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The genesis of csr

The genesis of CSR

2.0 Literature Review

2.1 Background

The dissertation focuses on notable positions of scholars regarding Corporation Social Responsibility (CSR) and Sustainable Development (SD). It may be noted that definition of some concepts in the social sciences are sometimes confused and often arises because the usage of such terms might have changed over time or by using it as synonyms for other concepts. It is therefore necessary to explain such concepts (like CSR and Sustainable Development) to enable readers to precisely know their meanings, particularly in the context in which they were used.

The genesis of CSR in academic history can be traced back to early 30s when Dean Donham had written in the Harvard Business Review of the necessity on businessmen to be responsible towards other groups in the community (Donham, 1927, 1929). Dodd (1932) pointed out in article published in the Harvard Law Review that substantial strides were being made in the direction of a view of business as an economic institution with both a social-service and profit-making function. Okoye (2009) mentioned that CSR get its popular beginning in 1950s with writers such as Abrams (1951) and Bowen (1953) with his book, Social Responsibilities of the Businessman. Abrams and Bowen contribution was followed by a host of supportive and critical analysts and writers that have helped broaden the acceptability and popularity of the concept. These also include writers such as Davis (1960) and Carroll (1979) as well as critical writers like Levitt (1958) and Friedman (1970).

Okoye (2009) agreed that CSR is generally acceptable as a concept but a major problem associated with CSR discourse is the lack of an agreed normative basis underpinning CSR practice (Campbell, 2007; Palazzo and Scherer, 2007) and this problem has been linked to the absence of an agreed universal definition of CSR. Although, attempts to map the landscape of CSR ideas and theories reveal its complexity and the most generalised of analytical formats, questions regarding the relationship between corporations and society have been analysed in the two-fold vein; that of rights approaches and power models (McMahon,1986).

Okoye used Essentially Contested Concept (ECC) theory proposed by Gallie (an eminent philosophical scholar) in 1956 to address concepts that by their very nature engender perpetual disputes then suggested that CSR is an ECC and this explains the potential for several conceptions of CSR, however, it does not totally obviate the need for a definition of its core or common reference point, if only to ensure that the contestants are dealing with an identical subject matter.

Controversy surrounding CSR make it impossible to measure its impact towards sustainable development which most companies claimed as the main objective of their CSR contributions. Aras and Crowther (2008a) noted that sustainable development is a notoriously ambiguous concept, as wide arrays of views have fallen under its umbrella. Aras and Crowther (2007a, b) proposed a Model of corporate sustainability that mentioned four aspects of sustainability which need to be recognised and analysed, namely: societal influence, environmental impact, organisational culture and finance. Furthermore, the four aspects was resolved into two-dimensional matrix along the polarities of internal vs. external focus and short term vs. long term focus which together represent a complete representation of organisational performance (Aras and Crowther, 2008b, see appendix for the diagram of the model [figure1]).

Many academic writers have argued that most of the CSR contributions were not for sustainable development but marketing tools to promote company's image and enhance financial performance. As mentioned by Rafael C et al (2009) with empirical evidence that CSR generates more consumer-company identification (C-C identification) because it improves brand prestige and distinctiveness; brand coherence is also a powerful antecedent of brand attractiveness in the context of CSR communication, and helps to generate better attitude towards the brand and greater purchase intention.

2.2 The Concept of Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) is a versatile concept in modern corporate governance which has different meanings across all disciplines. CSR is a concept with different understanding that has significant implications for academic scholars, businesses and society at large (including government). Williams and Aguilera (2008) pointed out that CSR like other concepts in social sciences have come to term with different definitions but in its broadest sense, means "doing good things” and having a positive impact. However, there is no general acceptable definition of CSR, and this has complicated efforts to measure and assess its accomplishments and drawbacks.

"Corporate Social Responsibility (CSR) means something, but not always the same thing to everybody. To some it conveys the idea of legal responsibility or liability; to others, it means social responsible behaviour in the ethical sense; to still others, the meaning transmitted is that of 'responsible for' in a causal mode; many simply equate it with a charitable contribution; some take it to mean socially conscious; many of those who embrace it most fervently see it as a mere synonym for legitimacy in the context of belonging or being proper or valid; a few see a sort of fiduciary duty imposing higher standards of behaviour on businessmen than on citizens at large” (Votaw, 1972, p.25).

