Corporate Social

Responsibility
CSR
Corporate Social Responsibility

In the discussion of CSR are three questions:

First, why do corporations have a social responsibility? That is, what is the basis
for such a responsibility?
Second, what is the extent of this responsibility, or what exactly do corporations
have a responsibility to do?
Third, and perhaps most important, how should corporations decide what CSR
activities to undertake, and what is required to implement CSR programs
effectively?
 The Meaning of CSR

Business firms have not one but many different kinds of responsibilities, including
economic and legal responsibilities
economic responsibility to produce goods and services and to provide jobs and
good wages to the workforce while earning a profit. Economic responsibility also
includes the obligation to seek out supplies of raw materials, to discover new
resources and technological improvements, and to develop new products
,business firms have certain legal responsibilities. One of these is to act as a
fiduciary, managing the assets of a corporation in the interests of shareholders,
but corporations also have numerous legal responsibilities to employees,
customers, suppliers, and other parties. The vast body of business law is
constantly increasing as legislatures, regulatory agencies, and the courts respond
to greater societal expectations and impose new legal obligations on business
CSR Defined

The concept of corporate social responsibility is often expressed as the voluntary

assumption of responsibilities that go beyond the purely economic and legal
responsibilities of business firms.More specifically, social responsibility,
according to some accounts, is the selection of corporate goals and the
evaluation of outcomes not solely by the criteria of profitability and
organizational well-being but by ethical standards or judgments of social
desirability.

The exercise of social responsibility, in this view, must be consistent with the
corporate objective of earning a satisfactory level of profit, but it implies a
willingness to forgo a certain measure of profit in order to achieve noneconomic
ends
CSR from different Perspectives

 Archie B. Carroll views social responsibility as a four-stage continuum.Beyond

economic and legal responsibilities lie ethical responsibilities, which are
“additional behaviors and activities that are not necessarily codified into law
but nevertheless are expected of business by society’s members.”At the far
end of the continuum are discretionary responsibilities. These responsibilities
are not legally required or even demanded by ethics, but corporations accept
them in order to meet society’s expectations.
 S. Prakash Sethi notes that social responsibility is a relative concept: What is
only a vague ideal at one point in time or in one culture may be a definite
legal requirement at another point in time or in another culture. Corporate
social responsibility can thus be defined as “bringing corporate behavior up to
a level where it is congruent with the prevailing social norms, values, and
expectations of performance
CSR according to Committee for
Economic Development
Basic Economic
Responsibilities

Economic
Responsibilities
with increasing
Social
Awareness

Active Social
Responsibility
 In 1971, the Committee for Economic Development issued an influential report that
characterized corporate social responsibility in a similar fashion but without an
explicit mention of legal responsibilities.
 The inner circle includes the clear-cut basic responsibilities for the efficient execution
of the economic function—products, jobs, and economic growth.
 The intermediate circle encompasses responsibility to exercise this economic function
with a sensitive awareness of changing social values and priorities: for example, with
respect to environmental conservation; hiring and relations with employees; and more
rigorous expectations of customers for information, fair treatment, and protection
from injury.
 The outer circle outlines newly emerging and still amorphous responsibilities that
business should assume to become more broadly involved in actively improving the
social environment. Society is beginning to turn to corporations for help with major
social problems such as poverty and urban blight. This is not so much because the
public considers business singularly responsible for creating these problems, but
because it feels large corporations possess considerable resources and skills that could
make a critical difference in solving these problems.
EXAMPLES OF SOCIAL RESPONSIBILITY

 Although there are some disagreements about the meaning of corporate social responsibility, there is general
agreement on the types of corporate activities that show social responsibility. Among these are the following:
 1. Choosing to operate on an ethical level that is higher than what the law requires. For example, Motorola’s
code of ethics prohibits payments of any kind to a government official, even when the payments are permitted
by U.S. and local law; and Mattel closely monitors its factories in China to ensure that its high labor standards
are observed.
 2. Making contributions to civic and charitable organizations and nonprofit institutions. American companies
contribute, on average, 1 percent of pre-tax net revenues to worthy causes, and many larger corporations
operate nonprofit foundations that fund grant applications from worthy philanthropic organizations.
 3. Providing benefits for employees and improving the quality of life in the workplace beyond economic and
legal requirements. Examples include family-friendly programs such as flexible work and childcare, and time off
for volunteer work.
 4. Taking advantage of an economic opportunity that is judged to be less profitable but more socially desirable
than some alternatives. For example, Starbucks pays an above-market rate for fair-trade coffee that benefits
growers in poor countries and Home Depot ensures that none of the wood it sells comes from old growth or
endangered forests.
 5. Using corporate resources to operate a program that addresses some major social problem. AT&T devotes
substantial resources to promoting diversity among its employees, suppliers, and local communities; and major
CORPORATE SOCIAL RESPONSIVENESS

