corporate social responsibility

1. Corporate Social Responsibility
What is CSR?
• “Is the overall relationship of the corporation with all of its stakeholders.
• Elements of social responsibility include investment in community outreach,
employee relations, creation and maintenance of employment, environmental
stewardship, and financial performance.”
• A corporation should act in a way that enhances society and its inhabitants and
be held accountable for any of its actions that affect people, their communities,
and their environment
– ‘Is the continuing commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large’. – World
Business Council For Sustainable Development
• “CSR is generally understood to be the way a company achieves a balance or
integration of economic, environmental and social imperatives while at the same
time addressing shareholder and stakeholder expectations.” (Canadian Govt)

2. Terminologies of CSR
The term [CSR] is often used interchangeably with others, including
• Corporate responsibility
• Corporate citizenship
• Social enterprise
• Corporate conscience
• Sustainability
• Sustainable development
• Sustainable responsible business/ responsible Business
• Social performance
• Triple-bottom line
• Corporate ethics
• and in some cases corporate governance.
• Though these terms are different, they all point in the same direction:
• Throughout the industrialised world and in many developing countries there
has been a sharp escalation in the social roles corporations are expected to
play.

3. Ethics and CSR
Why growing Interest and Awareness of Ethics and CSR?
• High-profile scandals and unethical behaviour
• Demand for ethical behaviour
• Globalisation and instant communications
• Public awareness and consumer behaviour
• Reputational risk
• Used as a ‘competitive advantage’
• Offensive and defensive marketing

4. Drivers of CSR
• Values - a value shift has taken place within businesses
where they not only feel responsibility for wealth creation but
also for social and environmental goods.
• Strategy - being more socially and environmentally
responsible is important for the strategic development of a
company.
• Public Pressure - pressure groups, consumers, media, the
state and other public bodies are pressing companies to
become more socially responsible.

5. Theories of Social Responsibility
Maximising
Profits
Moral
Minimum
Stakeholder
Interest
Corporate
Citizenship

6. Theories of Social Responsibility
Maximising Profits
• A theory of social responsibility that says a corporation owes a duty
to take actions that maximize profits for shareholders.
• The interests of other constituencies are not important in and of
themselves
Moral Minimum
• A theory of social responsibility that says a corporation’s duty is to
make a profit while avoiding harm to others.
• As long as business avoids or corrects the social injury it causes, it
has met its duty of social responsibility.
• The legislative and judicial branches of government have established
laws that enforce the moral minimum of social responsibility on
corporations.
– e.g., Occupational safety laws
– e.g., Consumer protection laws for product safety

7. Theories of Social Responsibility
Stakeholder Interest
• A theory of social responsibility that says a corporation must consider the effects
its actions have on persons other than its stockholders.
• This theory is criticised because it is difficult to harmonise the conflicting
interests of stakeholders.
Corporate Citizenship
• A theory of responsibility that says a business has a responsibility to do good.
• Business is responsible for helping to solve social problems.
• Corporations owe a duty to promote the same social goals as do individual members of society.
• This theory argues that corporations owe a debt to society to make it a better place.
– This duty arises because of the social power bestowed on corporations.
• A major criticism of this theory is that the duty of a corporation to “do good” cannot be
expanded beyond certain limits.

8. Theories of Social Responsibility – Summary
Theory Social Responsibility
Maximising profits To maximize profits for stockholders.
Moral minimum To avoid causing harm and to compensate for
harm caused.
Stakeholder interest To consider the interests of all stakeholders,
including stockholders, employees, customers,
suppliers, creditors, and local community.
Corporate citizenship To do good and solve social problems

9. The Corporate Social Audit
• A social audit is an attempt to measure a company’s actual social performance
against its social objectives.
• The social audit may be used for more than simply monitoring and evaluating firm
social performance.
• Corporate audits should be extended to include the moral health of the corporation.
• Corporations that conduct social audits will be more apt to prevent unethical and
illegal conduct by managers, employees, and agents.
• The audit would examine how well:
– Employees have adhered to the company’s code of ethics; and
– The corporation has met its duty of social responsibility.
• Such audits would focus on the corporation’s efforts to:
– Promote employment opportunities for members of protected classes
– Worker safety
– Environmental protection
– Consumer protection

10. The Corporate Social Audit
Companies should institute the following procedures when conducting a
social audit:
• An independent outside firm should be hired to conduct the audit.
– This will ensure autonomy and objectivity.
• The company’s personnel should cooperate fully with the auditing firm
while the audit is being conducted.
• The auditing firm should report its findings directly to the company’s
board of directors.
• The results of the audit should be reviewed by the company’s board of
directors
• The board of directors should determine how the company can:
– Better meet its duty of social responsibility; and
– Use the audit to implement a program to correct any deficiencies it
finds.

