Chapter 4

Corporate
Social
Responsibility

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 Learning Outcomes
• Describe and explain corporate social responsibility (CSR).
• Distinguish between instrumental and social contract
approaches to CSR.
• Explain the business argument for “doing well by doing good.”
• Summarize the five driving forces behind CSR.
• Explain the triple bottom-line approach to corporate
performance measurement.
• Discuss the relative merits of carbon-offset trading.

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 Corporate Social Responsibility (CSR)
• Actions of an organization that are targeted toward achieving
a social benefit over and above maximizing profits for its
shareholders and meeting all its legal obligations.
• Also known as corporate citizenship and corporate
consciences.

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 Approaches to CSR
• Instrumental approach: Perspective that the only obligation
of a corporation is to maximize profits for its shareholders in
providing goods and services that meet the needs of its
customers.
• Social contract approach: Perspective that a corporation has
an obligation to society over and above the expectations of its
shareholders.

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 Impact of Corporation Actions
Actions of corporations impact:

• Customers.
• Employees.
• Suppliers.
• Communities.

Can be positive or negative depending on the actions taken by

the corporation.

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 Management by Inclusion
Going beyond generating profit attracts a lot of attention.
• Example: Alcohol manufacturers have a long-term perspective and spread
awareness about drinking responsibly.

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 The Driving Forces behind CSR

Transparency Knowledge Sustainability

Failure of the
Globalization
public sector

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 CSR Risks
Corporations experimenting with CSR initiatives run the risk of
creating adverse results.
• Employees feel that they are working for an insincere, uncaring
organization.
• Public sees little more than a token action concerned with publicity rather
than community.
• Organization does not perceive much benefit from CSR and so sees no
need to develop the concept.

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 Triple Bottom Line
Adaptation of annual reports to reflect a triple bottom-line
approach is a testament of how seriously companies are taking
CSR.
• They provide social and environmental updates alongside their primary
bottom-line financial performance.

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 Ethical CSR
Organizations pursue a defined sense of social conscience in
managing their:

• Financial responsibilities to shareholders.

• Legal responsibilities to their local community and society as a whole.
• Ethical responsibilities to do the right thing for all their stakeholders.

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 Altruistic CSR
• Philanthropic approach to CSR.
• Organizations underwrite specific initiatives to give back to
the company’s local community or to designated national or
international programs.

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 Strategic CSR
Philanthropic approach to CSR.

Organizations target programs that will generate the most

positive publicity or goodwill for the organization.
• Programs run the greatest risk of being perceived as self-serving behavior
on the part of the organization.

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 Carbon Footprint
Total carbon dioxide emissions on an annual basis.

Kyoto Protocol requires developed nations to reduce their

greenhouse gas emissions by:

• Modifying their domestic industries.

• Funding projects in developing countries in return for carbon credits.
• Purchasing credits from carbon-positive projects can result in operations being
made carbon neutral.

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