Definitions of corporate social responsibility
“Corporate Social responsibility is a commitment to improve community well being through discretionary business practices and contributions of corporate resources. In businesses, CSR is done in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.”(Source: Carly fiorina, Hewlett Packard, CSR Annual Conference 2003)
A variety of terms are used sometimes interchangeably to talk about corporate social responsibility (CSR): business ethics, corporate citizenship, corporate accountability, sustainability. Business for Social Responsibility Organisation (BSR) defines corporate social responsibility as “achieving commercial success in ways that honour ethical values and respect people, communities, and the natural environment.” We also say that CSR means addressing the legal, ethical, commercial and other expectations society has for business, and making decisions that fairly balance the claims of all stakeholders. In its simplest term it is: “what you do, how you do it, and when and what you say.”
In this sense, CSR is viewed as a comprehensive set of policies, practices and programs that are integrated into business operations, supply chains, and decision-making processes throughout the company wherever the company does business and includes responsibility for current and past actions as well as future impacts. The issues that represent a company’s CSR focus vary by business, by size, by sector, and even by geographic region. In its broadest categories, CSR typically includes issues related to: business ethics, community investment, environment, governance, human rights, market place and workplace. (Business for Social Responsibility Organisation)
2.2 Other Definitions
An early and somewhat abstract depiction of social responsibility is “the businessman’s decision and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest (Davis, 1960). The conceptualization of this philosophy that has been adopted for purposes of this paper derives from Andrews (1971), a widely cited source. He defines social responsibility as follows:
By social responsibility we mean the intelligent and objective concern for the welfare of society that restrains individual and corporate behaviour from ultimately destructive activities, no matter how immediately profitable and leads to the direction of positive contributions to human betterment, variously as the latter may be defined.
Epstein (1987) attempted to differentiate “business ethics” and CSR and to incorporate them into a strategic process. According to him “business ethics” refer to issues and dilemmas related to the morality of organisational actions or decisions. CSR focuses more on the consequences of organisational actions. He defined CSR as “discernment of issues, expectations and claims on business organisations regarding the consequences of policies and behaviour and internal and external stakeholders” (Epstein 1987, p.101)
Another noteworthy theoretical contribution extracted from the triple bottom line approach by John Elkington (1997) is the idea that for an organisation to be sustainable it must be financially secure, it must minimize, or ideally eliminate, its negative environmental impacts, and it must act in conformity with societal expectations.(Corporate Volume 4 Number 3 2004 p.20-31).
Moreover, Carroll (1979) suggests that CSR is defined as the economic, legal, ethical and discretionary demands that society places on business. Similarly, Zanies conceptualised CSR as the degree of “fit” between society’s expectations of business and the ethics of business. He argues that CSR is really nothing more than another layer of managerial responsibility resulting from the evolution of capitalism.
The World Business Council for Sustainable Development in its publication “Making Good Business Sense” by Lord Holme and Richard Watts, used the following definition. ”Corporate Social Responsibility 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”
The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as “CSR” is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government” from Ghana through to “CSR is about business giving back to society” from the Philippines.
An interesting twist to the argument is provided by Tuzzolino and Armandi (1981) who provide a motivational theory of organisational social response based on Maslow’s hierarchy of needs. CSR is the fulfilment of a firm’s “internal and external self-actualization needs” which are located and the top of their organizational needs pyramid. According to this view, firms adopt CSR after they have satisfied three earlier layers of needs (which includes: physiological, safety and affiliation needs).
2.3 Why companies engage themselves in CSR?
Nowadays companies want to give a good image of their activities. CSR has integrated the day to day running of any business. Today, organisations are not merely seen by the results they achieved but how they achieved it. CSR practices have become a backbone for contributing towards the success of a company. So participation in Corporate Social initiatives impacts key performance factors such as:
Increased Sales and Market Share
People are rather keen to buy from a socially responsible company rather than from one who does not.
Strengthened Brand Positioning
Companies are seeking ‘self realization’ they are looking for social value in their brand.
Enhanced Corporate Image
Several respected reports cover standards and assessment of performance in CSR. Example the Fortunes Annual List of ‘America’s Most Admired Companies’. A strong reputation in the community can be real asset in times of crisis. Positive corporate image may influence policy makers.
Increased ability to attract, motivate and retain employees.
A company with social initiatives can have a positive impact on prospective and current employees. Employees working in such organisations are proud of their company’s social responsibilty values.
Decreased in operation cost.
