Corporate Social Responsibility
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Corporate social responsibility (CSR) is a form of international private business self-regulation which aims to contribute to societal goals of a
philanthropic Philanthropy is a form of altruism that consists of "private initiatives, for the public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private good, focusing on material ...
, activist, or charitable nature by engaging in or supporting
volunteering Volunteering is a voluntary act of an individual or group wikt:gratis, freely giving time and labor for community service. Many volunteers are specifically trained in the areas they work, such as medicine, education, or emergency rescue. O ...
or ethically oriented practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy, that time has passed as various national and international laws have been developed. Various organizations have used their authority to push it beyond individual or even industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "
creating shared value Creating shared value (CSV) is a business concept first introduced in a 2006 ''Harvard Business Review'' article, ''Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility''. The concept was further expanded i ...
", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits (see the detailed review article of Menghwar and Daood, 2021). Considered at the organisational level, CSR is generally understood as a strategic initiative that contributes to a brand's reputation. As such, social responsibility initiatives must coherently align with and be integrated into a
business model A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, soci ...
to be successful. With some models, a firm's implementation of CSR goes beyond compliance with regulatory requirements and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law". Furthermore, businesses may engage in CSR for strategic or ethical purposes. From a strategic perspective, CSR can contribute to firm profits, particularly if brands voluntarily self-report both the positive and negative outcomes of their endeavors. In part, these benefits accrue by increasing positive public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies encourage the company to make a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others. From an ethical perspective, some businesses will adopt CSR policies and practices because of the ethical beliefs of senior management: for example, the CEO of outdoor-apparel company Patagonia, Inc. argues that harming the environment is ethically objectionable. Proponents argue that
corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
s increase long-term profits by operating with a CSR perspective, while critics argue that CSR distracts from businesses' economic role. A 2000 study compared existing
econometric Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics," '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8 ...
studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact, were due to flawed
empirical analysis In philosophy, empiricism is an epistemological theory that holds that knowledge or justification comes only or primarily from sensory experience. It is one of several views within epistemology, along with rationalism and skepticism. Empir ...
and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes. Critics questioned the "lofty" and sometimes "unrealistic expectations" in CSR. or that CSR is merely
window-dressing A display window, also a shop window (British English) or store window (American English), is a window in a shop displaying items for sale or otherwise designed to attract customers to the store. Usually, the term refers to larger windows in the ...
, or an attempt to pre-empt the role of governments as a watchdog over powerful
multinational corporations A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...
. In line with this critical perspective, political and
sociological Sociology is a social science that focuses on society, human social behavior, patterns of social relationships, social interaction, and aspects of culture associated with everyday life. It uses various methods of empirical investigation and ...
institutionalists became interested in CSR in the context of theories of
globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...
,
neoliberalism Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent fa ...
, and
late capitalism Late capitalism, late-stage capitalism, or end-stage capitalism is a term first used in print by German economist Werner Sombart around the turn of the 20th century. In the late 2010s, the term began to be used in the United States and Canada t ...
.


Definition

Since the 1960s, corporate social responsibility has attracted attention from a range of businesses and stakeholders and been referred to by a number of other terms, including "corporate sustainability", "sustainable business", "corporate conscience", "corporate citizenship", "conscious
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
", and "responsible business". A wide variety of definitions have been developed but with little consensus. Part of the problem with definitions has arisen because of the different interests represented. A business person may define CSR as a business strategy, an NGO activist may see it as '
greenwash Greenwashing (a compound word modeled on "whitewash"), also called "green sheen", is a form of advertising or marketing spin in which green PR and green marketing are deceptively used to persuade the public that an organization's products, aims ...
' while a government official may see it as voluntary regulation. "In addition, disagreement about the definition will arise from the disciplinary approach." For example, while an economist might consider the director's discretion necessary for CSR to be implemented a risk of agency costs, a law academic may consider that discretion to be an appropriate expression of what the law demands from directors. In the 1930s, two law professors, A. A. Berle and Merrick Dodd, famously debated how directors should be made to uphold the public interest: Berle believed there had to be legally enforceable rules in favor of labor, customers and the public equal to or ahead of shareholders, while Dodd argued that powers of directors were simply held on trust. Corporate social responsibility has been defined by Sheehy as "international private business self-regulation." Sheehy examined a range of different disciplinary approaches to defining CSR. The definitions reviewed included the economic definition of "sacrificing profits," a management definition of "beyond compliance", institutionalist views of CSR as a "socio-political movement" and the law's focus on directors' duties. Further, Sheehy considered Archie B. Carroll's description of CSR as a pyramid of responsibilities, namely, economic, legal, ethical, and philanthropic responsibilities. While Carroll was not defining CSR, but simply arguing for the classification of activities, Sheehy developed a definition differently following the philosophy of science—the branch of philosophy used for defining phenomena. Carroll extended corporate social responsibility from the traditional economic and legal responsibility to ethical and philanthropic responsibility in response to the rising concerns on ethical issues in businesses. This view is reflected in the ''Business Dictionary'' that defines CSR as "a company's sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources."


Deep CSR and the Truly Responsible Enterprise

The “deep” definition for CSR is the following: The Truly Responsible Enterprise (TRE): – sees itself as a part of the system, not a completely individual economic actor concerned only about maximizing its own profit, – recognises unsustainability (the destruction of natural environment and the increase of social injustice) as the greatest challenge of our age, – accepts that businesses and enterprises have to work on solutions according to their economic weight, – honestly evaluates its own weight and part in causing the problems (it is best to concentrate on 2–3 main problems), – takes essential steps – systematically, progressively, and focused– towards a more sustainable world. The five principles of the TRE are 1) minimal transport, 2) maximal fairness, 3) zero economism, 4) maximum middle size, 5) product or service falling to the most sustainable 30%.


Consumer perspectives

Most consumers agree that while achieving business targets, companies should engage in CSR efforts at the same time. Most consumers believe companies doing
charity Charity may refer to: Giving * Charitable organization or charity, a non-profit organization whose primary objectives are philanthropy and social well-being of persons * Charity (practice), the practice of being benevolent, giving and sharing * Ch ...
work will receive a positive response. Somerville also found that consumers are loyal and willing to spend more on retailers that support charity. Consumers also believe that retailers selling local products will gain loyalty. Smith (2013) shares the belief that marketing local products will gain consumer trust. However, environmental efforts are receiving negative views given the belief that this would affect customer service. Oppewal et al. (2006) found that not all CSR activities are attractive to consumers. They recommended that retailers focus on one activity. Becker-Olsen (2006) found that if the social initiative done by the company is not aligned with other company goals it will have a negative impact. Mohr et al. (2001) and Groza et al. (2011) also emphasise the importance of reaching the consumer.


Approaches

Some commentators have identified a difference between the Canadian (Montreal school of CSR), the Continental European, and the Anglo-Saxon approaches to CSR. It has been described that for Chinese consumers a socially responsible company makes safe, high-quality products; for Germans it provides secure employment; in South Africa it makes a positive contribution to social needs such as health care and education. Even within Europe, the discussion about CSR is very heterogeneous. A more common approach to CSR is corporate
philanthropy Philanthropy is a form of altruism that consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private goo ...
. This includes monetary donations and aid given to nonprofit organizations and communities. Donations are made in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding political contributions and commercial event sponsorship. Another approach to CSR is to incorporate the CSR strategy directly into operations, such as procurement of Fair Trade tea and coffee.
Creating shared value Creating shared value (CSV) is a business concept first introduced in a 2006 ''Harvard Business Review'' article, ''Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility''. The concept was further expanded i ...
, or CSV, is based on the idea that corporate success and social welfare are interdependent. The ''Harvard Business Review'' article "Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility" provided examples of companies that have developed deep linkages between their business strategies and CSR. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but emphasizes the opportunities for competitive advantage from building a social value proposition into corporate strategy. CSV gives the impression that only two stakeholders are important – shareholders and consumers. Many companies employ benchmarking to assess their CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how others perceive competitor CSR strategy.


