Corporate social responsibility (CSR) is the concept that business has a set of multidimensional obligations to meet the expectations of society’s global stakeholders by fulfilling economic, legal, ethical, ecological, and discretionary philanthropic responsibilities. The belief that modern corporations have a responsibility to society and nature that extends beyond the economic responsibility to make money or profits for investors has become a key element in global corporate governance and a pervasive global expectation in light of the tremendous power exercised by multinational corporations (MNCs). The history and nature of CSR and the business case for it as a new global expectation requiring a strategic corporate response are dimensions of this concept to consider.
History And Nature Of CSR
CSR has been discussed throughout the 20th century, but it was Howard R. Bowen’s book Social Responsibilities of the Businessman (1953) that originated the modern debate on the topic. Bowen reasoned that there would be general social and economic benefits that would accrue to society if business recognized broader social goals in its decisions.
Numerous scholars contributed to the development of the concept, but during the 1970s a number of catalysts accelerated the acceptance of CSR. First, in its 1971 publication Social Responsibilities of Business Corporations, the Committee for Economic Development (CED), composed of business practitioners and leading scholars, endorsed CSR as reflecting a changing social contract between business-society and business-government relations. Second, in the early 1970s there was a major expansion of U.S. government social regulation including the creation of the Environmental Protection Agency, the Consumer Product Safety Commission, and the Equal Employment Opportunity Commission, which led to a supportive national context for CSR. Third, in the late 1970s Archie B. Carroll proposed a four-part model of CSR that differentiated CSR from corporate social performance (CSP). He maintained that CSP was an extension of the concept of CSR that focuses on actual performance results achieved rather than the general notion of business accountability or responsibility to society. However, in order for managers to engage in CSP they needed to have a basic definition of CSR, identification of stakeholders to whom the firm had a responsibility, and a pattern of responsiveness to CSR issues.
Carroll noted that the traditional view, advocated by the eminent economist Milton Friedman—that the only social responsibility of business was to legally make a profit for its investors—was inadequate to describe the judgment of many business leaders and did not reflect the changing expectations of domestic and global societies. He proposed that CSR encompass economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. This definition provided individuals with categories with which to quantitatively state the nature or kind of obligation that business had toward society.
First, according to Carroll, business has an economic obligation to society. Business has an economic responsibility to supply goods and services that society demands and to sell them at a profit. Unless a business is financially viable, its other responsibilities cannot be fulfilled. To achieve its capitalistic economic responsibilities, business must be effective, efficient, innovative, and strategically adaptive to changing global conditions.
Second, CSR entails meeting legal obligations at the local, state, federal, and international levels. Society charters and allows the business to function and enacts the laws and regulations under which business is expected to operate. These codified rules are the formal framework within which business is expected to generate prosperity; they represent the public boundaries of acceptable business practice.
Third, CSR also entails ethical responsibilities. Ethical responsibilities refer to those activities and practices that are expected, or prohibited, by societal members even though they may not be codified into law. They embody the range of norms, standards, or expectations about business activity that reflect a concern for what major stakeholders such as consumers, employees, owners, the community, and others regard as fair or just. The ethical responsibility of business includes the dictum to “do no harm” by such activities as polluting the environment, discriminating against workers, producing dangerous products, engaging in misleading advertising, and so on. To be sure, some of these practices are governed by the legal responsibility of business but some are not. The ethical responsibility embraces a response to the “spirit” of laws and regulations and helps guide business actions in those decision areas in which regulations are ill-defined or nonexistent. Some view the law as the ethical minimum or “floor” on business behavior, whereas the ethical manager or firm is often expected to operate above the minimum required by law. Ethical leadership would be a manifestation of this kind of business obligation.
Fourth, CSR entails discretionary responsibility. Society expects business to be a good corporate citizen by contributing to the well-being of the community, through business giving or philanthropy. The discretionary category of responsibility might well be named the philanthropic category, because the best examples of business fulfilling this expectation typically are considered philanthropic: giving money or other resources to charitable causes, initiating adopt-a-school programs, employing executive in-house programs in the community, conducting civic events, and so on. The distinction between ethical and discretionary responsibilities is that the latter are typically “desired” by society and not expected in a moral or ethical sense.
In summary for Carroll, the socially responsible corporation should strive to make a profit, obey the law, be ethical, and be a good corporate citizen. Though the social responsibility concept is normative in that it proposes what business ought to do, it is also descriptive because it captures the essence of what socially responsible business organizations are doing today.
In more recent times, CSR has expanded to explicitly include ecological responsibility, not as a discretionary but an expected performance standard. The subfield of corporate ecology focuses on sustainable development, triple-bottom-line accountability, biodiversity, and intergenerational justice as necessary components of modern corporate strategy.
The Business Case For CSR
The business case for CSR includes the following arguments: (1) corporations that pursue CSR defensively avoid the pressures that create costs for them from litigation and/or increased government regulation; (2) corporations that pursue CSR internalize the full costs of doing business, instead of externalizing them onto society, and thereby have a more accurate accounting of their business processes and the data to improve future performance; (3) corporations that pursue CSR form stakeholder partnerships that enhance their social capital so that economic growth opportunities/issues that impact stakeholders can more likely be cooperatively resolved; and (4) corporations that pursue CSR enhance their global citizenship reputation and find it easier to attract and retain high-quality human capital and to gain access to lucrative financial capital opportunities that serve the long term strategic interest of the firm.
In the 2002 Sustainability Survey Report by PricewaterhouseCoopers, the following were the reported reasons why corporations were deciding to be more socially responsible: (1) enhanced reputation, (2) strategic competitive advantage, (3) cost savings, (4) industry trends, (5) CEO/board commitment, (6) customer demand, (7) SRI demand, (8) top-line growth, (9) investor demand, and (10) access to capital.
Among the 100 Best Corporate Citizens identified by Business Ethics magazine are numerous corporations engaging in CSR practices, including Cummins, Inc., of Columbus, Indiana, which has reduced diesel engine emissions by 90 percent (far more than legally required); Xerox Corporation of Stamford, Connecticut, which has implemented its Employee Social Service Leave Program for selected employees to take a year off with full pay to work for a community nonprofit organization; and Green Mountain Coffee Roasters of Waterbury, Vermont, which assists developing countries by paying “fair trade” prices, that exceed regular market prices, and offering microloans to indigenous coffee-growing families.
- Archie B. Carroll and Ann K. Buchholtz, Business and Society: Ethics and Stakeholder Management, 7th ed. (Cengage Learning, 2008);
- William B. Werther, Jr., and David Chandler, Strategic Corporate Responsibility: Stakeholders in a Global Environment (Sage, 2005).
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