CSR can help in reduce waste, re-use of materials, recycling, and conserve water and electricity. CSR help to reduce advertising expenditures as a result of increased free publicity.
Increased appeal to investors
Companies engaging themselves in CSR activities give an indication of good management. They reduce their exposure to risk in the event of corporate crisis. They have a strong reputation in the community. This helps to enhance relations with bankers and investors. They have rapidly growing access to capital.
2.4 Business and social obligations
Growing demands on business to address and respond to social concern is an important component of the modern business landscape. Globalization is prompting similar transformation within the business environment. Beyond the traditional obligation of supplying goods and services, firms now face increasing pressures on social front. People nowadays enjoy greater access to knowledge, which feeds their concerns about societal and environmental issues around the world.
Corporations are represented by the people and therefore, corporate social commitments are maintained, nurtured and advanced by the people who manage them. The impact of these organizations has to justify their practices in order to meet increasingly higher public expectations of them. Those that refuse to play the game of risk the obvious consequences that a tarnished reputation can bring.
Many believe that corporate social responsibility (CSR) is one positive consequence of globalization. Nevertheless, some companies dismiss CSR as an unwelcome distraction from the goal of making money. Does this mean that profit and morality are always mutually exclusive? Indeed not. Shrewd organisations realize this and perceive that CSR offers a valuable opportunity to secure competitive advantage. Whether motivated by business or altruistic ambitions, self-examination by companies is on the increase. Research indicates that around 2,500 organisations worldwide are now exposing themselves to public scrutiny by issuing regular CSR reports. Such reports state future objectives relating to society and the environment, as well as summarising past actions and their effects. (Strategic Direction Volume 21 Number 7 2005 pp.24-28)
Currently, multinational companies are coming more and more under the scrutiny of different a audiences, NGOs and the media. Global activism and the growing number of special interest groups are making demands on companies and their public relations practitioners. Futurists predicts that organisation will be judged more by their social policies than on their delivery of products and services, and that key audiences will become more influential. Moreover, global inequality has brought issues of morality and responsibility onto the public agenda (Daugherty, 2001; McIntosh et al., 2003). This new world order has put pressure on global companies to act in word and deed in order to earn their legitimacy. (Corporate Governance Volume 4 Number 3 2004pp. 20-31).
2.5 Social Responsibility Model
Though we find numerous definitions and models of ‘business social responsibility’ ( Bowen 1953 p.6; Mc Cuire 1963,p.144), one that is widely accepted is that of Archie Carroll. His definition of ‘business social responsibility’ is: “the social responsibility of business encompass the economic, legal, ethical and discretionary of philanthropy expectations that society has of organisations at a given point in time” (1979 p.500)
Carroll’s four-part social responsibility model which clarifies distinction in various responsibilities, i.e economic, legal, ethical and discretionary of business.
Table 1: showing Carroll’s four-part social responsibility model
Source: (SK Bhatia, Dr Abad Ahmad, Business Ethics and Managerial values)
2.5.1 Economic Responsibilities
The first level of responsibility of all business is the long-run efficient and effective combining of resources so as to generate goods and services that society needs and wants to sell them profitably. The model suggests that business is basically an economic entity and primary responsibility is economic, that is produces goods and services that society wants and sell them at profit. Economic responsibilities, which comprise being profitable for shareholders while providing economic benefits to other corporate stakeholders, such as fair-paying jobs for employees and good quality, fairly-priced products for customers. (Strategic Direction, Volume 19 Number 6 2003 pp 31-35)
2.5.2 Legal Responsibilities
Legal responsibilities, which involve conducting business legally by complying with laws and playing by the rules of the game while fulfilling their economic responsibilities, firms must act within the constraints of pertinent laws and regulations. . (Strategic Direction, Volume 19 Number 6 2003 pp 31-35)
2.5.3 Ethical Responsibilities
Though the first two sets of responsibilities or expectations may involve ethical norms (these sets of responsibilities are not mutually exclusive), there are additional ethical expectations imposed on businesses by their constituencies. Ethical responsibility refers to behaviour by the firm that is expected by society but not codified in a law. Ethical responsibilities, which go beyond the law by avoiding harm or social injury; respecting people’s moral rights; and doing what is right, just, and fair. These duties exist even if the business might not benefit. For instance, firms should not impose social costs like unnecessary pollution or unknowingly produce harmful products. . (Strategic Direction, Volume 19 Number 6 2003 pp 31-35)
These are not precisely defined and they may vary over time. Some examples are compliance with the spirit of the law, not just with the letter of the law; thoughtful and conscience-based, not abusive, use of power, fair, rather than unfair behaviour when transacting with the constituents, cooperative, rather than adversarial, posturing toward various levels of government, their policies, and guidelines, and being a good corporate citizen.