Campbell (2007) noted that the major problem for lack of agreed universal definition of CSR is that an essential preliminary to the normative debate is the clarification of what is to count as 'CSR' while this was echoed by Whitehouse (2003) when she stressed that the apparent failure of CSR to fulfil its potential in remedying the adverse impact of corporate activity is due in part to the failure on the part of its advocates to establish a universally accepted definition of the term and the normative grounding necessary for effective regulation (Okoye, 2009).

Rafael C et al. (2009) conclude after empirical research that a socially responsible company is perceived by individuals with greater prestige; CSR helps the consumer to believe that everyone else has a more positive perception of the company (Brammer and Millington, 2005; Lafferty and Goldsmith, 1999). They confirmed that consumer-company identification (C-C identification) generate attitudinal and behavioural responses in consumers which are beneficial for companies (Bhattacharya and Sen, 2003; Cornwell and Coote, 2005) and emphasised that CSR is an attribute which distinguishes the brand from other competitors, making it special and different from other brands. They stressed further that socially responsible brand achieves greater value and is perceived as more attractive, and therefore individuals related to it can be positively distinguished.

Orlitzky et al. (2003) conclude in their studies that there is a statistical relationship between CSR and CFP (Corporate Financial Performance) and that CFP is a predictor of future CSR but CSR also predicts CFP. They stressed that the correlation between CSR and CFP was due to both internal (competency) and external (reputation) measures, and of the two, the reputation effect was stronger. Their findings support previous empirical studies of the relationship between CSR and organisational performance by Pava and Krausz's (1996). In 1996 studies, firms perceived as having met social responsibility criteria have either outperformed or performed as well as other firms that are not socially responsible.

Aguilera et al. (2007) voiced out that there should be closure of debate on the relationship between CSR and financial performance, stating that there is a lot of empirical evidence of a positive and significant association between two. They are in support of previous findings by Margolis and Walsh's (2001) and Orlitzky et al (2003) and these two meta-analyses add credence to the widely agreed notion that being socially responsible (as a corporate citizen) would improve a firm's financial performance.

Barnett and Salomon (2003) suggest that the relationship between financial and social performance is neither strictly positive nor negative. They stated that it is curvilinear, with strongest financial returns to low and high levels of social responsibility and significantly lower return to moderate levels of social responsibility. They stressed further that despite intensity of study directed at it, the relationship between CSP (Corporate Social Performance) and CFP (Corporate Financial Performance) remain in dispute.

Belaid Rettab et al. (2008) conclude in their study that CSR has a positive relationship with all three measures of organisational performance: financial performance, employee commitment, and corporate reputation. They stated that number of studies have shown that CSR improve organisational performance in western developed economies and contrary to their own prediction, the previous studies tally with the study carried out in Dubai using survey data from 280 firms operating in that region. They stressed that one could argue that in emerging economies (like Dubai), the link between CSR and a firm's financial performance is contingent on stakeholders' perceptions of CSR and subsequent reactions to CSR efforts.

Leonard and Parsa (2009) noted that relationship between CSR and financial performance is further complicated by the fact that there are no general agreed measurement methodologies and tools used to evaluate the link between CSR initiatives and a firm's financial performance. They stressed that in measuring CSR performance, combination of subjective indicators are generally used to measure a firm's performance on CSR initiatives such as corporate disclosures (annual reports), perceptions, CSR performance reports conducted by independent organisations such as Kinder, Lydenberg and Domini (KLD) rating systems, media reports, academic journals and government reports (Waddock and Graves, 1997).

