Defining Corporate Social Responsibility

Defining Corporate Social Responsibility

CSR as a phrase has been more and more commonly used during recent years. CSR is a tool, which contains several issues and has a wide variety of definitions. When looking at some of the definitions we can see that CSR takes several aspects into consideration. Some issues are more frequently used than others, these are issues like the environment, human rights, contribution to economical and social development et cetera. World Business Council for Sustainable Development (WBCSD) defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large”.

The World Bank, on the other hand, uses the following definition “CSR is the commitment of business to contribute to sustainable economic development, working with the employees, their families, the local community and society at large to improve the quality of life in ways that are both good for business and good for development”. While comparing these two definitions we see that they are similar and most definitions are often based on the WBCSD’s one

Layers of responsibility

Organized different corporate social responsibilities into a four-layered pyramid model, called the pyramid of responsibilities. The four different responsibilities are economic, legal, ethical, and philanthropically. The pyramid is constructed in a way that one kind of responsibility cannot be achieved if another responsibility located beneath it in the pyramid model is absent. Carroll (1998) stresses that the pyramid of responsibilities has a global reach, resulting in that multinational corporations operating in a globalized economy should practice global corporate citizenship. It is recently implemented the notion of a shareholder in the pyramid of responsibilities model.

Carroll makes clear that economic responsibility means doing what is required by global capitalism, legal responsibilities seize that corporations do what is required by global stakeholders, ethical responsibility means to do what is expected by global stakeholders while philanthropic responsibility means to do what is desired by the global shareholder

Several kinds of research (Aupperle, 1985; Carroll, 1983) have been made that supports Carroll’s model empirically. Pinkston and Carroll (1994) performed a survey among top managers in 591 U.S. subsidiaries of multinational chemical companies with headquarters in England, Germany, Sweden, Japan, U.S., Switzerland, and France. Their findings confirmed Carroll’s pyramid model but showed exceptions in Sweden and Germany, where legal responsibilities were ranked the highest priority followed by economic, ethical, and philanthropical aspects (CSRQuest, 2006)

Future aspects of CSR

There are some indications suggesting that CSR will be the factor that will influence the development of corporate management systems in the future. The traditional management systems, that have been and are used by a lot of corporations make sure that things are done right; however, they do not make sure that the right things are done. Doing things right means that the ethical values of the organization are supposed to influence the decision-making and

communication within a business leading to a focus on the important aspects when making decisions, and in that way ensure that the right things are done right. In this way, CSR and management systems are working together and this is why CSR is likely to have a large impact on management systems in the future

During recent years, institutions working with socially responsible investment (SRI) have raised awareness and obtained an increased impact on corporation’s work and approach to CSR issues. However there is still a problem, consider that the SRI still remains at the periphery of concern for most companies. The highest influence over corporations’ actions remains with the mainstream, non-socially responsible investors, which holds the strongest financial power. One future challenge will be to transfer the SRI and its principles into mainstream influences. Increased transparency of SRI procedures is also stressed. Increased transparency could lead to an improvement in shareholder’s investment decisions about which SRI firms are most effective in delivering results with this tool.

Why do MNC’s work with CSR

Throughout our conducted interviews we noticed there were some differences between the adopted motives that had lead to that the MNC’s initiated their CSR work. Highlights the fact, that there are some differences internally within the group of companies in Akzo Nobel. The reason for this is that the Akzo Nobel group contains quite different lines of business. The different lines of businesses choose which areas or issues within CSR they find most important to put the effort in.

Larsson asserts that there are still similar basic reflections throughout the group. argues that if a company has such a long history like it is obvious that it is aware of its dependence on society, the surrounding world, and its employees. The nature of some of Akzo Nobel’s products, especially chemicals and previously the work with explosives, have also lead to reflections concerning health and safety for employees when dealing with these high-risk products. Dealing with high-risk products also leads that you are closely observed which motivates working with CSR.

Stora Enso’s human resources department has noticed, that a lot of younger people are considering ethically well-performing businesses as something important when deciding where they would like to work. This is also an obvious reason to be working with CSR.

The CSR work is something that is derived from the core values of the business; hence the business-related side of CSR is something that comes along with this work. Also explains that IKEA does not talk much about CSR work, since IKEA has a tradition of doing things first and then talk. Hence this implies that IKEA looks seriously on the CSR work, and not only use it as a mean to increase their brand value and image.

Changes of CSR within the next ten years

The future of CSR might to a large extent be decided on who becomes the next general secretary of the UN. The reason for this is that the general secretary of the UN is responsible for launching the millennium goals, as well as the global compact, and those are factors that directly affect corporations. It is not very likely that the minimum requirements regarding CSR work are likely to decrease, even though a new general secretary might be more leaned towards a focus on business activities since the work has come so far. Instead, the issue should be how fast the development of CSR will expand. Illustrates a picture of the situation today, where there are two fractions that have different opinions regarding the legislation of CSR in the future.

One side argues for more legislative pressure, while the other side claims that this is not the right way to go, since the change and CSR work should come from within the business. IKEA is a firm believer, that legislation is not the right way. Instead, IKEA believes that if a business does not work with this voluntarily, they will not accomplish much even if there is legislation imposed on them.

