Corporate Social Responsibility


Commission of the European Communities 2001 • Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at .World Business Council for Sustainable development • A business operating in a manner that meets or exceeds the ethical. commercial and public expectations that society has of business.bsr.Definitions of CSR • A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.Business for Social Responsibility (2000) www. legal.

This group of theories could be call instrumental theories because they understand CSR as a mere means to the end of profits. So any supposed social activity is accepted if. it is consistent with wealth creation. A first group in which it is assumed that the corporation is an instrument for wealth creation and that this is its sole social responsibility. and only if. Only the economic aspect of the interactions between business and society is considered.Theories of CSR There are 4 groups of theories in CSR.they are explained below. . 1.

We will call this group political theories. specifically in its relationship with society and its responsibility in the political arena associated with this power.2. This leads the corporation to accept social duties and rights or participate in certain social cooperation. A second group in which the social power of corporation is emphasized. 3. They usually argue that business depends on society for its continuity and growth and even for the existence of business itself. We can term this group integrative theories . A third group includes theories which consider that business ought to integrate social demands.

. firms ought to accept social responsibilities as an ethical obligation above any other consideration. This leads to a vision of CSR from an ethical perspective and as a consequence.4. A fourth group of theories understands that the relationship between business and society is embedded with ethical values. We can term this group ethical theories.

• • • • Instrumental theories.Social Demandingness Theory Ethical theories.classical model political theories.Social Activist model .Models of CSR • The models explained below illustrate what the group of theories above explains.stakeholder model integrative theories.

each of which serve a particular function. The only . In order to fulfil their institutional responsibility to society.• The Classical Model argues that society is best served by a variety of institutions. this “invisible hand”—individuals operating together in mutually satisfying (or profitable) exchanges—leads to the most efficient economic system. The primary function of corporations should be economic rather than social. • According to classical theorists. The primary goal of the corporation should be to maximize profit and the primary obligation of managers are to act in the interest of their shareholders while not breaking the law. corporations should limit any social activities that add costs and reduce their profits.

creating more jobs. social services. .Assumptions of the classical model • Shareholders benefit because they make a greater return on their investment. better wages. If a company spends money for social causes. • Workers are happy because higher profits help the company to expand. roads. The government also acts in the interest of society to determine the laws by which these companies must abide. and other benefits. • Society as a whole benefits because these successful businesses and their workers all pay taxes to the government.50 per sandwich. the value of the stock drops. the deli doesn’t charge an extra $. it reduces the wealth of the shareholders. For example. • Consumers benefit because prices stay low. which then fulfills its social functions: education. and the company has less capital for future growth. which he can then donate to his local food bank. etc. As dissatisfied shareholders sell of their shares.

• Stakeholder Model :Proponents argue that the company should be driven by the interests of their stakeholders. government agencies overseeing the firm. . suppliers. rather than the interests of the stockholders alone (as argued in the Classical Model) Stakeholders include: Stockholders. workers. consumers. this model includes consideration of the impact upon major stakeholders when making a decision. professional groups representing individuals within the company and residents of local communities in which the facilities or plants are located • In addition to earning a profit. creditors. competitors.

In this sense the general public has a generalized ownership relation to corporate assets and a responsibility to monitor the conduct of managers and hold them accountable for poor decisions. Unlike the Stakeholder theory.• The Social Demandingness Theory says that the corporation exists to carry out the demands of the broad public. • They are responsible to serve the general public and the general public is also responsible to uphold the corporation. this theory maintains that management is directly responsible to the general public. .

Much like the Social Demandingness model. Proponents of both of these models argue that executives should be social and moral leaders in the community and that corporations should be addressing major issues like poverty and global health. the social activism (or moralism) model assumes that there is a universal standard for determining these responsibilities. Unlike the Social Demandingness theory. .• Social Activist Model. however. this model assumes that corporations are responsible to the whole of society.

These theorists advocate a wide variety but here are a few responsibilities: • to voluntarily disclose the contents of products • to examine the ethical impact of their actions • to disclose the results of their social performance • to restructure the corporate board to include independent members and watchdogs • to implement a code of conduct • to hire specialists in social or ethical decision-making to advise executives • to conduct social impact studies before a major decision is made • to be more generous in charitable giving • to implement social responsibility planning .

they interfere with the concept of personal freedom and take away money that belongs to shareholders. goods and services that are demanded and by paying taxes. A company is doing ‘good’ by generating profit. In this traditional approach the company gives a higher priority to the interests of shareholders than to those of other stakeholders.Approaches to CSR and CSI 1. . Further. providing labour. Friedman does not believe that corporate philanthropy or any social programs achieve their goals. CSR as Profit Maximization’ The Nobel Prize-winning economist Milton Friedman argued that ‘socially responsible’ companies are those that operate most profitably.

Company resources are distributed in a reactive way according to social value and social and moral principles. CSR as Altruism Companies with an altruistic alignment use financial excesses to make a positive contribution to society. . Corporations in this category act with a philanthropic standpoint. to groups or causes that are not essentially related to their business activities.2.

There is a clear rationale for any expenditure. Causes are related to business activities and create a variety of benefits for the partners involved. . CSR as Enlightened Self-Interest According to this approach business leaders recognise that giving back to the community and protecting the environment ensure indirect returns to their companies.3. Support for community groups or causes is viewed as a business investment.

4. • Corporate citizenship refers to the relationship a company has with the wider society. • With an increase in wealth and freedom and the internationalisation of operations. their communities and the environment. • Corporations want to be held responsible for any actions that affect people. CEOs recognise the need for sustainability and for social investment strategies in business. rather than merely with selected stakeholder groups. CSR as Corporate Citizenship • Goes beyond the previous models. corporations are increasingly realising a new sense of responsibility. . • The approach suggests that stakeholders are not only being managed but also integrated in decision making.

Netherlands . Journal of Business Ethics 53: 51–71.instituteforpr. (2004) Corporate Social Responsibility Theories: Mapping the Territory.wordpress. Kluwer Academic Publishers.bsr.Brummer J. An Overview of Corporate Social Responsibility in • The State Chamber of Commerce (2001).com/ quoting. Australia • Business for Social Responsibility (2000) www.Sources • • Garriga E & Melé D. Corporate Responsibility and Legitimacy: An Interdisciplinary Analysis • www.