Leonard and Parsa proposed a parsimonious model (The Corporate Socially Responsible and Financial Performance- CSRFINP Matrix) that a firm can use to perform their own "check up” or by investors to assess and assign a score. They mentioned that the fundamental premise of CSRFINP model is to rank and classify firms based on their financial performance relative to industry standards as well as its social value as indicated by societal perceptions in combination with the firm's observed practice of social initiatives. They stressed that firm can fall into one of the model's four quadrants based on their CSR and financial performance scores. A firm can fall on black or the "Aggressive” quadrant if it pursue purely financial initiatives and performs well on those initiatives. If a firm is a non profit entity and pursue purely social responsibility initiatives, then this firm will be regarded as purely green or placed in the "Green” quadrant. Firm that performed well both on social responsibility and financial initiatives fall into blue or "Progressive” quadrant while firm that underperform on both social responsibility and financial initiatives fall into yellow or "Repressive” quadrant (see appendix for the diagram of the model [figure2]).

Indeed it is noticeable that extractive industries - which by their nature cannot be sustainable in the long term - make sustainability a very prominent issue. Any analysis of these statements regarding sustainability however quickly reveals the uncertainty regarding what is meant by this sustainability. Clearly the vast majority do not mean sustainability as discussed in this article, or as defined by the Brundtland Report. Often is appears to mean little more than that the corporation will continue to exist in the future. Our argument is not just that this focus upon such a vague notion of sustainability is misleading and obfuscates the need for a rigorous debate about the meaning of sustainability. Our argument is that this treatment of sustainability is actually disingenuous and disguises the very real advantages that corporations obtain by creating such a semiotic of sustainability (Aras and Crowther, 2008b, p.284).

2.2 The Concept of Sustainable Development

Sustainable Development (SD) is a controversial concept because of its different meanings but an important one to businesses, communities, and societies. The birth of sustainable development can be traced to the World Commission on Environment and Development (WCED) report (1987), "Our Common Future” (Morvaridi, 1996). In the report, sustainable development was defined as a state in which the needs of the present are met without compromising the ability of future generations to meet their own needs. The report stressed the interdependence of economic growth, the environment quality, and that without a healthy economic environment activity, let alone growth is threatened (Ibid). Morvaridi emphasized on the common elements or criteria found in most definition of sustainable development which formed multi-disciplinary approach: concern for economic and social viability of future generations' intergenerational equity; alleviation of poverty, concern for social welfare; local participation in planning and execution of development projects; and positive impacts on environment and resource use (Ibid).

Pickering and Owen (1997) posited that the International Union for Conservation of Nature first present the idea of sustainable development at an International forum of the World Conservation Strategies in 1980. They stated that sustainable development in essence invokes present development of available resources without compromising the ability of future generations to meet their needs (WCED report, 1987). They posited further that many people would argue that this is an abstract idea that is not possible to achieve by asking this question; how can this generation understand the needs of future generations, even before they have been born, let alone future needs before they have been formulated? To this end, they suggested that the practical application of sustainable development should involve greater environment awareness by both government and individuals.

Aras and Crowther (2008b) defined sustainable development as a development that attempts to bridge the divide between economic growth and environmental protection, while taking into account other issues traditionally associated with development. It seeks to develop the means of supporting economic growth while supporting biodiversity, relieving poverty and without using up natural capital in the short term (Daly, 1999) at the expense of long-term development. They stressed that indeed there is a growing consensus that firms and governments in partnership should accept moral responsibility for social welfare and for promoting individuals' interest in economic transactions (Amba-Rao, 1993). Aras and Crowther (2008b, p. 281) stated that there is a confusion surrounding the concept of sustainability because for the purist sustainability implies nothing more than stasis (the ability to continue in an unchanged manner) but often it is taken to imply development in sustainable manner (Hart and Milstein, 2003; Marsden, 2000) and the terms sustainability and sustainable development are for many viewed as synonymous. They pointed out that as far as corporate sustainability is concerned, the term sustainable has been used in the management literature over the last 30 years (see Reed and DeFillippi, 1990) to merely imply continuity. They stressed further that an almost unquestioned assumption is that growth remains possible (Elliott, 2005) and therefore sustainability and sustainable development are synonymous.