2.5.4 Discretionary Responsibilities
Seemingly society, in general expects businesses to assume some discretionary activities to such an extent that their productivity and capability permits them. Discretionary or Philanthropy responsibility is purely voluntary obligation that an organisation assumes, for example providing philanthropic contributions to institutes. Few people expect organisations to fulfill discretionary responsibilities, but all expect a firm to satisfy ethical obligations.
Corporate Philanthropy (CP) applies to a corporation that makes a direct contribution to a charity or cause, most often in the form of cash, grants, donations or in-kind services. CP is the most traditional of all corporate social initiatives.
Some typical CP programs are the provisions of cash donations, grants, scholarships, products/services, technical expertise, facilities and distribution channels and the use of equipment.
CP helps to build reputation with respected organisations, creates community goodwill and national attention, strengthen the corporation industry build and secure a strong brand position. One of the potential benefits of CP is to have an impact on societal issues in the local communities and providing opportunity for non-cash and in-kind contribution.
Some examples of CP:
Ronan McDonald house offers places to stay for families with seriously ill children.
Another example through Dell Computers is the “Direct Giving” program with employees, employee donations are made to Earth Share, which supports multiple environmental projects.
However, ethical and discretionary together constitute social responsibilities of business. Discretionary responsibility of today may become the ethical responsibility of tomorrow. Carroll suggest that companies undertake both activities voluntarily otherwise society will assert to make it legal.
In light of these four responsibilities business social responsibility is defined as the hierarchy of obligations of the firm to fulfil its economic obligations, obey the law of the land, behave ethically and finally voluntarily assume the obligation to tackle some of the problems of society at large.
Thus the astute modern manager must recognize that business entities have social responsibilities and that one of many management tasks is to develop strategies to enable the enterprise to achieve economic objectives within constraints of legal requirements, while giving due regard to the ethical implications of the firm’s actions and assuming an appropriate share of responsibility for discretionary quality-of-life concerns when the firm is capable of making a useful contribution.
Source: (SK Bhatia, Dr Abad Ahmad, Business Ethics and Managerial Values)
2.6 Importance of CSR
The current wave of globalisation presents historically unprecedented trends towards interconnectedness and interdependence that are reshaping global and local political, economic and cultural processes (Held et al., 1999). These trends and processes have significant global implications for businesses and industry activities, the natural environment and technologies (Parker, 2005) and have led to a blurring of boundaries between business, government and society.
It is no news that today’s business organisations are expected to exhibit ethical behaviour and moral management. However, over the past half century the bar has been steadily raised. Now, not only are firms expected to be virtuous, but also they are being called practice “social responsibility” or “corporate citizenship” (Carroll, 2000, p.187), accepting some accountability for societal welfare.
(Journal of Consumer Marketing, Volume 18 Number 7 2001 pp.595-632)
Consumers are being increasingly exposed to corporate social responsibility from wide range of industries (Darbonne, 2001; Ching et al., 2002). A growing number of scholars take the view that firms can no longer be seen purely as private institutions but as social institutions instead. The benefits flowing from firms need to be shared collectively. This thesis is similar to the stakeholders model (Freeman, 1984) and claims that a firm is responsible not only to its shareholders (owners) but to all stakeholders (consumer, employees, creditors, etc) chose contribution is necessary for a firm’s success. Thus, CSR means that a corporation should be held accountable for any of its actions that affect people, communities and the environment in which those people or communities live (Frederick et al., 1992).
Another school of thought sees social responsibility as a contractual obligation firms have towards society (Donaldson, 1983). It is society in the first instance that has permitted firms to use both natural and human resources and has given them the right to perform their productive functions and to attain their power status. As a result, society has implicit social contract with the firm. Thus, in return for the right to exploit resources in the production process, society has a claim on the firm and the right to control it.
2.7 Different aspects of CSR
2.7.1 Cause Promotions
Description: Supporting social causes through promotions to increase awareness, fundraising, volunteers.
Cause promotions are where a corporation provides funds, in kind contributions, or other corporate resources for increasing awareness and concern about a social cause. One of the major focuses of cause promotion is persuasive communications to create awareness and concern for social issues.
Some examples of cause promotion are Dell computers which sponsors efforts to collect used computers for donation to local non-profits and public agencies. McDonald sponsoring the Olympic Youth Camp program held in 200 in Sydney, Australia.