Cost-benefit analysis

In competitive markets, the cost-benefit analysis of CSR initiatives can be examined using a
resource-based view The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's 1991 article "Firm Resources and Sustained Competitive Advantage" is widely ...
(RBV). According to Barney (1990), "formulation of the RBV, sustainable competitive advantage requires that resources be valuable (V), rare (R), inimitable (I) and non-substitutable (S)." A firm introducing a CSR-based strategy might only sustain high returns on their investment if their CSR-based strategy could not be copied (I). However, should competitors imitate such a strategy, that might increase overall social benefits? Firms that choose CSR for strategic financial gain are also acting responsibly. RBV presumes that firms are bundles of heterogeneous resources and capabilities that are imperfectly mobile across firms. This imperfect mobility can produce competitive advantages for firms that acquire immobile resources. McWilliams and Siegel (2001) examined CSR activities and attributes as a differentiation strategy. They concluded that managers could determine the appropriate level of investment in CSR by conducting cost-benefit analysis in the same way that they analyze other investments. Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only sustain an abnormal return if it could prevent competitors from imitating its strategy. * Moreover, when it comes to cost-benefit analysis, one should look at Waddock and Graves (1997), who showed that corporate social performance was positively linked to financial performance, meaning that the benefit of being socially responsible outweigh the costs. McWilliams and Siegel (2000) noted that Waddock and Graves had not taken innovation into account, that companies that did CSR were also very innovative, and that the innovation drove financial performance, not CSR. Hull and Rothenberg (2007) then found that when companies are not innovative, a history of CSR does help financial performance.


CSR and Corporate Financial Performance

The relationship between corporate social responsibility and a firm's corporate financial performance is a phenomenon that is being explored in a variety of research studies that are being conducted across the world. Based on these research studies, including those conducted by Sang Jun Cho, Chune Young Chung, and Jason Young, a positive relationship exists between a firm's corporate social responsibility policies and corporate financial performance. To investigate this relationship, the researchers conducted a regression analysis and preceded the analysis with the provision of several measures that they utilized to serve as proxies for key financial performance indicators (i.e. return on assets serves as a proxy for profitability).


Scope

Initially, CSR emphasized the official behaviour of individual firms. Later, it expanded to include supplier behaviour, the uses to which products were put, and how articles were disposed of after they lost value. Malcolm McIntosh notes also that focussing on the identifiable behaviour of individual businesses risks not including what he calls "''unincorporated'' market behaviour" within the scope of CSR - actions attributable to market processes, and also calls for other factors including "brand citizenship" and "illegitimate, informal or illegal activity" to be considered as part of a more complete picture.McIntosh, M.
The Ecology of Corporate Citizenship
from ''Raising a Ladder to the Moon'' (2003), accessed 6 December 2022
The term "brand citizenship" has been put forward because the public perception of an organisation may be associated with its branding rather than its corporate identity: McIntosh uses
Virgin Virginity is the state of a person who has never engaged in sexual intercourse. The term ''virgin'' originally only referred to sexually inexperienced women, but has evolved to encompass a range of definitions, as found in traditional, modern ...
as an example. Similarly, Anne Bahr Thompson uses the same term and observes that companies adopting socially responsible behaviours are primarilly investing in their reputations.


Supply chain

In the 21st century, corporate social responsibility in the supply chain has attracted attention from businesses and stakeholders. A corporations' supply chain is the process by which several organizations, including suppliers, customers, and logistics providers work together to provide a value package of products and services to the end-user, who is the customer. Corporate social irresponsibility in the supply chain has greatly affected the reputation of companies, leading to a lot of costs to solve the problems. For instance, incidents like the 2013 Savar building collapse, which killed over 1000 people, pushed companies to consider the impacts of their operations on society and the environment. On the other hand, the horsemeat scandal of 2013 in Europe affected many food retailers, including Tesco, the largest retailer in the United Kingdom, leading to the dismissal of the supplier. Corporate social irresponsibility from both the suppliers and the retailers has greatly affected the stakeholders who lost trust in the affected business entities, and although sometimes it is not directly undertaken by the companies, they become accountable to the stakeholders. These surrounding issues have prompted supply chain management to consider the corporate social responsibility context. Wieland and Handfield (2013) suggested that companies need to include social responsibility in their reviews of component quality. They highlighted the use of technology in improving visibility across the supply chain.


Corporate social initiatives

Corporate social responsibility includes six types of corporate social initiatives: * Corporate philanthropy: company donations to charity, including cash, goods, and services, sometimes via a corporate foundation * Community
volunteering Volunteering is a voluntary act of an individual or group wikt:gratis, freely giving time and labor for community service. Many volunteers are specifically trained in the areas they work, such as medicine, education, or emergency rescue. O ...
: company-organized volunteer activities, sometimes while an employee receives pay for
pro-bono ( en, 'for the public good'), usually shortened to , is a Latin phrase for professional work undertaken voluntarily and without payment. In the United States, the term typically refers to provision of legal services by legal professionals for pe ...
work on behalf of a non-profit organization * Socially-responsible business practices: ethically produced products that appeal to a customer segment * Cause promotions and
activism Activism (or Advocacy) consists of efforts to promote, impede, direct or intervene in Social change, social, Political campaign, political, economic or Natural environment, environmental reform with the desire to make Social change, changes i ...
: company-funded advocacy campaigns * Cause-related marketing: donations to charity based on product sales * Corporate social marketing: company-funded behavior-change campaigns All six of the corporate initiatives are forms of corporate citizenship. However, only some of these CSR activities rise to the level of
cause marketing Cause marketing is marketing done by a for-profit business that seeks to both increase profits and to better society in accordance with corporate social responsibility, such as by including activist messages in advertising. A similar phrase, cau ...
, defined as "a type of corporate social responsibility (CSR) in which a company's promotional campaign has the dual purpose of increasing profitability while bettering society." Companies generally do not have a profit motive when participating in corporate philanthropy and community volunteering. On the other hand, the remaining corporate social initiatives can be examples of cause marketing, in which there is both a societal interest and profit motive.


Implementation

CSR may be based within the
human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include m ...
, business development or
public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. P ...
departments of an organisation, or may be a separate unit reporting to the CEO or the
board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
.


Engagement plan

An engagement plan can assist in reaching the desired audience. A corporate social responsibility individual or team plans the
goal A goal is an idea of the future or desired result that a person or a group of people envision, plan and commit to achieve. People endeavour to reach goals within a finite time by setting deadlines. A goal is roughly similar to a purpose or ai ...
s and objectives of the organization. As with any corporate activity, a defined budget demonstrates commitment and scales the program's relative importance.