An important aspect of corporate social responsibility is the responsiveness of

corporations—that is, the ability of corporations to respond in a socially
responsible manner to new challenges.
William C. Frederick explains that the concept of corporate social responsiveness
“refers to the capacity of a corporation to respond to social pressures.”
The emphasis of corporate social responsiveness, in other words, is on the
process of responding or the readiness to respond, rather than on the content of
an actual response. Thus, a socially responsive corporation uses its resources to
anticipate social issues and develop policies, programs, and other means of
dealing with them. The management of social issues in a socially responsive
corporation is integrated into the strategic planning process, instead of being
handled as an ad hoc reaction to specific crises.
CORPORATE CITIZENSHIP

The term “corporate citizenship,” which gained currency in the 1990s, especially
in Europe, is often used interchangeably with “corporate social responsibility”
and “corporate social performance,” but it sometimes has a broader meaning to
include the impacts of a business organization on all groups in society, on society
as a whole, and on the environment.
According to one definition, “corporate citizenship is the process of identifying,
analyzing and responding to the company’s social, political and economic
responsibilities as defined through law and public policy, stakeholder
expectations, and voluntary acts flowing from corporate values and business
strategies.”
Debate over CSR

The initial debate over CSR in the 1950s and 1960s was largely over the
normative question of whether CSR was something that corporations were
morally obligated or, at least, morally permitted to do. Opponents of the idea,
such as Milton Friedman, argued on moral grounds that corporations ought not to
engage in CSR at all, unless doing so benefited shareholders, while proponents
offered arguments for the position that corporations were morally permitted to
engage in some voluntary socially responsible activity and, in some situations,
could be morally faulted for not doing so. The starting point for most of the
arguments for and against corporate social responsibility is what has been called
the “classical view” of the corporations, which is the dominant conception
THE CLASSICAL VIEW.

 1. Economic behavior is separate and distinct from other types of behavior, and
business organizations are distinct from other organizations, even though the same
individuals may be involved in business and nonbusiness affairs. Business organizations
do not serve the same goals as other organizations in a pluralistic society.
 2. The primary criteria of business performance are economic efficiency and growth in
production of goods and services, including improvements in technology and
innovations in goods and services.
 3. The primary goal and motivating force for business organizations is profit. The firm
attempts to make as large a profit as it can, thereby maintaining its efficiency and
taking advantage of available opportunities to innovate and contribute to growth.
In the classical view, corporations should engage in purely economic activity and be
judged in purely economic terms. Social concerns are not unimportant, but they should
be left to other institutions in society
ARGUMENT AGAINST CSR

 Perhaps the best-known critic of corporate social responsibility is Milton

Friedman. Friedman’s main argument against CSR is that corporate
executives, when they are acting in their official capacity and not as private
persons, are agents of the shareholders of the corporation. As such,
executives of a corporation have an obligation to make decisions in the
interests of the shareholders, who are ultimately their employers.
Arguments for Corporate Social
Responsibility
 THE MORAL MINIMUM OF THE MARKET
 POWER AND RESPONSIBILITY
 GIVING A HELPING HAND TO GOVERNMENT
Criticisms of Classical View

Holders of the classical view generally admit the legitimacy of three other functions of
government that place limits on business activity.
First, business activity generates many externalities, that is, social harms, such as worker injury
and pollution, which result indirectly from the operation of business firms. In order to prevent
these harms or to correct them after they occur, it is proper for government to act—by requiring
safer working conditions and pollution controls, for example.
Second, the operation of a free-market economy results in considerable inequalities in the
distribution of income and wealth. Insofar as it is desirable as a matter of public policy to
reduce these inequalities, it is appropriate for government to undertake the task by such means
as progressive taxation and redistribution schemes. It is the job of government, in other words,
and not business, to manage the equity/efficiency trade-off.
Third, free markets are prone to instability that manifests itself in inflation, recessions,
unemployment, and other economic ills. Individual firms are too small to have much effect on
the economy as a whole, and so government must step in and use its powers of taxation, public
expenditure, control of the money supply, and the like to make the economy more stable
Business case for CSR.

 One argument is that CSR contributes to profitability because the market

rewards responsible behavior and punishes a company’s lapses. -- The Market
for Virtue

 Competitive Advantage -- The second argument is that CSR can be a source of

competitive advantage.
Implementing CSR

 If either of the two arguments for CSR—the argument from the market for
virtue or the argument about competitive advantage—is persuasive to a
company’s management, a large gulf still remains between making a
commitment to CSR on the one hand and formulating and implementing a
successful CSR program on the other.
 Program Selection and Design
 Reporting and Accountability