In Mauritius, Data Communication Ltd (DCL) has agreed to give a percentage of its profit on every activated easy-call card to a social organisation, United Way Mauritius. (Extract of Le Matinal Sept.2005)
2.7.2 Cause Related Marketing (CRM)
Description: Donating a percentage of revenues to a specific cause based on product sales. Most commonly, this offer is for an announced period of time for a specific product and for a specified charity.
The important activities of CRM are to establish specific promotional offer, developing co-branding, advertisements and tracking consumer purchases and activities. One typical aspect of CRM is to donate a specific amount for each product sold. For example, the company matches consumer contributions related to product sales.
CRM supports a cause which have a lot of supporters, example; Aids, poverty alleviation, homelessness, hunger, environment, breast cancer. Some benefits of CRM are the potential attraction of new customers, raising funds for a cause, reaching niche markets, increasing product sales, building valuable partnerships that supports the effort and building positive brand identity.
For example Dell offers 10% off selected new products when up to 3 used products are recycled online. McDonald earmarked $1 for children’s causes from the sales of Big Macs and other items on World Children’s Day, 22 November 2002.
2.7.3 Corporate Social Marketing (CSM)
Description: Supporting behaviour change campaign. The use of marketing principles and techniques to influence a target audience to voluntarily, accept, reject, modify or abandon behaviour for the benefit of individuals, groups, or society as a whole.
CSM refers to corporation that supports the development and implementation of a behaviour change campaign. This can be in the form of improving public health, safety, the environment or community well-being. CSM distinguish itself from other social initiatives as the focus is on behaviour change and primary to support and influence a public behaviour.
The common areas for CSM are: improving public health (Aids campaign), improving public safety (safety belts), protecting the environment (pollution control) and encouraging public involvement. CSM is commonly developed and implemented by state public sector agencies. For example Dell computer offers free and convenient return of used printers for recycling or reuse.
2.7.4 Community Volunteering (CV)
Description: Providing volunteer in the community. Community volunteering applies to a corporation that supports and encourages employees, retail partners and franchise members to volunteer their time to support local community organisations and causes. Volunteer effort can be contribution of their talents, ideas and physical labour.
For example Barclays Bank Plc is one of the first corporations that have engaged itself in community volunteering. Typical CV programs are promoting and encouraging ethics through corporate communication, suggesting specific causes and charities, organising volunteer teams for specific cause and events, helping employees to find opportunities buy matching personal interest with community needs. Those contributing towards CV are provided with time off during the year. They are also awarded cash grants.
Some potential benefits of CV can be termed as follows:
Building genuine relationships in the community
Contributing to business goals
Increasing employee satisfaction and motivation
Supporting other corporate initiatives
Enhancing corporate Image
Providing opportunities to showcase products and services
Examples of community volunteering are McDonald providing meals for professionals and volunteers at the September 11 disaster sites and Dell employees around the globe participating in the “Global Community Involvement Week” each September, including activities such as park cleanup.
2.7.5 Socially Responsible Business Practices (SRBP)
Description: Adapting and conducting discretionary business practices and investments and supports social causes. SRBP applies to corporation that adopts and conducts discretionary business practices and investments that support social causes to improve community well-being and protect the environment. Most initiatives related to SRBP are concerned with altering internal procedures and policies, such as those related to: product offerings, facility design, Manufacturing or Assembly and Employee support.
Some common activities of SRBP are to design facilities to meet or exceed environmental and safety recommendation, e.g reduce wastage, energy conservation.
Another activity of SRBP is the development of process improvement, e.g practices such as eliminating the use of hazardous waste materials, reducing the amount of chemical used in growing crops, or eliminating the use of certain types of material in food preparation or conservation. SRBP deals with the discontinuation of products offering that are considered harmful but not illegal, selection of supplies based on their willingness to adopt or maintain sustainable environmental practices and rewarding their efforts.
The potential benefits can be classified under financial and marketing.
Decreasing operating costs
Increasing employee productivity and retention
Increasing Community goodwill
Creating Brand Preference
Building Brand Positioning
Improving Product Quality
Increasing Corporate Respect
Examples of Socially Responsible Business practices are Dell creating product design programs with specific environmental guidelines, policies and goals. Also McDonald’s changed to recycled-content packaging and reduced packaging materials.
2.7 Empirical Evidences (Best CSR practices)
Johnson & Johnsons “Campaign for nursing’s future”.