Accounting, auditing, and reporting

Social accounting Social accounting (also known as ''social accounting and auditing'', ''social accountability'', ''social and environmental accounting'', ''corporate social reporting'', ''corporate social responsibility reporting'', ''non-financial reporting'' or '' ...
is the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large. Social accounting emphasizes the notion of corporate
accountability Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account-giving. As in an aspect of governance, it has been central to discussions related to problems in the publ ...
. Crowther defines social accounting as "an approach to reporting a firm's activities which stresses the need for the identification of socially relevant behavior, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques." Reporting guidelines and standards serve as frameworks for social accounting, auditing, and reporting: *
AccountAbility Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account-giving. As in an aspect of governance, it has been central to discussions related to problems in the publ ...
's AA1000 standard, based on John Elkington's
triple bottom line The triple bottom line (or otherwise noted as TBL or 3BL) is an accounting framework with three parts: social, environmental (or ecological) and economic. Some organizations have adopted the TBL framework to evaluate their performance in a broade ...
(3BL) reporting * The Prince's Accounting for Sustainability Project's Connected Reporting Framework * The
Fair Labor Association The Fair Labor Association (FLA) is a non-profit collaborative effort of universities, civil society organizations, and businesses. It describes its mission as promoting adherence to international and national labor laws. History The FLA was ...
conducts audits based on its Workplace Code of Conduct and posts audit results on the FLA website. * The
Fair Wear Foundation Fair Wear Foundation (Fair Wear) is an independent multi-stakeholder organisation that works with garment brands, garment workers and industry influencers to improve labour conditions in garment factories. Receiving the Fair Wear stamp of approv ...
verifies labour conditions in companies' supply chains, using interdisciplinary auditing teams. *
Global Reporting Initiative The Global Reporting Initiative (known as GRI) is an international independent standards organization that helps businesses, governments and other organizations understand and communicate their impacts on issues such as climate change, human righ ...
's
Sustainability Reporting Sustainability reporting refers to the disclosure, whether voluntary, solicited, or required, of non-financial performance information to outsiders of the organization. Generally speaking, sustainability reporting deals with information concerning e ...
Guidelines *
Economy for the Common Good Economy for the Common Good (ECG) is a global social movement that advocates an alternative economic model, which is beneficial to people, the planet and future generations. The common good economy puts the common good, cooperation and community i ...
's Common Good Balance Sheet * GoodCorporation's standard developed in association with the Institute of Business Ethics * Synergy Codethic 26000 Social Responsibility and Sustainability Commitment Management System (SRSCMS) Requirements—Ethical Business Best Practices of Organizations—the necessary management system elements to obtain a certifiable ethical commitment management system. The standard scheme has been built around ISO 26000 and UNCTAD Guidance on Good Practices in Corporate Governance. The standard is applicable to any organization. *
Earthcheck EarthCheck (previously known as EC3 Global), an international tourism advisory group. It is headquartered in Brisbane, Queensland and was developed by the Sustainable Tourism CRC, a research centre specialising in sustainable tourism and research ...
Certification / Standard * Social Accountability International's SA8000 standard *
Standard Ethics Aei Standard Ethics is an independent sustainability reporting rating agency based in London, known for its sustainable finance and ESG (Environmental, Social and Governance) studies. In 2001, it introduced a standardised approach to sustainabilit ...
guidelines * The
ISO 14000 ISO 14000 is a family of standards related to environmental management that exists to help organizations (a) minimize how their operations (processes, etc.) negatively affect the environment (i.e. cause adverse changes to air, water, or land); (b) ...
environmental management standard * The
United Nations Global Compact The United Nations Global Compact is a non-binding United Nations pact to encourage businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The UN Global Compact is a princi ...
requires companies to communicate on their progress (or to produce a Communication on Progress, COP), and to describe the company's implementation of the Compact's ten universal principles. * The
United Nations The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and international security, security, develop friendly relations among nations, achieve international cooperation, and be ...
Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) provides voluntary technical guidance on eco-efficiency indicators, corporate responsibility reporting, and corporate governance disclosure. * The
FTSE Group FTSE International Limited trading as FTSE Russell ( "Footsie") is a British provider of stock market indices and associated data services, wholly owned by the London Stock Exchange (LSE) and operating from premises in Canary Wharf. It operat ...
publishes the
FTSE4Good Index The FTSE4Good Index Series is a series of ethical investment stock market indices launched in 2001 by the FTSE Group which reports on the performance of companies which demonstrate "strong Environmental, Social and Governance practices". A numbe ...
, an evaluation of CSR performance of companies. * EthicalQuote (CEQ) tracks the reputation of the world's largest companies on Environmental, Social, Governance (ESG), Corporate Social Responsibility,
ethics Ethics or moral philosophy is a branch of philosophy that "involves systematizing, defending, and recommending concepts of right and wrong behavior".''Internet Encyclopedia of Philosophy'' The field of ethics, along with aesthetics, concerns m ...
, and sustainability. * The Islamic Reporting Initiative (IRI) is a
not-for-profit organization A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
that leads the creation of the IRI framework; the guiding integrated CSR reporting framework based on Islamic principles and values. In nations such as France, legal requirements for social accounting, auditing and reporting exist, though international or national agreement on meaningful measurements of social and environmental performance has not been achieved. Many companies produce externally audited annual reports that cover
Sustainable Development Sustainable development is an organizing principle for meeting human development goals while also sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The des ...
and CSR issues ("Triple Bottom Line Reports"), but the reports vary widely in format, style, and
evaluation Evaluation is a systematic determination and assessment of a subject's merit, worth and significance, using criteria governed by a set of standards. It can assist an organization, program, design, project or any other intervention or initiative to ...
methodology In its most common sense, methodology is the study of research methods. However, the term can also refer to the methods themselves or to the philosophical discussion of associated background assumptions. A method is a structured procedure for br ...
(even within the same industry). Critics dismiss these reports as lip service, citing examples such as
Enron Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional companies. ...
's yearly "Corporate Responsibility Annual Report" and tobacco companies' social reports. In South Africa, as of June 2010, all companies listed on the
Johannesburg Stock Exchange JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange in Africa. It is located in Sandton, Johannesburg, South Africa, after it moved from downtown Johannesburg in 2000. In 2003 ...
(JSE) were required to produce an integrated report in place of an annual financial report and sustainability report. An integrated report reviews environmental, social, and economic performance alongside financial performance. This requirement was implemented in the absence of formal or legal standards. An Integrated Reporting Committee (IRC) was established to issue guidelines for good practice. One of the reputable institutions that capital markets turn to for credible sustainability reports is the Carbon Disclosure Project, or CDP.


Verification

Corporate social responsibility and its resulting reports and efforts should be verified by the consumer of the goods and services. The accounting, auditing, and reporting resources provide a foundation for consumers to verify that their products are socially sustainable. Due to an increased awareness of the need for CSR, many industries have their own verification resources. They include organizations such as the
Forest Stewardship Council The Forest Stewardship Council A. C. (FSC) is an international non-profit, multistakeholder organization established in 1993 that promotes responsible management of the world's forests via timber certification. It is an example of a market-ba ...
(paper and forest products), International Cocoa Initiative, and Kimberly Process (diamonds). The
United Nations Global Compact The United Nations Global Compact is a non-binding United Nations pact to encourage businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The UN Global Compact is a princi ...
provides frameworks not only for verification, but also for reporting human rights violations in corporate supply chains.


Ethics training

The rise of ethics training inside corporations, some of it required by government regulation, has helped CSR to spread. Such training aims to help employees make ethical decisions when the answers are unclear. The most direct benefit is reducing the likelihood of "dirty hands", fines, and damaged reputations for breaching laws or moral norms. Organizations see increased employee loyalty and pride in the organization.


Common actions

Common CSR actions include: * Environmental sustainability: recycling, waste management, water management, renewable energy, reusable materials, 'greener' supply chains, reducing paper use, and adopting
Leadership in Energy and Environmental Design Leadership in Energy and Environmental Design (LEED) is a green building certification program used worldwide. Developed by the non-profit U.S. Green Building Council (USGBC), it includes a set of rating systems for the design, construction ...
(LEED) building standards. *Human capital enhancement: Companies provide additional resources for
capacity building Capacity building (or capacity development, capacity strengthening) is the improvement in an individual's or organization's facility (or capability) "to produce, perform or deploy". The terms ''capacity building'' and ''capacity development'' ha ...
of local employees, including technical and professional training, adult basic education, and language classes. * Community involvement: This can include raising money for local charities, providing volunteers, sponsoring local events, employing local workers, supporting local economic growth, engaging in fair trade practices, etc. *
Ethical marketing Ethical marketing refers to the application of marketing ethics into the marketing process. Briefly, marketing ethics refers to the philosophical examination, from a moral standpoint, of particular marketing issues that are matters of moral judgm ...
: Companies that ethically market to consumers are placing a higher value on their customers and respecting them as people who are ends in themselves. They do not try to manipulate or falsely advertise to potential consumers. This is important for companies that want to be viewed as ethical.


Social license to operate

Social License to Operate can be determined as contractual grounds for the legitimacy of activities and projects a company is involved in. It refers to the level of support and approval of a company's activities by its stakeholders. Displaying commitment to CSR is one way to achieve a social license, by enhancing a company's reputation. As stated in ''Enduring value:'' the Australian minerals industry framework for sustainable development the concept of the 'social license to operate', then defined simply as obtaining and maintaining broad community support and acceptance. Unless a company earns and maintains that license social license holders may intend to block project developments; employees may leave the company for a company that is a better corporate citizen: and companies may be under ongoing legal challenge. In research of
Requisite Organization Requisite organization (RO) is a term and methodology developed by Elliott Jaques and Kathryn Cason as a result of the research in stratified systems theory, general theory of bureaucracy, work complexity and human capability over 60 years. Requ ...
,
Elliott Jaques Elliott Jaques (January 18, 1917 – March 8, 2003) was a Canadian psychoanalyst, social scientist and management consultant known as the originator of concepts such as corporate culture, midlife crisis, fair pay, maturation curves, time ...
defines Social License to Operate for the company as the social contract the company has with the social license holders (employees, trade unions, communities, government) for them to manifest positive intention to support the business short- and long-term objectives by "providing managerial leadership that nurtures the social good and also gives the foundation for
sustainable growth Sustainable development is an organizing principle for meeting human development goals while also sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The desi ...
in organizational results." The primary objective for the companies is to obtain and maintain the Social License to Operate. Based on the
Requisite Organization Requisite organization (RO) is a term and methodology developed by Elliott Jaques and Kathryn Cason as a result of the research in stratified systems theory, general theory of bureaucracy, work complexity and human capability over 60 years. Requ ...
to achieve this goal a company needs to: * Identify the business strategy and business objectives * Identify the social license holders (employees of a company, labour unions, local and national governments, communities, activist groups, etc.) for every business objectives * Identify the support that the company desires to achieve from the social license holders by specifying for every business objective social license elements (target of support, context of support, time of support, action of support) * Quantitatively measure the intention (positive or negative) of the social license holders to support the business objectives * Identify the factors that negatively impact the intention of the social license holders to support the business objectives (strength of their belief in support, their evaluation of support outcomes, the pressure to provide support, enablers/disablers of support, etc.) * Develop the Social License Development Strategy to remove the negative factors and ensure the positive intention of all the social license holders to support all the business objectives of the company. * Perform ongoing monitoring and quantitative measurement of changes in the Social License to Operate of the company