"Sustainable development is the leading concept of our days embracing economic, social and environmental dimensions (Brundtland 1987). The measuring and management of this process is a difficult task because the concept varies, depending on the changing conditions of life. The measurement of social and economic development of a country is a complex phenomenon, which is described by a set of criteria (Podvezko, 2008). Many international institutions presented the assessment systems of indicators to measure the sustainability around the world. Despite the main pillars, classifications and sets of indicators differ across various institutions” (Lapinskiene and Tvaronaviciene 2009, p.205)

Dennis R.C (2008) noted that the developed world has experienced an unprecedented growth in its standard of living at a high cost to the environment with confusion about the true purpose of growth which is not merely to acquire wealth and power, but as far as possible, to have the potential for a life worth living for each community person and businesses. He suggested that to rectify the situation, sustainability must be aggressively pursued by individuals, businesses, and federal, state, and local governments, and a new eco-economy paradigm of ecological, social welfare capitalism adopted and promulgated by government, private property owners including businesses, and all other community citizens. He suggested further that this new paradigm would stress sustainability in general which in turn will require sustainable cities in particular.

2.3 Theoretical Framework

The dissertation used Structural-functionalism to view the relationship that exist among these factors; CSR, sustainable development, and marketing. Since people agreed that outputs of one sub-system become the inputs of the others and each sub-system operates in an environment which included each of the other sub-systems. The impression of academic scholars toward companies CSR contribution (like ISS UK) is either for marketing (promote image) or for sustainable environmental development.

The structural-functionalism is a notion of system maintenance which can be equated with equilibrium by Parsons. Parsons believed in existence of the political system of four basic functions: adaptation, goal attainment, integration, and pattern maintenance. He stated that each of these basic functions was carried out by four analytic sub-systems: social, cultural, personality, and behavioural organism. He stressed that these functions (collectively) are the necessary pre-requisites for the maintenance of any society. Society according to Parsons consisted of four basic structures (sub-systems): economy, polity, law and social control, and cultural and motivational commitments.

The structural-functionalism according Easton is known as System analysis from the concept of Input-Output analysis. Easton claimed to be using the term "System” in different way from the behavioural scientists. He interprets system as a complex organised form of behavioural through which something gets done and as an active set of relationships, not just as a collection of parts that interact with each other. System analysis is concern about the work that a system does and how is does that work. The initial emphasis is not on parts of the system and interactions but on identifying the work the system does; what flow through the system, how it is transformed by the system, what comes out of the system, and the necessary materials needed by the system to be able to produce these results.

The structural-functionalism according to Almond is known as Interdependence. Almond believed that various sub-sets of the system are closely connected with each other that a change in one sub-set produces a change in all the other sub-sets and was related to input-output functions. The input functions are performed by non-governmental sub-systems, the society and the general environment, while the output functions are performed by the government. Almond used seven-variable list of functional categories which four of these are input functions: political socialization and recruitment, interest-articulation, interest-aggregation, and political communication; and the remaining three are output functions: rule-making, rule-application, and rule-adjudication.

What the dissertation is primarily interested in the structural-functionalism are two things: to check relationship between CSR contribution by ISS UK and marketing (brand promotion), and CSR contribution by ISS UK and sustainable development. Since structural-functionalism was based on certain assumptions and interpretations of historical facts which the authors do not prove, or try to prove, and perhaps cannot be proved. Therefore, it may not be adequate to accept in absolute terms the relationship between CSR contribution by ISS UK as a marketing tool (brand promotion) and CSR contribution by ISS UK as a tool toward sustainable development.

Since ISS UK is a sub-system of a system in an environment which includes each of the other sub-systems (stakeholders: employees, customers, suppliers, business-partners, pressure-groups, business-community, and government). Outputs of ISS UK are the services rendered to their clients and their CSR contribution which become inputs to their stakeholders. The process and the application of their CSR contribution will determine if it is for marketing purpose or for sustainable development. The outputs of ISS UK is the supply-side of an equation while the satisfaction from all the stakeholders represent the demand-side which must be viewed equally important elements in both brand-promotion and sustainable development process. Any attempt by ISS UK not to provide satisfactory services to their clients and not to make enough CSR contribution to the system, it will definitely affect the whole system by decline in sustainable environmental development and give a bad image to the company (ISS UK).

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