Crane and Matten

Business Ethics (3rd Edition)

Chapter 10
Civil Society and Business Ethics

Lecture 10
 Overview
• Show how the role played by various types of civil
society organizations in society constitutes them as
important stakeholders of corporation
• Examine the tactics that such groups might employ
towards corporations to achieve their purposes
• Discuss the impacts of globalization on the nature
and extent of the role played by civil society towards
corporations
• Discuss the appropriate relationships between
business and civil society
• Assess the role of civil society in providing for
enhanced corporate sustainability
Civil Society as ‘third sector’

State sector Market sector

Government Business

Civil society
sector
Including NGOs,
pressure groups,
charities, unions,
etc
 Civil society organizations
Civil society organizations include a whole
plethora of pressure groups, non-
governmental organizations, charities,
religious groups, and other actors that are
neither business nor government
organizations, but which are involved in the
promotion of certain interests, causes, and/or
goals
Diversity in CSO characteristics

Scope Type
Individual Community group
Grass-roots Campaign group
Local Research
Regional organization
National Business
Transnational association
Global Religious group
Trade union
Technical body

CSOs
Activities Structure
Informal
Academic research
Formal
Market research
Co-operative
Policy research
Professional
Information
Entrepreneurial
provision
Network
Campaigning Focus
Protests & demos Natural environment
Boycott co- Social issues
ordination Development
Poverty alleviation
Human rights
Animal welfare

Source: adapted from McIntosh and Thomas (2002: 31)

Civil society organizations as
stakeholders
 Civil society organizations as
stakeholders
The ‘growth in the number, power and influence of
CSOs represents one of the most important societal
developments in the past twenty years, in terms of
how the dynamics of public debates and government
policies concerning corporate behaviour are
changing’ (Yaziji and Doh, 2009: 16)
The stake held by CSOs is largely one of:
• Representing the interests of individual stakeholders
• Representing the interests of non-human
stakeholders
 Different types of CSOs
Sectional groups Promotional groups

Membership Closed Open

Represent Specific section of Issues or causes

society
Aims Self-interest Social goals

Traditional status Insider Outsider

Main approach Consultation Argument

Pressure exerted Threat of withdrawal Mass media publicity

through
 Degrees of trust in different types of
organization in selected global regions
80

70

60

50
NGOs
40 Business
Government
30

20

10

0
North America Europe Asia Pacific Latin America Global Total

Source: 2009 Edelman Trust Barometer

Ethical issues and CSOs
 Recognizing CSO stakes
• Many CSO groups tend to ‘self-declare’ themselves
as stakeholders in a particular issue (Wheeler et al. 2002)
– Issuing statements
– Launching campaigns
– Initiating some kind of action towards the corporation
• Self-declaring does not necessarily lead to
recognition
• Ignoring CSOs may have detrimental long-term
consequences
 CSO tactics
• Indirect action
– Sometimes criticised for providing misleading information
• Violent direct action
– Often illegal
– Tends to generate the most publicity
– Is this action ‘civil’ at all?
• Non-violent direct action
– Demonstrations and marches
– Protests
– Boycotts
– Occupations
– Non-violent sabotage and disruption
– Stunts
– Picketing
 Boycotts
• A boycott is an attempt by one or more parties to
achieve certain objectives by urging individual
consumers to refrain from making selected
purchases in the marketplace
• Four different purposes for boycotts:
– Instrumental boycotts
– Catalytic boycotts
– Expressive boycotts
– Punitive boycotts
 Some well-known boycotts
Target CSO Organizer Dates Main issues Outcomes
company
ExxonMobil Greenpeace, Friends 2001-4 Anti climate change position, including active Raised awareness and brought (unsuccessful) shareholder
(Esso) of the Earth, People lobbying against Kyoto global warming treaty; lack resolutions to the AGM. ExxonMobil has since shifted to a
and Planet of investment in renewable energy more accommodating climate change position

Triumph Burma Campaign 2001-2 Manufacturing operations in Burma Announced withdrawal from the country in 2002
International
KFC People for the 2003- Cruelty towards chickens in the KFC supply chain Some improvements in practices. Campaign called off in
Ethical Treatment of Canada due to new animal welfare plan but continues in US,
Animals (PETA) UK, and several other countries.