Emerging Markets vs. Developed Economies

Although a positive relationship has been shown to exist between CSR and a firm's corporate financial performance, results from these analyses may need to be examined under different lenses for emerging and developed economies, especially since firms based in emerging economies oftentimes have weak firm-level governance. For companies operating in emerging markets, engaging in CSR practices enables widespread reach into a variety of outside markets, an improved reputation, and stakeholder relationships. In all cases (emerging markets vs. developed economies), implementing CSR policies into the daily activities and framework of a company has been shown to allow for a competitive advantage versus other companies, including the creation of a positive image for the company, improved stakeholder relationships, increased employee morale, and attraction of new consumers who are committed to social responsibility. Despite all of the benefits, it is important to note that several drawbacks exist, including possible accusations of hypocrisy, the difficulty of measuring the social impact of CSR policies, and oftentimes placing companies at a disadvantage against competitors when prioritizing CSR ahead of advancing a company's R&D.


Potential business benefits

A large body of literature exhorts businesses to adopt non-financial measures of success (e.g., Deming's Fourteen Points,
balanced scorecard A balanced scorecard is a strategy performance management tool – a well structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from ...
s). While CSR benefits are hard to quantify, Orlitzky, Schmidt and Rynes found a correlation between social/environmental performance and financial performance. The
business case A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also come in the form of a short verbal agreement or presentation. The logic of the business case is that, ...
for CSR within a company employs one or more of these arguments:


Triple bottom line

"People, planet, and profit", also known as the triple bottom line, form one way to evaluate CSR. "People" refers to fair labour practices, the community, and the region where the business operates. "Planet" refers to sustainable environmental practices. Profit is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital (unlike accounting definitions of profit). Overall, trying to balance economic, ecological, and social goals is at the heart of the triple bottom line. This measure was claimed to help some companies be more conscious of their social and moral responsibilities. However, critics claim that it is selective and substitutes a company's perspective for that of the community. Another criticism is about the absence of a standard auditing procedure. The term was coined by John Elkington in 1994 who re-evaluated it in 2018 and called for more urgent action toward sustainability


Human resources

A CSR program can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often consider a firm's CSR policy. CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving,
fundraising Fundraising or fund-raising is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies. Although fundraising typically refers to efforts to gathe ...
activities, or community volunteering. CSR has been credited with encouraging customer orientation among customer-facing employees. CSR is known for impacting
employee turnover In human resources, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees may consist of termination, retirement, death, interagency transfers, and resignations.Trip, R. (n.d.). Turnover-S ...
. Several executives suggest that employees are their most valuable asset and that the ability to retain them leads to organizational success. Socially responsible activities promote fairness, which in turn generates lower employee turnover. On the other hand, if irresponsible behavior is demonstrated by a firm, employees may view this behavior as negative. Proponents argue that treating employees well with competitive pay and good benefits is seen as socially responsible behavior and therefore reduces employee turnover. Executives have a strong desire for building a positive work context that benefits CSR and the company as a whole. This interest is driven particularly by the realization that a positive work environment can result in desirable outcomes such as more favorable job attitudes and increased work performance. The IBM Institute for Business Value surveyed 250 business leaders worldwide in 2008. The survey showed that businesses have assimilated a much more strategic view with 68% of companies utilizing CSR as an opportunity and part of a
sustainable growth Sustainable development is an organizing principle for meeting human development goals while also sustaining the ability of natural systems to provide the natural resources and ecosystem services on which the economy and society depend. The desi ...
strategy. Developing and implementing a CSR strategy represents a unique opportunity to benefit the company. However, only 31% of businesses surveyed engaged their employees on the company's CSR objectives and initiatives. Employee engagement on CSR initiatives can be a powerful recruitment and retention tool. Moreover, employees tend to avoid employers with a bad reputation.


Risk management

Managing
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...
is an important executive responsibility. Reputations that take decades to build up can be ruined in hours through corruption scandals or environmental accidents. These situations draw unwanted attention from regulators, courts, governments, and the media. CSR can limit these risks. Sustainability is key to resilience across value chains. As companies prefer working with long-lasting partners, those that have implemented CSR practices will be preferred over ones that have not in order to minimize reputational as well as other damages. High levels of CSR compliance within supply chains (including Tier 1 and beyond) will also help reduce vulnerabilities and eliminate environmental, social, and economic risks through implementing a sustainability-focused procurement strategy. With effective CSR policies, a company is better situated to mitigate legislative and legal risks through complying with emerging CSR-related laws and regulations, preempting costly lawsuits and non-compliance actions, and addressing sources of non-compliance by fostering corporate alignment around the relevant issues.