11. The Clarkson Principles
Principle 1
Managers should acknowledge and actively monitor the concerns of all legitimate
stakeholders and should take their interests appropriately into account in
decision making and operations.
Principle 2
Managers should listen to and openly communicate with stakeholders about their
respective concerns and contributions and about the risks that they assume
because of their involvement with the corporation.
Principle 3
Managers should adopt processes and modes of behavior that are sensitive to the
concerns and capabilities of each stakeholder constituency.
Principle 4
Managers should recognise the interdependence of efforts and rewards among
stakeholders and should attempt to achieve a fair distribution of the benefits and
burdens of corporate activity among them, taking into account their respective
risks and vulnerabilities.

12. The Clarkson Principles
Principle 5
Managers should work cooperatively with other entities, both public and private,
to insure that risks and harms arising from corporate activities are minimized and,
where they cannot be avoided, appropriately compensated.
Principle 6
Managers should avoid altogether activities that might jeopardize inalienable
human rights or give rise to risks that, if clearly understood, would be patently
unacceptable to relevant stakeholders.
Principle 7
Managers should acknowledge the potential conflicts between their own role as
corporate stakeholders, and their legal and moral responsibilities for the interests
of stakeholders and should address such conflicts through open communication,
appropriate reporting and inventive systems, and where necessary, third-party
review.

13. Social Responsibility Strategies
• Reactive Strategy
– Denying responsibility while striving to maintain the status quo
by resisting change
• Defensive Strategy
– Resisting additional social responsibilities with legal and public
relations tactics
• Accommodation Strategy
– Assuming social responsibility only in response to pressure from
interest groups or the government
• Proactive Strategy
– Taking the initiative in formulating and putting in place new
programs that serve as role models for industry

14. Social Responsibility Strategies

15. Key Components of CSR
Best Practices

16. Key Components of CSR Best Practices
Strategic Partnerships
•Partnership = new development approach favoured by the
multilateral and bilateral donor community, industry, public
and private sector organizations.
• Advantages include pooling resources, building respect and
understanding between potential adversaries, and
transferring knowledge.
• Tri-sector partnerships requires business, government and
civil society to pull together complementary resources.

17. Key Components of CSR Best Practices
Stakeholder Engagement
•Stakeholders are individuals or groups who have a vested interest in
a company’s operations, who interact with a company in one or more
of its activities and whose co-operation or active involvement a
company needs for its ‘license to operate’.
• Engagement methods include consultation papers, perception
surveys, stakeholder workshops, public and private meetings, liaison
groups and academic roundtables.
• The overall success of the engagement process will depend to a
large extent on corporate communication.

18. Key Components of CSR Best Practices
Public Sector Support
a) Mandating - define minimum standards for business performance.
b) Facilitating - provide incentives for companies to engage with the
CSR agenda.
c) Partnering - act as participants, convenors or facilitators.
d) Endorsing - direct recognition of the efforts of individual enterprises
through award schemes or ‘honourable mentions’ in speeches by top
government officials.

19. Practical Application of CSR Guidelines
• You need to evaluate various aspects of your business and operations
• You need to evaluate the impact your business is having on your
stakeholders.
• Then set realistic targets on how to improve your business operations
and processes.
• Draw up a result- driven CSR Policy.
• Embed your CSR into your business strategy.

20. Practical Application of CSR Guidelines
• Appoint a driver for your CSR initiative
• Communicate your CSR efforts to all your stakeholders clearly and boldly.
• Make your CSR initiative part of your business culture
• Set up CSR measuring indicators to monitor progress and possible deviations.
• Be enthusiastic about your CSR initiative; be committed to it.
• Report on your initiatives and measure progress/ impact made.