PG Tips Tea Captive Animals' 2004 Use of performing chimpanzees in advertisements - Removed advertisements featuring the chimpanzees in 2004,
Protection Society claimed to reduce animals to ridicule, and to having used the image for 45 years. Now uses animated
(CAPS) involve taking young chimps from their mothers, animals.
and potential physical punishment

Body Shop Naturewatch 2006- Sale of Body Shop to L’Oreal, which is part owned A Naturewatch press release claimed that the Body Shop had
by Nestlé. Main issues involved L’Oreal’s use of lost millions in revenue in just one year due to the campaign.
animal testing No change in policy at L’Oreal.

Guess The Coalition to 2007-8 The international clothes retailer Guess sells Following an international campaign, Guess announced that it
Abolish the Fur products made with real fur. would not buy fur after September 2007, and would stop
Trade (CAFT) selling fur in their 800 shops worldwide by April 2008.

Heinz Stonewall 2008 Company accused of discrimination against Ad is investigated by Advertising Standards Authority. Heinz
homosexuals after it dropped a UK advert featuring sticks to decision not reinstate ad despite a motion being filed
two men kissing following the receipt of more than in Parliament condemning decision.
200 customer complaints

Sources: www.ethicalconsumer.org.uk; www.caft.org.uk; www.greenpeace.org.uk; www.stopanimalcruelty.co.uk/bodyshop; www.captiveanimals.org

 CSO accountability
• CSO stakeholders might be said to include:
– Beneficiaries
– Donors
– Members
– Employees
– Governmental organizations
– Other CSOs
– General public (especially those who support their ideals)
• Recently, growing number of organizations similar to CSOs
being initiated within business
• Accountability of CSOs to supposed beneficiaries tends to
raise most debate
– Force agendas on beneficiaries without understanding needs
– Limited involvement of beneficiaries in decision making
– CSO donor interests receive higher priority
– Lack of effective mechanisms for beneficiaries to feedback on CSO
performance
Globalization and civil society
organizations
 Globalization and civil society
organizations
• Globalization reshaping relations between corporations
and CSOs:
– Engagement with overseas CSOs
• Potentially new set of unfamiliar groups
• Many developing and transitional economies lack strong
and institutionalized civil society (e.g. China)
– Global issues and causes
• Problems that transcend national boundaries (e.g. climate
change, water conservation, human rights)
• Critique of globalization
– Globalization of CSOs
• ‘the resistance will be as transnational as capital’
• Global civil society
Corporate citizenship and civil
society

Charity, collaboration, or regulation?