Brand differentiation

CSR can enhance a brand's reputation by "inducing a desire to support and help the company that has acted to benefit consumers". In this way, CSR serves to enhance brand perceptions, which can lead to positive product evaluations, though this effect is dependent upon a variety of factors, including the degree to which consumers value close relationships or believe that the CSR initiative is self-serving, whether the CSR program may be perceived to negatively affect product quality, consumers' consumption-related goals (i.e., whether their consumption is socially versus product-motivated), or consumers' attributions toward the motives of the CSR endeavor. Some companies use their commitment to CSR as their primary positioning tool, e.g.,
The Co-operative Group Co-operative Group Limited, trading as Co-op, is a British consumer co-operative with a group of retail businesses including food retail, wholesale, e-pharmacy, insurance and legal services, and funeral care. The Co-operative Group has over ...
,
The Body Shop The Body Shop International Limited, trading as The Body Shop, is a British cosmetics, skin care and perfume company. Founded in 1976 by Anita Roddick, the company currently has a range of 1,000 products sold in about 3,000 stores, divided ...
, and
American Apparel American Apparel Inc. is an online-only retailer and former brick-and-mortar stores operator based in Los Angeles, California. Founded by Canadian businessman Dov Charney in 1989, it was a vertically integrated company that ranked as one of the ...
. Others use CSR methodologies as a strategic tactic to gain public support for their presence in global markets, helping them sustain a competitive advantage by using their social contributions as another form of advertising. Companies that operate strong CSR activities tend to drive customers' attention to buy products or services regardless of the price. As a result, this increases competition among firms since customers are aware of the company's CSR practices. These initiatives serve as a potential differentiator because they not only add value to the company, but also to the products or services. Furthermore, firms under intense competition are able to leverage CSR to increase the impact of their distribution on the firm's performance. Lowering the carbon footprint of a firm's distribution network or engaging in fair trade are potential differentiators to lower costs and increase profits. In this scenario, customers can observe the company's commitment to CSR while increasing company sales.
Whole Foods Whole Foods Market IP, Inc., a subsidiary of Amazon, is an upscale American multinational supermarket chain headquartered in Austin, Texas, which sells products free from hydrogenated fats and artificial colors, flavors, and preservatives. A US ...
' marketing and promotion of organic foods have had a positive effect on the supermarket industry. Proponents assert that Whole Foods has been able to work with its suppliers to improve animal treatment and the quality of meat offered in their stores. They also promote local agriculture in over 2,400 independent farms to maintain their line of sustainable organic produce. As a result, Whole Foods' high prices do not turn customers away from shopping. They are pleased to buy organic products that come from sustainable practices. A ''
Harvard Business Review ''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a wholly owned subsidiary of Harvard University. ''HBR'' is published six times a year and is headquartered in Brighton, Ma ...
'' article proposes three stages of practice in which CSR can be divided. Stage one focuses on philanthropy, which includes donations of money or equipment to non-profit organizations, engagement with communities' initiatives, and employee volunteering. This is characterized as the "soul" of a company, expressing the social and environmental priorities of the founders. The authors assert that companies engage in CSR because they are an integral part of society. The
Coca-Cola Company The Coca-Cola Company is an American multinational beverage corporation founded in 1892, best known as the producer of Coca-Cola. The Coca-Cola Company also manufactures, sells, and markets other non-alcoholic beverage concentrates and syrups ...
contributes $88.1 million annually to a variety of environmental educational and humanitarian organizations. Another example is
PNC Financial Services The PNC Financial Services Group, Inc. (stylized as PNC) is an American bank holding company and financial services corporation based in Pittsburgh, Pennsylvania. Its banking subsidiary, PNC Bank, operates in 27 U.S. state, states and the D ...
' "Grow Up Great" childhood education program. This program provides critical school readiness resources to underserved communities where PNC operates. On the other hand, stage two focuses on improving operational effectiveness in the workplace. The researchers assert that programs in this stage strive to deliver social or environmental benefits to support a company's operation across the value chain by improving efficiency. Some of the examples include sustainability initiatives to reduce resource use, waste, and emission that could potentially reduce costs. It also calls for investing in employee work conditions such as health care and education, which may enhance productivity and retention. Unlike philanthropic giving, which is evaluated by its social and environmental return, initiatives in the second stage are predicted to improve the corporate bottom line with social value.
Bimbo Bimbo is slang for a conventionally attractive, sexualized, naive, and unintelligent woman. The term was originally used in the United States as early as 1919 for an unintelligent or brutish man. As of the early 21st century, the "stereotypic ...
, the largest bakery in
Mexico Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
, is an excellent example of this. The company strives to meet social welfare needs. It offers free educational services to help employees complete high school. Bimbo also provides supplementary medical care and financial assistance to close gaps in the government's health coverage. Moreover, the third stage program aims to transform the business model. Basically, companies create new forms of business to address social or environmental challenges that will lead to financial returns in the long run. One example can be seen in Unilever's Project Shakti in India. The authors describe that the company hires women in villages and provides them with micro-finance loans to sell soaps, oils, detergents, and other products door-to-door. This research indicates that more than 65,000 women entrepreneurs are doubling their incomes while increasing rural access and hygiene in Indian villages. Another example is
IKEA IKEA (; ) is a Dutch multinational conglomerate based in the Netherlands that designs and sells , kitchen appliances, decoration, home accessories, and various other goods and home services. Started in 1943 by Ingvar Kamprad, IKEA has been t ...
's "People and Planet" initiative to be 100% sustainable by 2020. As a consequence, the company wants to introduce a new model to collect and recycle old furniture.


Reduced scrutiny

Corporations are keen to avoid interference in their business through
taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal person, legal entity) by a governmental organization in order to fund government spending and various public expenditures (regiona ...
or regulations. A CSR program can persuade governments and the public that a company takes
health and safety Occupational safety and health (OSH), also commonly referred to as occupational health and safety (OHS), occupational health, or occupational safety, is a multidisciplinary field concerned with the safety, health, and welfare of people at wo ...
, diversity, and the environment seriously, reducing the likelihood that company practices will be closely monitored.


Supplier relations

Appropriate CSR programs can increase the attractiveness of supplier firms to potential customer corporations. For example, a fashion merchandiser may find value in an overseas manufacturer that uses CSR to establish a positive image and to reduce the risks of bad publicity from uncovered misbehavior. A price-focused procurement strategy has limitations for companies with high CSR expectations. According to Boston Consulting Group, “businesses that are considered leaders in environmental, social and governance criteria have an 11% valuation premium over their competitors.” Such companies look for suppliers who share their social, environmental, and business ethics values, which in turn would trigger common innovations that would attract more customers and generate further value for the whole supply chain for a win-win business relationship through a series of interconnected activities implemented holistically. Furthermore, supplier relations are crucial for a company's CSR profile as 70% of businesses’ social and environmental impacts occur in their supply chain. Through the spillover effect, CSR programs encourage sustainable practices within different industries. Additionally, a CSR-focused supplier relations management improves collaboration with suppliers, increases the satisfaction of customers’ expectations and requirements, expands the market opportunities, enhances investor relations, and promotes the development of more
sustainable products Sustainable products are those products that provide environmental, social and economic benefits while protecting public health and environment over their whole life cycle, from the extraction of raw materials until the final disposal. Scope of ...
. Furthermore, CSR supply chain imperatives can leverage their responsible commitment to forge robust and lasting relationships with important stakeholders and positively influence the decision-making of consumers, partners, investors, and talent. Through constructing this reputational capital, companies have access to earn consumer loyalty, attract top talent, and strengthen employee morale and commitment.


Crisis management

CSR strategy or behaviors related to CSR was discussed by many scholars in terms of crisis management like responses to boycott in an international context. Ang found that relationship building through providing additional services rather than price-cutting is what businesses in Asia feel more comfortable with as a strategy during an economic crisis. Regarding direct research about strategies in cross-cultural crisis management, scholars found that CSR strategies could make effects through empirical case studies involving multinational businesses in China. They found that meeting local stakeholders' social expectations can mitigate the risk of crises. The strategy utilized by
Arla Foods , industry = Dairy , predecessor = ArlaMD Foods , founded = , founder = , location_city = Viby , location_country = Denmark , area_served = Worldwide , key_people = Peder Tub ...
works and has helped the company in regaining most of its lost market share among many countries in the Middle East. Arla Foods founded funding for children with cancer and they donated ambulances to refugees in Lebanon. As Arla Foods did, they tried to contribute to solving social problems of children's access to health care which were local priorities. Other researchers analyzed the case of multinational enterprise strategies under the context of conflicts between Lebanon and Israel. During the conflict, many companies stressed seeking to help the local community. In the post-conflict stage, managers highlighted their philanthropic programs and contributions, in terms of monetary in-kind donations to the refugees or businesses that were directly affected. For example, Citibank has provided monetary assistance to some local businesses affected by the war. Another activity done by a Lebanon company was a fund-raising campaign.


Criticisms and concerns

CSR concerns include its relationship to the purpose of business and the motives for engaging in it.


Nature of business

Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
and others argued that a corporation's purpose is to maximize returns to its shareholders and that obeying the laws of the jurisdictions within which it operates constitutes socially responsible behavior. Friedman argued each person should be free to spend their own money on social causes if they wished, but that business owners should avoid putting a "tax" on consumers as "unwitting puppets" of
socialism Socialism is a left-wing economic philosophy and movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to private ownership. As a term, it describes the e ...
by raising prices to support business practices with social goals unrelated to profit. While some CSR supporters claim that companies practicing CSR, especially in developing countries, are less likely to exploit workers and communities, critics claim that CSR itself imposes outside values on local communities with unpredictable outcomes. Better governmental regulation and enforcement, rather than voluntary measures, are an alternative to CSR that moves decision-making and resource allocation from public to private bodies. However, critics claim that effective CSR must be voluntary as mandatory social responsibility programs regulated by the government interferes with people's plans and preferences, distorts the allocation of resources, and increases the likelihood of irresponsible decisions.