21. Business Organisations’ Stakeholders
A stakeholder is as any group or individual who is ‘either
harmed by or benefits from the organisation; or whose rights
can be violated or have to be respected, by the corporation’
Evan and Freeman (1993)
Primary vs. Secondary Stakeholders
• Primary stakeholders: those whose continued association is
necessary for a firm’s survival
– Employees, customers, investors, governments and communities
• Secondary stakeholders: are not essential to a company’s
survival
– Media, trade associations, and special interest groups

22. The Stakeholder Interaction Model

23. Business Organisations’ Stakeholders
Government Taxation, Legislation
Customer Value, Quality, safety
Creditor Credit score, new contracts, Liquidity
Shareholder Profit, Performance, Direction
Trade Union Working conditions, Minimum wage
Local Community Jobs, Involvement, Environmental issues
Stakeholder Examples of interests

24. Business Organisations’ Stakeholders
environment pollution control, protection of environment
Non-Managerial staff Job security, Living salary
Suppliers Trade credit obligations
Senior Management staff Performance, Targets
Stakeholder Examples of interests
Media dissemination to the public
Senior Management staff
Performance, Targets
Trade Unions
Special Interest Groups

25. Carroll’s model of corporate social
responsibility (1979; 2008)
• He regards CSR as a multi-layered concept, which can
be differentiated into four interrelated aspects-
economic, legal, ethical, and philanthropic
responsibilities
• "The social responsibility of business encompasses
the economic, legal, ethical and discretionary
expectations that a society has of organizations at a
given point in time."

26. Carroll’s Model of Corporate Social Responsibility
The Pyramid of Social Responsibility

27. Carroll’s model of corporate social responsibility
a) Economic:
Companies have shareholders who demand a reasonable return on their
investments, they have employees who want safe and fairly paid jobs, they
have customers who demand good-quality products at a fair price.
b) Legal :
The legal responsibility of corporation demands that business abide by the
law and play by the rules of the game.
Laws are the codification of society’s moral views.
The satisfaction of legal responsibilities is required of all corporations
seeking to be socially responsible.

28. Carroll’s model of corporate social responsibility
C) Ethical :
These responsibilities oblige corporations to do what is right, just, and fair
even when they are not compelled to do so by the legal framework.
Carroll argues ethical responsibilities consist of what is generally
expected by society over and above economic and legal requirements.
d) Philanthropic:
It means literally ‘the love of the fellow human’
The model includes all those issues that are within the corporation’s
discretion to improve the quality of life of employees, local communities
and ultimately society in general.

29. Benefits of CSR
Legislative Framework
Benefits
of CSR
Winning new
businesses
Enhancing your
influence in the
industry
Attracting,
Retaining and
Maintaining a happy
workforce
Increase in
customer retention
Differentiating
yourself from the
competitor
Saving money
on energy and
operating cost
Access to funding
opportunities
Media interest
and good
reputation
Benefits
Benefits
Enhanced
Relationship with
stakeholders

30. Arguments Against CSR
Legislative Framework
Demerits
of CSR
Dilutes the
primary aim of
business
Increase business powerIncrease business power
Managers not elected by
society so not
accountable to it
As an economic
institution, business
lacks the ability to
pursue social goals.
Imposes hidden
Cost passed on
stakeholders
Places responsibility
on business rather
than individuals.
Imposes social
unequal
cost on
competitors
Against
Against
Restricts the free
market goal
Of profit
maximisation

31. Corporate Benefits of CSR
• Building a strong corporate reputation, image and clout as well as
strengthen brand positioning
• Attracting and retaining a motivated workforce
• Reducing risks and operating costs
• Reducing regulatory oversight by working closely with regulatory
agencies to meet or exceed guidelines
• Increased appeal to investors and financial analysts.
• Building strong community relationships with organisations and
agencies that can provide technical expertise.

32. The Social Contract
32
The Organisation
Thomas Hobbes,
John Locke &
Jean-Jacques Rousseau
(1600s & 1700s)
Individuals
Other Organisations
Government
Society

33. The Social Contract Theory
 Social Contract
--set of written and unwritten rules and assumptions about acceptable
interrelationships among various elements of society - hiring minorities
 Organisational Stakeholder
--individual or group whose interests are affected by organisational
activities
 Obligations to Other Organisations
--managers must be concerned with relationships with other
organisations, both like their own (such as competitors) and very
different ones
 Obligations to Government
--expect to work with government agencies
 Obligations to Individuals
--certain obligations to organisation’s employees- Voting and Jury Duty