What is Corporate Social Responsibility
(CSR)? Why does CSR exist?
“Corporate Social Responsibility encompasses the
economic, legal, ethical, and philanthropic
expectations placed on organisations by society at a
given point in time.”
(Carroll and Buchholtz 2002)
CSR raises questions about justice for current and future
generations and it’s tasked with preventing immoral
practices which can weaken society, damage companies
and hurt employees. It’s arrived as a result of corporate
failures resulting from immoral practices e.g. Enron
CSR is how companies earn their profits and not how
they spend them.
Advantages of CSR
Innovation – e.g. Unilever
Cost Savings - e.g. General Mills
Brand Differentiation – e.g. BodyShop, Timberland
Customer Engagement – e.g. Walmart
Employee Engagement – If they get your message
then they can spread the message effectively. e.g.
Elephant Branded - Employees of integrity along
with appropriate organisational structures are
essential to realise CSR.
CSR makes great business sense!!!
Stakeholders companies need to consider
The Consumer – Consumer responsibility is on the rise.
Consumers possess a significant amount of power and influence.
e.g. Starbucks - tax avoidance in the UK
BP – Deepwater Horizon disaster
= blow to reputation, lost revenue, share prices fall
Government – The Department of Justice imposed a £4bn fine
on BP over Deepwater Horizon, and charged and convicted a
number of workers with manslaughter. Politics plays an
important role, however, we must bear in mind, in a globalised
world the effects of regulation can be difficult.
Suppliers, NGOs, local communities, employees are also
Human Rights and CSR
CSR – Companies are meant to operate in a positive
way and adhere to laws and regulations, some of which
relate to human rights. But are companies following
the law? In many cases the answer will be no:
e.g. Bangladesh factory fires, torture and murder of
Ikea – political prisoners used as forced labourers of
Human rights is a major issue in CSR, especially
in relation to the supply chain (remember CSR is
how companies make their profits!)
CSR in annual reports
20-25 years ago, annual reports would have contained
nothing but purely financial data. But things have
started to change.
Over the years a corporate social responsibility report
has started to be developed by many companies. Many
companies now put in quite a lot of data affecting
society, i.e. employee turnover, the number of cases
within the company where it was found that child
labour was being used, the number of injuries
maintained by staff, customer satisfaction levels, and
also the records of the environment i.e. pollution and
At the moment we have the financial data in one part
of the annual report and then we have the social and
environmental in another part. This is often referred to
as ‘triple bottom line’. We’ve got financial figures,
social figures, and environmental figures – three lots
of data – three bottom lines. A financial profit, a social
profit or loss, and an environmental profit or loss.
While it’s helpful that all three areas are reported,
there is a concern that whilst you keep them separate,
most people’s focus will stick with profit. So maybe
there is another way of handling this where somehow
we can combine all of the stuff together into one set of
A liability to society
Maybe what we need is a new type of liability – a liability to society. This
would be a provision to show the amount of damage a company has caused
over time which can be argued that the company sort of owes back.. If the
company starts building this liability up on their balance sheet, the next step
would be at some point someone has to come to them and demand that they
pay this money maybe to the government so that the government can spend it
on clearing up their environmental mess. Now fairly clearly this is a
controversial way forward but there are already examples of this being done.
There are some products in your kitchen which are potentially dangerous to the
environment i.e. fridges and freezers. If you’ve got an old fridge and you want
to get rid of it because you have a new fridge coming, you cannot simply go a
dump this fridge somewhere. Nowadays they have to be properly gotten rid of
in order to minimize the damage to the environment as they’re disposed of .
The companies who’ve made profits manufacturing these products in the past
are in some countries now under legal obligation to make a contribution
towards getting rid of their old products properly. So if five years ago, I buy a
fridge from company x, they are expected five years later to take my old fridge
and dispose of it properly or at least pay towards someone else to do that. If
they’re paying the bill then it would appear to be an example of full cost
accounting. They are being held accountable for the environmental damage
that they could create.
Stakeholder vs Shareholder
Managers will, first and foremost, act in the interest of the
shareholder – shareholder theory
But now decisions are being made with the stakeholder in
mind – stakeholder theory.
Corporate Social Responsibility is statutorily recognised in
Section 172 of the Companies Act 2006.
Shareholders remain dominant in the business world and
Corporate Governance, in particular, but the emergence of
the stakeholder is providing a counter-argument, helped by
the existence of Corporate Social Responsibility.
Companies should operate responsibly, with or without CSR, but is
anything really happening? There is no clear answer
- CSR is like “teenage sex”; everybody says they’re doing it but few
actually are, and those who actually do, do it badly.
CSR has arrived in business practice and it is here to stay. It is unclear if
a good and fair society can be created with the help of companies but it
cannot be created without them. Businesses have a responsibility to
become moral actors.
CSR should be used as a vehicle to establish benchmarks such as good
management and taking responsibility for those likely to be affected by
companies’ behaviour, such as working conditions for employee. We
can think about the environment, the local community and the
population with that community who are directly affected from the
CSR is corporate social responsibility and if businesses engage in
this the right way then they won’t be ‘a company saying rubbish’.
“If you do things well, do them better. Be
daring, be first, be different, be just.” (Anita
“Go out in the world and do well. But also go
out in the world and do good.” (Minor Myers)