Motives

Some critics believe that CSR programs are undertaken by companies to distract the public from ethical questions posed by their core operations. They argue that the reputational benefits that CSR companies receive (cited above as a benefit to the corporation) demonstrate the hypocrisy of the approach. Moreover, some studies find that CSR programs are motivated by corporate managers' personal interests at the cost of the shareholders so they are a type of an
agency problem Agency may refer to: Organizations * Institution, governmental or others ** Advertising agency or marketing agency, a service business dedicated to creating, planning and handling advertising for its clients ** Employment agency, a business that ...
in corporations. Others have argued that the primary purpose of CSR is to provide legitimacy to the power of businesses. As
wealth inequality The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or heterogeneity in economics, economic heterogeneity. The distribution of wealth differs from the i ...
is perceived to be increasing it has become increasingly necessary for businesses to justify their position of power.
Joel Bakan Joel Conrad Bakan (born 1959) is an American-Canadian writer, jazz musician, filmmaker, and professor at the Peter A. Allard School of Law at the University of British Columbia. Born in Lansing, Michigan, and raised for most of his childhood in ...
is one of the prominent critics of the conflict of interest between private profit and a public good characterizing corporate officials of publicly listed corporations are constrained by law to maximize the wealth of their shareholders. This argument is summarised by Haynes that "a corporate calculus exists in which costs are pushed onto both workers, consumers and the environment". CSR spending may be seen in these financial terms, whereby the higher costs of socially undesirable behaviour are offset by a CSR spending of a lower amount. Indeed, it has been argued that there is a "halo effect" in terms of CSR spending. Research has found that firms that had been convicted of bribery in the US under the Foreign Corrupt Practices Act (FCPA) received more lenient fines if they had been seen to be actively engaging in comprehensive CSR practices. It was found that typically either a 20% increase in corporate giving or a commitment to eradicating a significant labour issue, such as child labour, was equated to a 40% lower fine in the case of bribing foreign officials. Aguinis and Glavas conducted a comprehensive review of CSR literature, covering 700 academic sources from numerous fields including
organizational behaviour Organizational behavior (OB) or organisational behaviour is the: "study of human behavior in organizational settings, the interface between human behavior and the organization, and the organization itself".Moorhead, G., & Griffin, R. W. (1995) ...
,
corporate strategy In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment ...
,
marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
, and HRM. It was found that the primary reason for firms to engage in CSR was the expected financial benefits associated with CSR, rather than being motivated by a desire to be responsible to society. Consistent with this analysis, consumers respond less favorably to CSR initiatives that they believe are tainted with self-serving motives".


Ethical ideologies

CEOs' political ideologies are evident manifestations of their different personal views. Each CEO may exercise different powers according to their organizational outcomes. Their political ideologies are expected to influence their preferences for CSR outcomes. Proponents argue that politically liberal CEOs will envision the practice of CSR as beneficial and desirable to increase a firm's reputation. They tend to focus more on how the firm can meet the needs of society. As a consequence, they will advance with the practice of CSR while adding value to the firm. On the other hand, property rights may be more relevant to conservative CEOs. Since conservatives tend to value free markets, individualism, and the call for respect of authority, they will not likely envision this practice as often as those identifying as liberals might. The financials of the company and the practice of CSR also have a positive relationship. Moreover, the performance of a company tends to influence conservatives more likely than liberals. While not seeing it from the financial performance point of view, liberals tend to hold a view that CSR adds to the business's triple bottom line. For example, when the company is performing well, it will most likely promote CSR. If the company is not performing as expected, they will rather tend to emphasize this practice because it will potentially envision it as a way to add value to the business. In contrast, politically conservative CEOs will tend to support the practice of CSR if they hold a view that it will provide a good return to the financials of the company. In other words, these types of executives tend to not see the outcome of CSR as a value to the company if it does not provide anything in exchange.


Misdirection

There have been unsubstantiated social efforts, ethical claims, and outright
greenwashing Greenwashing (a compound word modeled on " whitewash"), also called "green sheen", is a form of advertising or marketing spin in which green PR and green marketing are deceptively used to persuade the public that an organization's products, aim ...
by some companies that have resulted in increasing consumer cynicism and mistrust. Sometimes companies use CSR to direct public attention away from other, harmful business practices. For example,
McDonald's Corporation McDonald's Corporation is an American multinational fast food chain, founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United States. They rechristened their business as a hamburger s ...
positioned its association with Ronald McDonald House and other children's charities as CSR while its meals have been accused of promoting poor eating habits. Acts that may initially appear to be altruistic CSR may have ulterior motives. The funding of scientific research projects has been used as a source of misdirection by firms. Stanley B. Prusiner, who discovered the protein responsible for
Creutzfeldt–Jakob disease Creutzfeldt–Jakob disease (CJD), also known as subacute spongiform encephalopathy or neurocognitive disorder due to prion disease, is an invariably fatal degenerative brain disorder. Early symptoms include memory problems, behavioral changes ...
(CJD) and won the 1997 Nobel prize in Medicine, thanked the tobacco company
RJ Reynolds Richard Joshua Reynolds (July 20, 1850 – July 29, 1918) was an American businessman and founder of the R. J. Reynolds Tobacco Company. The son of a tobacco farmer, he worked for his father and attended Emory & Henry College from 1868 to 1870 ...
for their crucial support. RJ Reynolds funded the research into CJD. Proctor states that "the tobacco industry was the leading funder of research into genetics, viruses, immunology, air pollution", anything which formed a distraction from the well-established research linking smoking and cancer. Research has also found that corporate
social marketing Social marketing is a marketing approach which focuses on influencing behavior with the primary goal of achieving "common good." It utilizes the elements of commercial marketing and applies them to social concepts. However, to see social marke ...
, a form of CSR promoting societal good, is being used to direct criticism away from the damaging practices of the alcohol industry. It has been shown that advertisements that supposedly encourage responsible drinking simultaneously aim to promote drinking as a
social norm Social norms are shared standards of acceptance, acceptable behavior by groups. Social norms can both be informal understandings that govern the behavior of members of a society, as well as be codified into wikt:rule, rules and laws. Social normat ...
. Companies may engage in CSR and social marketing, in this case, to prevent more stringent government legislation on alcohol marketing.


Controversial industries

Industries such as tobacco, alcohol, or munitions firms make products that damage their consumers or the environment. Such firms may engage in the same philanthropic activities as those in other industries. This duality complicates assessments of such firms concerning CSR.


Case Studies

To fully observe the impact of corporate social responsibility practices on a firm's corporate financial performance, it is important to delve into a concrete example, such as the study conducted by researchers from the Global Conference on Business, Economics, Management, and Tourism. In this study, Mocan, Draghici, Ivascu, and Turi examined the correlation between CSR policies and value creation/financial performance in the banking industry specifically and found that various benefits include greater economic efficiency, improved company reputation, and employee loyalty, better communication streamline between the industry and individuals, and the opportunity to attract new opportunities (i.e. attract new investments, or remain competitive) and improve organizational commitment. However, before discussing these effects, the researchers preceded the analysis by stating that typically implementing CSR and other ethical principles within the framework of a financial institution such as banks make it seem as if these are marketing tools for attracting and communicating with stakeholders rather than serving as tools that afford banks and other financial institutions the opportunity to benefit the individuals that they serve. Another interesting case study is provided by Schreuder (2022) who discusses the evolution of CSR at
DSM DSM or dsm may refer to: Science and technology * Deep space maneuver * Design structure matrix or dependency structure matrix, a representation of a system or project * Diagnostic and Statistical Manual of Mental Disorders ** DSM-5, the fifth ed ...


Stakeholder influence

One motivation for corporations to adopt CSR is to satisfy stakeholders beyond those of a corporation's shareholders. Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the set of views of corporate responsibility held by all groups or constituents with a relationship to the firm. In their normative model, the company accepts these views as long as they do not hinder the organization. The stakeholder perspective fails to acknowledge the complexity of network interactions that can occur in cross-sector partnerships. It relegates communication to a maintenance function, similar to the exchange perspective.