This means that the future of CSR is hard to predict, but Bergmark (2006) goes on by saying that corporations that work with this, in the right way, are likely of becoming the winners of tomorrow. This statement implies that CSR could probably become an even more established phenomenon in the future.

Arguments in favour of law firms implementing a CSR policy

Increased number of clients and customer loyalty

A number of studies have suggested a large and growing market for the products and services of companies perceived to socially responsible. Studies regarding the goods industry have shown a growing desire to buy based on other values-based criteria, such as “sweatshop-free” and child-labor-free clothing, smaller environmental impact, and absence of genetically modified materials or ingredients.20 These studies appear to confirm that customers are interested in and value the overall way an organization expresses and fulfills its social responsibilities.

This seems to be reflected in consumers’ attitudes towards the service industry, for example, the growth of socially responsible investment (SRI) and ethical investment, together with CSR market indices, not to mention the continuing profitability of the Co-operative Bank which has striven to conduct its business in a socially and environmentally responsible manner

Enhanced employee quality and loyalty

Companies perceived to have strong CSR commitments often find it easier to recruit and retain employees, i.e. they benefit from a reduction in staff turnover, which means lower recruitment and training costs.26 Shell, for example, perceived reluctance amongst graduates to work for the company following the Brent spar incident and the clashes with the Ogoni people of Nigeria.27 Whilst lawyers may not yet necessarily be attracted to the work for law firms because of their CSR policies, the public, clients, and the government would arguably be influenced by this to a greater or lesser extent.

Strategic and comparative advantages

Several academic studies have shown a correlation between socially responsible business practices and positive financial performance.28 A company considered to be socially responsible can benefit both from its enhanced reputation with the public, as well as its reputation within the business community, thus increasing a company’s ability to attract capital and trading partners. Many companies increasingly see their reputation as one of their key assets.

Since it can be easily damaged, and companies need procedures in place to monitor their activities from an ethical perspective. Thus, CSR appears to be increasingly essential for company competitiveness, as CSR Europe has observed. Improved relations with the local community via relations with the host bar, local lawyers and firms, and the employment of local staff. Facilitated integration for international firms. Employing and training local lawyers and staff provides a valuable opportunity for a firm to develop strong, positive links with the local community, in addition to strengthening professional relations between the foreign firm and the host profession.

Increased Productivity and Quality

Companies that have taken steps to improve working conditions, lessen environmental impact, and encourage employee involvement in decision-making can reap the rewards of the increased productivity and a reduced error rate.30

Reduced Regulatory Scrutiny

Companies that demonstrate they are engaging in practices that comply with and exceed regulatory requirements are being scrutinized less and are being given more freedom by both national and local government entities. In the U.S., for example, federal and state agencies overseeing environmental and workplace regulations have formal programs that recognize and reward companies that have taken proactive measures to reduce adverse environmental, health, and safety impacts. Such companies are often subject to fewer inspections and bureaucracy and may be given preference when applying for various forms of governmental permission.

Arguments against implementing a CSR policy

Adequate existing measures

It could be argued that the existence of international standards and codes of conduct such as the OECD Guidelines and the UN Compact in addition to corporate-led CSR initiatives obviates the need for an additional set of guidelines on CSR from the Law Society.

Companies are best placed to set a CSR policy themselves

Arguably, firms themselves are in the best position to assess the needs of the local community and adapt themselves accordingly. They are best placed to implement a CSR policy that remains relevant and flexible to their environment. Indeed, the CBI argues that ‘since each company has a unique corporate identity, a one-size-fits-all approach is unfeasible’.P. K. Doraiswamy former Special Chief Secretary, Government of Andhra Pradesh (INDIA) says, In a recent statement, the ITC Chairman said that corporate social responsibility (CSR) involved an additional cost, both transactional and real, placing companies practicing it at a disadvantage– vis-a-vis those that did not, and that, therefore, investors, customers, and the government should reward CSR in economic terms.

According to Milton Friedman, the only social responsibility of business is to comply with the law of the land and stay profitable. Any other non-economic or social activities are the responsibility of the State using the taxes collected from profitable businesses. Peter F. Drucker considers profitability the first and the basic social responsibility of business as no other responsibility, social or otherwise, can be fulfilled by any losing business.

The three levels

CSR could exist at three levels:

1. compliance in letter of the law;
2. observing norms of common morality, like ethics and fair play, in its internal management and dealings; and
3. a social trusteeship mindset in deploying its resources.

Level A needs deterrents for default rather than incentives for adherence, being the basic obligation of any ordinary or corporate citizen in any civilized society. Level B refers to behavior that is not specifically obligatory under law but is expected in any just society.

Level C is a non-obligatory, discretionary area and a company’s involvement would depend on its values and social commitment. In a genuinely competitive environment, level B will, in the long run, regulate itself. Businesses and customers dealing with a company would evaluate its behavior and either continue to patronize it or ‘vote with their feet’.

Whereas levels A and B are independent of profitability, activity under level C arises only after the company ensures its own profitability, as otherwise CSR cannot be sustained. Level C is a rather vast area as it cannot be defined or listed out precisely.

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