces will lead companies to ‘do the right thing’

What can governments do?
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Spreading message on CSR Rewarding ‘champions’ Facilitating transparency Co-ordinating practice between cos. Building relationships with NGOs Linking CSR to wider public policy

Regulatory techniques

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Supporting compliance with Codes of Conduct Requiring publication of social and environmental performance information Incentives for ‘good’ behaviour Possibility of criminal action - last resort?

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Pressures to deregulate Developed world – avoidance of additional costs (maintaining competitiveness) Developing world – concern about imposing costs (attracting investment) Power of business (Naomi Klein, No Logo, 2000; Noreena Hertz, The Silent Takeover, 2001)

Issues for individual governments

European Commission Communication March 2006

The Commission… wishes to give greater political visibility to CSR, to acknowledge what European enterprises already do in this field and to encourage them to do more. Because CSR is fundamentally about voluntary business behaviour, an approach involving additional obligations and administrative requirements for business risks being counter-productive and would be contrary to the principles of better regulation. Acknowledging that enterprises are the primary actors in CSR, the Commission has decided that it can best achieve its objectives by working more closely with European business…

European Parliament Resolution of 13 March 2007 on CSR
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Concern about genuineness of dialogue including employees Concern about competitiveness and sustainability Concern about reporting Concern about global supply chains

EU Focus

Business contribution to delivering sustainable growth both environmentally and socially CSR defined as being about dealings with stakeholders and wider society (corporate governance about relations between management and shareholders)

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Guidelines cover: General policies Disclosure Employment and Industrial Relations Environment Combating Bribery Consumer Interests Science and Technology Competition Taxation

OECD Guidelines for Multinational Enterprises (revised 2000)

OECD approach
Voluntary and non-binding  Addressed to companies operating from OR in OECD countries  National Contact Points are established for information

OECD impact
Encouragement to spread jobs and technology  Reference to national laws – diversity persists  On complaints, name and shame only

United Nations Global Compact (launched 2000, as amended)
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Human Rights Labour standards Environmental protection Combating Bribery - embedded in corporate operations - subject to regular reporting

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UN GC advantages

Grounded in established provisions known from international law Strong involvement of NGOs as well as business

UN critics

Problems with possible ‘bluewash’ – good public relations without real responsibility ‘Naming and shaming’ participants whose reporting is inadequate too slow

A ‘third way’?

Codes of Conduct as ‘soft law’, selfgenerated by business but with consequences for non-compliance Transparency requirements – requiring reporting to enable informed choice Stakeholder participation with business and government

Responsible conduct ‘required’?

Linked in to stock exchange listing via reporting Linked in to obtaining of licences and permissions Defence to legal challenge if key CSR standards were followed?

A Market for Virtue?

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How concerned are customers about e.g. labour standards and environmental issues? How concerned are employees? Crucially today, how concerned are shareholders? Are they well informed to choose?

Management Viewpoint

Charitable donations are no longer enough? What are the values and mission of the company? Obedience to laws of host state not enough? Can the company ultimately be profitable?