 Charity and community involvement
• Starting point for a consideration of business involvement in civil
society
• One-way support – benefits communities and civil action but
does not usually allow them much voice in shaping corporate
action.
• Types of involvement:
– Corporate foundations to channel philanthropy
– Employee volunteering. This allows achievement of the following
aims (Muthuri, Matten, and Moon 2009):
• Making a meaningful social contribution
• Contributing to the development of their human resources
• Enhancing the firm’s reputation
• Increasing employee morale
• Building ‘social capital’ within the community
 Business-CSO collaboration
• Closer and more interactive relations between civil
society and corporations
• Sometimes called social partnerships
• Limitations of business-CSO collaboration
– Difficulties managing relations between such culturally
diverse organisations
– Difficulties ensuring consistency and commitment
– Partnership appear to mask continuing hostility and/or power
imbalances between the ‘partners’
• The question of power imbalance
• The distribution of the benefits of partnerships
• CSO independence
 Some examples of business-CSO
collaborations
Name of Country Main CSO(s) involved Main corporation(s) Launch Aims and objectives
initiative involved
Change for International UNICEF Major airline carriers incl. 1987 To collect unused currency from passengers and
Good Alitalia, British Airways, convert it into life-saving materials and services
Cathay Pacific, JAL, Quantas for needy children
Marine International Originally developed by Unilever (at outset), now 1997 Establishment of standards and independent
Stewardship WWF-UK, now MSC is an thousands of retailers, suppliers certification for sustainable fishing
Council (MSC) independent CSO in itself and restaurants globally
Ethical Trading UK/ 15 NGOs & 3 trade unions 50+ companies, incl. Gap, 1998 To define best practice in ethical trade and enable
Initiative International incl. International Jaeger, Monsoon, Tesco, Body firms to implement labour standards in
Confederation of Free Trade Shop international supply chains
Unions, Anti-Slavery
International & Christian Aid
Juice UK Greenpeace Npower 2001 Development of a ‘clean’ electricity product
which is based on renewable energy sources.
Sustainable US/ The Rainforest Alliance Kraft Foods 2003 To bring coffee beans certified for social and
Coffee International environmental sustainability into Kraft’s
mainstream brands, including Kenco Yuban, and
Carte Noir.
International Indonesia Oxfam Unilever 2004-5 Development of a research programme to explore
Business and the nature of Unilever’s Indonesia business and its
Poverty impacts on people living in poverty.
Reduction
HSBC Climate International The Climate Group, HSBC 2007 To combat climate change by ‘inspiring action by
Partnership Earthwatch Institute, individuals, businesses and governments
Smithsonian Tropical worldwide’, including programmes in education,
Research Institute, WWF research, conservation, and engagement with
business, government and communities.
Green Works US Sierra Club Clorox 2008 Endorsement of ‘green’ line of cleaning products
 Drivers towards business-CSO
collaboration
Drivers for business engagement
with CSOs
Consumer expectations
NGO credibility with public
Need for an external challenge
Cross-fertilisation of thinking
Greater efficiency in resource allocation
Desire to head off negative public
confrontation and protect image
Desire to engage stakeholders
Drivers for CSO engagement with
business
Growing interest in markets
Disenchantment with government as
provider of solutions
Need for more resources
Credibility of business with government
Cross-fertilisation of thinking
Access to supply chains
Greater leverage
 Social enterprise
The escalating number of CSO alliances with
businesses suggests an increased attention in
the sector to using market-based solutions to
address social problems
• Venture Philanthropy, also called philanthrocapitalism
– application of venture capital techniques to grant making
(Moody 2008)
• Social enterprise
– Has developed since the 1990s
– Novel way of embedding dual social and economic goals into
the nature of organizations: social enterprises are designed to
address social problems from the outset
 Key differences between social
enterprise, CSOs & corporations
Social Enterprise Civil society Corporation
organization
Aims Social and economic Social value creation Economic value creation
value creation
Role of profit Profit earning; limits on Nonprofit making Profit maximising
profit distribution
Activities Production and trade of Production of social Production and trade of
social goods and goods and services, goods and services
services campaigning, advocacy,
research, grant-giving,
etc
Funding Self-funding (at least Grants, donations, or Self-funding
partially) membership dues
Governance Based on participation Based on participation Based on accountability
and democracy amongst and democracy amongst to providers of capital
stakeholders stakeholders

Sources: Dees (1998); Defourny and Nyssens (2006); Nicholls (2006)

 Problems with social enterprise
• Compromise of social mission
– Demands of the marketplace can lead to ‘mission drift’
• Moral legitimacy
– The more business-like social enterprises become, the less
moral legitimacy they may have for key stakeholders
• Escalation of risk
– Social enterprise tends to emphasise risk taking and
innovation which can pose threats to essential services and
clients
• Prioritisation of profitable markets
– The need for sustainable revenue encourages a focus on
potentially profitable social goods and services, rather than
unprofitable areas where clients might be more needy
 Civil Regulation
Civil regulation is the ability and power of CSOs
to shape, influence or curb business practice
• Focus on relations and outcomes
• Key drawback is that regulation is voluntary

Key points
• Civil society can act as a conduit through which
individuals citizens can exert some kind of leverage
on, or gain a form of participation in, corporate
decision-making and action
• CSOs are now part of systems or regimes of ‘global
governance’ (e.g. Vogel 2008)
Civil society, business, and
sustainability
 Balancing competing interests
• Civil society: wide variety of disparate actors
promoting different issues
• Business must take account of these different issues
simultaneously
• e.g. energy industry – wind power
– Groups supporting wind power as clean source of renewable
energy that supports local areas financially
– Groups against wind power because they ‘despoil’ the
countryside
– This is a battle of green vs. green (Lynas, 2008)
 Fostering participation and
democracy

“Organizations…that affect you and your community,

especially when they affect the material foundations
of your self-determination, must be able to be
influenced by you and your community…What are
required are new forms of democratic governance so
that people can determine their own futures in a
sustainable environment”
(Bendell, 2000:249)
 Summary
• Discussed the role that civil society has played in
business ethics
• Taken a fairly broad definition of what constitutes civil
society
• The representational nature of CSO stakes makes
their claim rather more indirect than for other
constituencies
• Gradual shift in the nature of business-CSO relations
from primarily confrontational to a more complex,
multifaceted relationship that still involves
confrontation, but also charitable giving, collaboration
and aspects of civil regulations