1

CORPORATE SOCIAL
RESPONSIBILITY
 ‘Fundamentals of Corporate Social
2 Responsibility’

 CSR is now a mainstream approach to business:

“The movement for CSR has won the battle of ideas …CSR
commands the attention of Executives Everywhere.”
(Economist 2005)

 In 2006, as this movement gains momentum and mainstream

acceptance, it is time for people that work or have an interest
in this area to take stock and take a closer at the fundamentals
of CSR.
 ‘Fundamentals of Corporate Social
3 Responsibility’

As part of this exercise, fundamental questions should be asked:

 What is CSR?

 How does it relate to other concepts? (e.g. sustainable

development, corporate governance, corporate
responsibility, corporate citizenship) Same/different/related?

 Is CSR purely voluntary or does it now have legal

dimensions?
 ‘Fundamentals of Corporate Social
4
Responsibility’

 This presentation will focus on answering these

fundamental questions.

 Will draw on research I am currently undertaking for a

book project.

 Turning to first question- what is CSR?

 What is CSR?
5

 Concept of CSR often criticized because of lack of legally

defined or commonly accepted definition.
 Is this criticism justified?
 Should it matter that CSR is not legally defined or subject to a
single universal definition?
 By comparison, the term corporate governance is not in
itself legally defined or subject to a commonly accepted
definition- the term is associated with concepts, ideas and
principles that evolve over time.
 Arguably, CSR should never be given a fixed definition. This
will foster evolution.
6 What is CSR?

 Despite the lack of a single definition, my own research has

shown that by examining different definitions from around the
world, it is clear that there are commonly held understandings
about what constitutes CSR.

Let’s firstly examine some of these definitions----- then I will

address the common understanding.
7 What is CSR?

Canadian Government:

“CSR is generally understood to be the way a company achieves a

balance or integration of economic, environmental and social
imperatives while at the same time addressing shareholder and
stakeholder expectations.”
8 What is CSR?

UK Government:

“The 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 – maximising the benefits and minimising the downsides.”
9 What is CSR?

European Union:

“[CSR is] a concept whereby companies integrate social and

environmental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis.”
10
What is CSR?

World Business Council for Sustainable Development:

“We define CSR as business' commitment to contribute to sustainable

economic development, working with employees, their families, the local
community, and society at large to improve their quality of life.”
 What is CSR?
11

The Kennedy School of Government (Harvard

University), CSR Initiative:

“The term [CSR] is often used interchangeably with others,

including corporate responsibility, corporate citizenship, social
enterprise, sustainability, sustainable development, triple-bottom
line, corporate ethics, and in some cases corporate governance.
Though these terms are different, they all point in the same
direction: throughout the industrialized world and in many
developing countries there has been a sharp escalation in the social
roles corporations are expected to play.”
 What is CSR?
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 What do these definitions tell us about CSR?

 What are some of the common understandings that

emerge?

 How does CSR relate to other concepts?

 What other issues arise?

13
What is CSR?

Common Understanding One:

CSR is an idea whereby companies

integrate economic, social and
environmental concerns in their business
operations
 Common Understanding One: Integration

Corporate Social Responsibility: The Integrated

Approach to Business in the 21st Century

Consumer
Exchange Confidence Interest
Rates Rates
Regulation/Policy
Governance

Economic
Climate Corruption
Change

Environment Social Communities

Waste

Biodiversity Labour/
Workplace
Resource Human
Use Rights
Common
15 Understanding Two: Stakeholders

 Common Understanding Two: CSR relates to the idea whereby a business

addresses and balances the needs of stakeholders.
 Who/what are stakeholders? “Individuals and groups who may affect or be
affected by the actions, decisions, policies, practices or goals of an
enterprise.”