Johnson & Johnsons believed that doctors, nurses and patients were the first to use their products and services as a result of a shortage of nurses in UK. They initiated a program “Campaign for nursing’s future” in February 2002 to enhance the image of the nursing profession, recruit new nurses and retain nurses currently in the system. Johnson & Johnsons committed themselves to invest 25million dollars towards this campaign. The project elements included programs on the national televisions, print and interactive advertising campaign in English and Spanish, celebrating the nursing professionals in their contribution to health care, a very visible public relations component with press releases, video news releases and satellite radio tours available to hundreds of media outlets across the country. Recruitment materials including brochures, pins, posters and videos in both English and Spanish were distributed free of charge to hospitals, high schools, nursing schools and nursing organisations. Also incorporated in this project was fundraising for nurse student scholarships, faculty fellowship, and grants to nursing school to expand the program capacity.
Stanley S. Litow president for corporate community relations and president of the IBM International Foundation, chairs the On Demand Community, and innovative employee volunteer program that IBM believes has effectively leveraged its existing corporate social initiatives, as well as invigorated its workforce. IBM has developed a reputation for state-of-the-art community programs that capitalize on the IBM know-how and expertise. Their award–winning programs feature world-class technology solutions to address social problems and are characterized by buy-in and supports of community leaders; broad promotion programs to its employee population; adjustment of the technology solutions as necessary to make them more immediately responsive; linkage of programs to other corporate activities; and monitoring and evaluation plans that have helped IBM determine program effectiveness and improvements that needed to be made.
Shell: “We all need to assess the impact our business makes on society and ensure that we balance the economic, environmental and social aspect of everything we do” (Moody Stuart, 1999). In Shell we believe that a responsible business must operate on the basis of core global values. It should listen to society’s messages, justify its legitimacy in the eyes of societies and opinion leaders, and regulate itself effectively and openly (Corporate Governance, Volume 1 Number 2 2001 pp.16-22).
SkyWest Airlines Donates More Than $184,000 to Haiti Earthquake Victims
SkyWest Airlines employees across the United States have helped donate nearly $200,000 to benefit earthquake victims in Haiti. The relief donations total more than $184,000, reflecting a 100 percent SkyWest Airlines match of donated employee paid time off hours and monetary donations. The relief, collected through the Company's Spirit of SkyWest Foundation, will be donated to the American Red Cross to directly support victims of Haiti's massive January 12 earthquake which left more than one million people homeless and without basic supplies.
"The response of SkyWest's people has been overwhelming and humbling to say the least," said Chip Childs, President and COO. "Their generosity will help thousands of people in Haiti, who months after the devastating quake are still in desperate need of basic necessities.” The money was donated by SkyWest employees between January 22 and February 14, 2010. The massive contribution in such a short amount of time demonstrates the compassion typical of the SkyWest team, who help those in need in the communities the airline serves and around the world.
PepsiCo marks progress toward sustainability goals: Advancing on water, electricity and fuel conservation initiatives.
PepsiCo announced that it has made significant progress toward its long-term environmental sustainability goals, which include reducing water consumption by 20 percent, electricity consumption by 20 percent and fuel consumption by 25 percent per unit of production by 2015 compared to 2006. These goals are part of PepsiCo's Performance with Purpose vision, the company’s commitment to delivering shareholder value while leaving a positive imprint on society.
"All of the credit for the progress we've made so far goes to the many talented people within PepsiCo who have found innovative ways to reduce our environmental footprint," said Indra Nooyi, PepsiCo's chairman and chief executive officer. "We still have much work to do, but these are important, positive steps in our long journey to constantly improve our stewardship of the environment."
In order to attain these goals PepsiCo has launched a number of activities:
Water Reduce consumption by 20% -- Across the world, PepsiCo has saved nearly 1.5 billion gallons of water in 2007 compared to 2006. PepsiCo is taking to scale a combination of new technology, information sharing and employee initiatives that reduce water consumption and increase re-use.
Electricity -- Reduce consumption by 20% -- At the Tropicana facility in Bradenton, the orange juice storage system was converted from an ultra-low temperature freezer system to cool refrigeration that preserves the juice's freshness without freezing it.
Fuel -- Reduce consumption by 25% -- Alternative fuel sources are also a major focus for PepsiCo. This year, the Frito-Lay manufacturing facility in Modesto, inaugurated a solar concentrator field made up of large curved mirrors that move with the position of the sun, focusing the heat into tubes of glass filled with water. The water is converted into steam, which helps heat the cooking oil used to make Sun Chips.
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