Ethical consumerism

The rise in popularity of
ethical consumerism Ethical consumerism (alternatively called ethical consumption, ethical purchasing, moral purchasing, ethical sourcing, or ethical shopping and also associated with sustainable and green consumerism) is a type of consumer activism based on the con ...
over the last two decades can be linked to the rise of CSR. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumption decisions and in some cases make purchasing decisions related to their environmental and ethical concerns. One issue with the consumer's relationship with CSR is that it is much more complex than it first appears. This phenomenon could be described as the "CSR-Consumer Paradox" or mismatch that occurs where consumers report that they would only buy from companies with good social responsibility. Many consumers want to buy from responsible companies, but surveys indicate an "ethical purchases" are a small percentage of household expenditures. The discrepancy between consumer beliefs and intentions, and actual consumer behaviour, means CSR has a much lesser impact than consumers initially say it does. One theory for explaining this discrepancy is the "bystander apathy" or the
bystander effect The bystander effect, or bystander apathy, is a social psychological theory that states that individuals are less likely to offer help to a victim when there are other people present. First proposed in 1964, much research, mostly in the lab, has ...
. This theory stems from social psychology and states that the likelihood of an individual acting in a given situation is greatly reduced if other bystanders do nothing even if that individual strongly believes in a certain course of action. It would suggest an "If they do not care then why should I?" mentality. Even if a consumer is against the use of sweatshops or wants to support green causes, they may continue to make purchases from companies that are socially irresponsible just because other consumers seem apathetic towards the issue. Another explanation is that of
reciprocal altruism In evolutionary biology, reciprocal altruism is a behaviour whereby an organism acts in a manner that temporarily reduces its fitness while increasing another organism's fitness, with the expectation that the other organism will act in a similar m ...
. In the evolutionary psychology of human behaviour: people only do something if they can get something back in return. In the case of CSR and ethical consumerism, however, consumers get very little in return for their investment. Ethically sourced or manufactured products are typically higher in price due to greater costs. However, the reward for consumers is not much different from that of a non-ethical counterpart. Therefore, evolutionary speaking making an ethical purchase is not worth the higher cost to the individual even if they believe in supporting ethically, environmentally, and socially beneficial causes.


Socially responsible investing

Shareholders and investors, through
socially responsible investing Socially responsible investing (SRI), social investment, sustainable socially conscious, "green" or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about soci ...
(SRI), are using their capital to encourage behavior they consider responsible. However, definitions of what constitutes ethical behavior vary. For example, some religious investors in the US have withdrawn investment from companies that violate their religious views, while secular investors divest from companies that they see as imposing religious views on workers or customers.


Public policies

Some national governments promote socially and environmentally responsible corporate practices. The heightened role of government in CSR has facilitated the development of numerous CSR programs and policies. Various European governments have pushed companies to develop sustainable corporate practices. CSR critics such as
Robert Reich Robert Bernard Reich (; born June 24, 1946) is an American professor, author, lawyer, and political commentator. He worked in the administrations of Presidents Gerald Ford and Jimmy Carter, and served as Secretary of Labor from 1993 to 1997 in ...
argued that governments should set the agenda for social responsibility with laws and regulations that describe how to conduct business responsibly.
Collective bargaining Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The ...
is a way nations promote CSR. In Germany, CSR is kept at the industry level instead of the workplace; this has been viewed as one of the strengths of the German government's push for CPR. Germany also established the
German Trade Union Confederation The German Trade Union Confederation (german: Deutscher Gewerkschaftsbund; DGB) is an umbrella organisation (sometimes known as a national trade union center) for eight German trade unions, in total representing more than 6 million people ...
in 1949 to further advance CSR; the confederation represents the interests of 45 million workers in Germany. Job security, wage increases with industry growth are key aspects of collective bargaining in the German labor system. There is a higher percentage of workers in unions in countries like Sweden and Iceland which have more Social-Democratic elements in their Nordic Model than the U.S. and the U.K. The U.S. and the U.K are Liberal Market Economies (LMEs) and the German economy falls under Coordinated Market Economy (CMEs) which are
Varieties of Capitalism ''Varieties of Capitalism: The Institutional Foundations of Comparative Advantage'' is a 2001 book on economics, political economy, and comparative politics edited by political economists Peter A. Hall and David Soskice. Contents ''Varieties of ...
. In comparison with the U.S. that covers 25.5% of its blue and white-collar workforce under collective bargaining and the U.K. that covers 29% of its workforce, Germany covers a significantly higher 57% of its workforce under collective bargaining.


Regulation

Fifteen
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
countries are actively engaged in CSR regulation and public policy development. CSR efforts and policies are different among countries, responding to the complexity and diversity of governmental, corporate, and societal roles. Some studies have claimed that the role and effectiveness of these actors were case-specific. This variety among company approaches to CSR can complicate regulatory processes. Canada adopted CSR in 2007. Prime Minister Harper encouraged Canadian mining companies to meet Canada's newly developed CSR standards. The 'Heilbronn Declaration' is a voluntary agreement of enterprises and institutions in Germany especially of the Heilbronn-Franconia region signed on 15 September 2012. The approach of the 'Heilbronn Declaration' targets the decisive factors of success or failure, the achievements of the implementation, and best practices regarding CSR. A form of responsible entrepreneurship shall be initiated to meet the requirements of stakeholders' trust in the economy. It is an approach to make voluntary commitments more binding. In opposition to mandated CSR regulation, researchers Armstrong and Green suggest that all regulation is "harmful", citing regulation as the cause for North Korea's low economic freedom and per capita GDP. They further claim without source that "There is no form of market failure, however egregious, which is not eventually made worse by the political interventions intended to fix it," and conclude "there is no need for further research on regulation in the name of social responsibility."


Laws

In the 1800s, the US government could take away a firm's license if it acted irresponsibly. Corporations were viewed as "creatures of the state" under the law. In 1819, the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
in ''
Dartmouth College vs. Woodward ''Trustees of Dartmouth College v. Woodward'', 17 U.S. (4 Wheat.) 518 (1819), was a landmark decision in United States corporate law from the United States Supreme Court dealing with the application of the Contracts Clause of the United States ...
'' established a corporation as a legal person in specific contexts. This ruling allowed corporations to be protected under the Constitution and prevented states from regulating firms. Countries have included CSR policies in government agendas. On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100 largest Danish companies, investors, and state-owned companies to include CSR information in their financial reports. The reporting requirements became effective on 1 January 2009. The required information included: * CSR/
SRI Shri (; , ) is a Sanskrit term denoting resplendence, wealth and prosperity, primarily used as an honorific. The word is widely used in South and Southeast Asian languages such as Marathi, Malay (including Indonesian and Malaysian), Javanes ...
policies * How such policies are implemented in practice * Results and management expectations CSR/SRI is voluntary in Denmark, but if a company has no policy on this it must state its positioning on CSR in financial reports. In 1995, item S50K of the Income Tax Act of
Mauritius Mauritius ( ; french: Maurice, link=no ; mfe, label=Mauritian Creole, Moris ), officially the Republic of Mauritius, is an island nation in the Indian Ocean about off the southeast coast of the African continent, east of Madagascar. It incl ...
mandated that companies registered in Mauritius pay 2% of their annual book profit to contribute to the social and environmental development of the country. In 2014, India also enacted a mandatory minimum CSR spending law. Under
Companies Act, 2013 The Companies Act 2013 is an Act of the Parliament of India on Indian company law which regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company. The 2013 Act is divided into 29 chapters containin ...
, any company having a net worth of 500 crore or more or a turnover of 1,000 crore or a net profit of 5 crore must spend 2% of their net profits on CSR activities. The rules came into effect on 1 April 2014. The only mandatory CSR Act in the world thus far was passed by the Indian parliament in 2013 as Section 135 of the Companies Act. According to that bill, all firms with a net worth above 5 billion rupees (approx. $75 million), turnover over 10 billion rupees (approx. $150 million), or net profit over 50 million rupees (approx. $750,000) are required to spend at least 2% of their annual profits (averaged over three years). The Act requires that all businesses affected establish a CSR committee to oversee the spending. Before this law's passage, CSR laws applied only to public sector companies. Unlike global definitions of CSR which are in the triple bottom line, corporate citizenship, sustainable business, business responsibility, and closed-loop realm, in India CSR is a philanthropic activity. What has changed since formalizing it in 2014 is the shift in focus from institution building (schools, hospitals, etc.) to focus on community development.