Examples:
• Shareholders and other investors
• Employees
• Customers
• Governments
• Local communities
• NGOs
• Environment
 CSR and Related Concepts:
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Sustainable Development
 Many definitions describe CSR as the business pursuit of
sustainable development.
 Sustainable development: “development that meets the needs of
the present without compromising the ability of future
generations to meet their own needs.” (1987 Brundtland Report).
 Like CSR, sustainable development is also recognised as having
three fundamental pillars: economic development, social
development and environmental protection.
17 CSR and Sustainable Development

2002 World Summit on Sustainable Development (Johannesburg)

confirmed link with CSR.
Paragraph 49 of the Johannesburg Plan of Implementation calls for
action at all levels to:

“Actively promote corporate responsibility and accountability, based on

the Rio principles, including through the full development and effective
implementation of intergovernmental agreements and measures,
international initiatives and public-private partnerships and appropriate
national regulations, and support continuous improvement in corporate
practices in all countries.”
18 CSR and Related Concepts:
Corporate Governance

Many definitions highlight the link between CSR and corporate governance.

Is CSR a subset of corporate governance or is corporate governance a subset of

CSR?

In my view this is a pointless question. Both concepts are closely related which
ever way you look at it.
 CSR and Corporate Governance
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Related in definition:

1994 Report of the Toronto Stock Exchange Committee on Corporate

Governance in Canada:

“Corporate Governance means the process and structure used to direct

and manage the business and affairs of the corporation with the
objective of enhancing shareholder value…. The direction and
management of the business should take account the impact on other
stakeholders such as employees, customers, suppliers and communities.”

Principle 4 of The OECD Principles of Corporate Governance (2004)

underscores the need of a corporate governance framework to
“encourage active co-operation between corporations and stakeholders
in creating wealth, jobs, and the sustainability of financially sound
enterprises.
 CSR and Corporate Governance
20 Related in Management:
 Many companies are now using company codes of conduct to address
conduct issues that relate to both corporate governance issues (conflict of
interest, market disclosure, whistleblowing, corruption, fraud &
accounting) and CSR issues (human rights, environment & labour
standards)

Related in Investment:
 Mainstream investors now consider environmental, social and
governance issues (known collectively as ESG issues) in their
investment decisions.
Example: United Nations Principles for Responsible Investment
Launched in April 2006, now has support of investors with combined
worth of $4 Trillion.
21 CSR and Other Related Concepts

 The term CSR is often used interchangeably with the terms corporate
responsibility, corporate citizenship and triple bottom line.

 In my opinion, these terms describe the same concept to that of CSR.

 Companies choose the terminology they feel comfortable with.

 IS CSR a Voluntary Concept?
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 Some definitions (e.g. European Union) describe CSR as a voluntary

concept.

 Given the multitude of initiatives that promote CSR (e.g. Global Compact,
Global Reporting Initiative, OECD Guidelines) in a voluntary fashion- not
surprising CSR is perceived in this way

 However, recent legal developments suggest CSR is no longer a voluntary

concept.

 Two major areas of development: Reporting and Directors’ Duties

 Mandatory CSR Reporting
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 Backed by increasing calls from investors and the community for more disclosure and reporting on CSR issues,
many jurisdictions have now introduced mandatory corporate reporting requirements on environmental and
social matters:
• Australia
• France
• South Africa
• Sweden
• Canada
• Denmark
• Netherlands
• Norway
• UK.
 Directors’ Duties and CSR
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 New ways of interpreting and conceiving directors’ duties that align with
concept of CSR.
 The duty: To act in the best interests of the company.
 Traditional, conservative interpretation: Shareholders are the company-
Duty is to raise profits for benefit of shareholders. Environmental and
social considerations not relevant.
 The current, progressive interpretation: Supreme Court of Canada, in
Peoples v. Wise (2004)
“We accept as an accurate statement of law that in determining whether
they are acting with a view to the best interests of the corporation it may
be legitimate, given all the circumstances of a given case, for the board
of directors to consider, inter alia, the interests of shareholders,
employees, suppliers, creditors, consumers, governments and the
environment.”
 Directors’ Duties and CSR
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 New UK directors’ duty set to be introduced this year through Companies Bill.
(Waiting on Royal Assent)

Section 173     Duty to promote the success of the company

A director of a company must act in the way he considers, in good faith, would be
most likely to promote the success of the company for the benefit of its members
as a whole, and in doing so have regard (amongst other matters) to:
 the likely consequences of any decision in the long term;
 the interests of the company’s employees;
 the need to foster the company’s business relationships with suppliers,
customers and others;
 the impact of the company’s operations on the community and the environment;
 the desirability of the company maintaining a reputation for high standards of
business conduct; and
 the need to act fairly as between members of the Company.
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Questions & Discussion