Crises and their consequences

Crises have encouraged the adoption of CSR. The
CERES Ceres most commonly refers to: * Ceres (dwarf planet), the largest asteroid * Ceres (mythology), the Roman goddess of agriculture Ceres may also refer to: Places Brazil * Ceres, Goiás, Brazil * Ceres Microregion, in north-central Goiás ...
principles were adopted following the 1989 ''
Exxon Valdez ''Oriental Nicety'', formerly ''Exxon Valdez'', ''Exxon Mediterranean'', ''SeaRiver Mediterranean'', ''S/R Mediterranean'', ''Mediterranean'', and ''Dong Fang Ocean'', was an oil tanker that gained notoriety after running aground in Prince Wi ...
'' incident. Other examples include the
lead paint Lead paint or lead-based paint is paint containing lead. As pigment, lead(II) chromate (, "chrome yellow"), lead(II,IV) oxide, (, "red lead"), and lead(II) carbonate (, "white lead") are the most common forms.. Lead is added to paint to accele ...
used by toymaker
Mattel Mattel, Inc. ( ) is an American multinational toy manufacturing and entertainment company founded in January 1945 and headquartered in El Segundo, California. The company has presence in 35 countries and territories and sells products in more ...
, which required the recall of millions of toys and caused the company to initiate new risk management and quality control processes.
Magellan Metals Rosslyn Hill Mining Pty Ltd (formerly known as Magellan Metals Pty Ltd) operates Paroo Station Mine (formerly Magellan Mine) at Wiluna in Western Australia. Rosslyn Hill Mining is wholly owned by and the principal operating asset of Canadian ...
was found responsible for lead contamination killing thousands of birds in Australia. The company ceased business immediately and had to work with independent regulatory bodies to execute a cleanup.
Odwalla Odwalla Inc. () was an American food product company selling fruit juices, smoothies and food bars founded in Santa Cruz, California in 1980 and from 1995–2020 was headquartered in Half Moon Bay, California. Odwalla's products included juices, ...
experienced a crisis with sales dropping 90% and its stock price dropping 34% due to cases of ''E. coli''. The company recalled all apple or carrot juice products and introduced a new process called "
flash pasteurization Flash pasteurization, also called "high-temperature short-time" (HTST) processing, is a method of heat pasteurization of perishable beverages like fruit and vegetable juices, beer, wine, and some dairy products such as milk. Compared with other ...
", as well as maintaining lines of communication constantly open with customers.


National and regional approaches

Corporations that employ CSR behaviors do not always behave consistently in all parts of the world. Conversely, a single behavior may not be considered ethical in all jurisdictions. E.g., some jurisdictions forbid women from driving, while others require women to be treated equally in employment decisions.


CSR in the European Union

The
European Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...
presented a
green paper In the United Kingdom, the Commonwealth countries, Hong Kong, the United States and the European Union, a green paper is a tentative government report and consultation document of policy proposals for debate and discussion. A green paper represen ...
for the European Communities, as the EU was then called, "promoting a European framework for Corporate Social Responsibility" in 2001. In that document CSR was defined as By 2011, the Commission recognised a "strategic approach" to CSR as "increasingly important too the competitiveness of enterprises".European Commission
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A renewed EU strategy 2011–14 for Corporate Social Responsibility
published 25 October 2011, accessed 15 July 2021
Believing that enterprises can "significantly contribute to the European Union's treaty objectives of sustainable development and a highly competitive social market economy", therefore presented a revised strategy in October 2011, ''A renewed EU strategy 2011–14 for Corporate Social Responsibility''. In this document, CSR was defined more briefly as In parallel with CSR, the alternative term "responsible business conduct" (RBC) introduced by the
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
(see
OECD Guidelines for Multinational Enterprises The OECD Guidelines for Multinational Enterprises are recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from the 50 adhering countries. The Guidelines provide non-binding princip ...
) was also adopted. No longer treating CSR as a "voluntary" or is some sense "additional" aspect of managing an enterprise, the commission now stated that Actions planned under the 2011–2014 agenda were aimed at: *Enhancing the visibility of CSR and disseminating good practices *Improving and tracking levels of trust in business *Improving self- and co-regulation processes *Enhancing market reward for CSR *Improving company disclosure of social and environmental information *Further integrating CSR into education, training, and research *Emphasising the importance of national and sub-national CSR policies, and *Better aligning European and global approaches to CSR. Subsequently, the Commission published a staff working document in March 2019 which looks at progress in implementing CSR/RBC and business and human rights.


UK retail sector

A 2006 study found that the UK retail sector showed the greatest rate of CSR involvement. Many of the big retail companies in the UK joined the
Ethical Trading Initiative The Ethical Trading Initiative (ETI) is a UK-based independent body founded on 9 June 1998, which brings together companies, trade unions and non-governmental organisations (NGOs) to ensure compliance with international labour standards in the globa ...
, an association established to improve working conditions and worker health.
Tesco Tesco plc () is a British multinational groceries and general merchandise retailer headquartered in Welwyn Garden City, England. In 2011 it was the third-largest retailer in the world measured by gross revenues and the ninth-largest in th ...
(2013) reported that their 'essentials' are 'Trading responsibility', 'Reducing our Impact on the Environment', 'Being a Great Employer' and 'Supporting Local Communities'.
J Sainsbury J Sainsbury plc, trading as Sainsbury's, is the second largest chain of supermarkets in the United Kingdom, with a 14.6% share of UK supermarket sales. Founded in 1869 by John James Sainsbury with a shop in Drury Lane, London, the company ...
employs the headings 'Best for food and health', 'Sourcing with integrity', 'Respect for our environment', 'Making a difference to our community', and 'A great place to work', etc. The four main issues to which UK retail companies are committed: environment, social welfare, ethical trading, and becoming an attractive workplace. Anselmsson and Johansson (2007) assessed three areas of CSR performance: human responsibility, product responsibility, and environmental responsibility. Martinuzzi et al. described the terms, writing that human responsibility is "the company deals with suppliers who adhere to principles of natural and good breeding and farming of animals, and also maintains fair and positive working conditions and workplace environments for their employees. Product responsibility means that all products come with a full and complete list of content, that country of origin is stated, that the company will uphold its declarations of intent and assume liability for its products. Environmental responsibility means that a company is perceived to produce environmental-friendly, ecological, and non-harmful products". Jones et al. (2005) found that environmental issues are the most commonly reported CSR programs among top retailers.


CSR and US corporations updates

An article published in
Forbes.com ''Forbes'' () is an American business magazine owned by Integrated Whale Media Investments and the Forbes family (publishers), Forbes family. Published eight times a year, it features articles on finance, industry, investing, and marketing ...
in September 2017 mentioned the yearly study of Boston-based
reputation management Reputation management, originally a public relations term, refers to the influencing, controlling, enhancing, or concealing of an individual's or group's reputation. The growth of the internet and social media led to growth of reputation manage ...
consulting company Reputation Institute (RI) which rates the top 10 US corporations in terms of corporate social responsibility. RI monitors social responsibility reputations by focusing on the perception of consumers regarding company governance, positive impact on the community and society, and treatment of the workforce. It rates each criterion with the firm's proprietary RepTrak Pulse platform. Forbes identified companies like Lego, Microsoft, Google, Walt Disney Company, BMW Group, Intel, Robert Bosch, Cisco Systems, Rolls-Royce Aerospace, and Colgate-Palmolive. According to the CSR Journal, the millennial generation worldwide helps propel brands toward social responsibility. Many millennials want to conduct business with companies and trademarks that employ pro-social themes, sustainable manufacturing processes, and ethical business practices. Nielsen Holdings published its Annual Global Corporate Sustainability Report in 2017 concentrating on global responsibility as well as sustainability. Nielsen's 2015 report showed that 66 percent of consumers will spend more on products that come from sustainable brands. Another 81 percent expect their preferred corporate institutions to reveal in public their statements about corporate citizenship The National Association on the Advancement of Colored People ( NAACP) through its chief executive officer Derrick Johnson shared the organization's insights on how American corporations can help in the realization of social justice. According to the article from Yahoo News, the NAACP has been engaged in a crusade for racial justice and economic opportunities during the last 109 years. This organization believes all citizens in the United States must be held liable in ensuring democracy works for all people.


Texts

* ''
United Nations Guiding Principles on Business and Human Rights United may refer to: Places * United, Pennsylvania, an unincorporated community * United, West Virginia, an unincorporated community Arts and entertainment Films * ''United'' (2003 film), a Norwegian film * ''United'' (2011 film), a BBC Two fi ...
'' (2011) * ''
OECD The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
Guidelines for Multinational Enterprises'' (2011)''OECD Guidelines for Multinational Enterprises''
Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organization, intergovernmental organisation with 38 member countries ...
(page visited on 29 October 2016).


See also


References


Notes


Sources


Books

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Journals and magazines

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Web

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External links

{{DEFAULTSORT:Corporate Social Responsibility Applied ethics Branding terminology Codes of conduct Concepts in ethics Ethical codes Ethical investment Euthenics Economy and the environment Law of obligations Morality Professional ethics Social ethics Social finance Social concepts Articles containing video clips Private aid programs Industrial and organizational psychology