According to Vogel (2006) the subject of corporate social responsibility is something which is often troubled by ambiguity, caught between being good for business and doing good for others, it has been unable to shake off its tainted image. To what extent does a critical analysis of contemporary corporate social responsibility practice reveal that CSR has begun to successfully address the trio of challenges facing the modern world - ecological, social and financial sustainability?
The subject of corporate social responsibility, CSR, is not a new concept, having been around for in various evolving forms for over thirty years (Votaw, 1972, p. 25). However, the past decade has seen a significant increase in the perceived importance of the concept, largely due to rising levels of concern around factors such as climate change and poverty, and the impact of businesses on these issues. Kolk and van Tulder (2010, p. 119) argue that business, and particularly multinational corporations, are seen as having an important role to play in addressing these and other ecological and social concerns, as well as helping promote and develop overall levels of financial sustainability. Whilst companies' actions in these areas were previously seen as being part of many of the problem, recent thinking and contemporary CSR practices have begun to focus on the potential for businesses to become part of the solution. Specifically, the unique situation that businesses find themselves in, with the ability to affect a wide range of stakeholders; the experience of managing projects and investments efficiently; and access to a wider range of finance than individuals and businesses, implies that they have the potential to make a significant contribution to achieving modern CSR challenges (Kolk and van Tulder, 2010, p. 119). However, it is uncertain whether the reality will match this potential. As such, this piece will attempt to analyse the extent to which contemporary social responsibility practices indicate that CSI is actually addressing the ecological, social and financial challenges facing the modern world.
Get your grade
or your money back
using our Essay Writing Service!
When considering contemporary corporate social responsibility practices, it is important to recognise the diverse nature of modern CSR. All accounts of CSR recognize that business firms have many different kinds of social responsibilities, including ecological and financial responsibilities in this umbrella (Carroll, 1979, p. 497; Waddock, 2004a, p. 313). Indeed, it is generally accepted that CSR has evolved somewhat like a tree, with various branches dividing to cover various responsibilities and social expectations concerning companies (Waddock, 2004b, p. 5). This has led to a wide range of practices and policies in companies, as well as a significant degree of debate around the extent to which these practices effectively balance the economic, social, ecological and financial concerns of businesses and society as a whole. As such, whilst the development of comprehensive CSR frameworks has provided a wide range of opportunities and advice for professionals, it has also created a wide range of definitional problems that reduce the ability of CSR to comprehensively address global challenges. As such, in spite of all the developments that have occurred in CSR over the previous few decades, CSR still arguably "means something, but not always the same thing to everybody" (Votaw, 1972, p. 25).
This can be seen in the primary theories of CSR that have the most influence over modern CSR practices and social concerns. In particular, the instrumental theories, driven by the arguments of Friedman (1972, p. 1) continue to influence contemporary practices. These theories focus on the use of CSR as a profit maximisation tool, claiming that CSR should focus only on addressing customer concerns about corporate actions, and thus maximising profits. Other influential theories include the political theories, which hold that corporations hold power over society through the importance of the products they supply and actions they undertake, and thus should use this power responsibly to maximise social outcomes. Further to this, there are ethical theories of CSR, which are based on the absolute ethical responsibilities that corporations have to the societies and groups that support them. These theories are thus linked to the definition of CSR as satisfying absolute societal concerns, such as the financial, social and ecological challenges discussed above (Garriga and Melé, 2004, p. 51), and hence are of importance to this piece.
The ethical theories of CSR cover a relatively wide range of theories, each of which is dependent on the method of ethical analysis used in a given situation. However, all of these theories focus on the objective and absolute nature of corporate social responsibility, specifically the requirement for firms to behave in an absolutely ethical manner, and take responsibility for addressing social challenges. There is evidence from current corporate social responsibility literature that this set of theories does drive business actions, leading them to create a more objective view of the various social and ethical challenges that they face, and also to integrate their social responsibilities into their other corporate responsibilities such as profit and shareholder value maximisation (Maak, 2008, p. 353). Companies are also increasingly motivated to apply the ethical theories due to the existence of CSR watchdogs that rate the quality of a business' CSR actions on an absolute scale. However, at the same time this objective and absolute model of CSR is of limited appeal to corporations, as it does not provide them with any direct economic benefit, only increased costs. As a result, it arguably sits in opposition to the responsibility of a business to maximise the profits it pays to its investors. This implies that whilst this set of theories of CSR may be more objectively accurate and clear, and have gained some traction with businesses, they are less likely to gain any sort of widespread acceptance amongst businesses and help businesses meet the social, ecological and financial challenges facing society.
Always on Time
Marked to Standard
However, by far the most dominant theory and model of CSR is the stakeholder theory of CSR. This theory holds that the social responsibility of business is not purely to maximise profits, or to adhere to absolute ethical requirements and demands. Instead, the social responsibility of businesses is to listen to the social requirements of corporate stakeholders, be they suppliers, customers, employees, investors or some other, and take action to address these requirements and concerns. The nature of stakeholder theory can be seen in Frederick's (1987, p. 142) CSR classification model, which indicated that early CSR approaches were highly philosophic and abstract, based on the perceived need for businesses to address any and all social problems they came across. These early approaches proved to be unworkable, and burdened businesses that adopted them, leading to the emergence of the concept of corporate social responsiveness, aimed at moderating operational and behavioural aspects of businesses depending on the company's relationship with its internal and external stakeholders (Carroll, 1999, p. 268).
Stakeholder theory evolved from this original approach to the defining of CSR approaches and theory, with Wartick and Cochran (1985, p. 758) demonstrating that practical corporate actions at this time were focused on being socially responsive to stakeholder demands, as well as pursuing policies based on managing social issues that were relevant to a company's stakeholders and environment. The stakeholder theory of CSR was also strongly influenced by Carroll's (1991, p. 39) four level CSR pyramid model. This model indicates that businesses have four primarily social responsibilities: to make a profit, to obey the law, to be ethical, and to be a good corporate citizen. These were ordered throughout the pyramid, with profitability being the most important responsibility, and being a good corporate citizen being the least important (Carroll, 1991, p. 39). As such, any company should focus on making a profit and obeying the letter and spirit of the law as primary concerns. However, once these concerns have been addressed, they should then focus on behaving in ethically acceptable ways, and finally focusing on addressing social, ecological and financial challenges. This model can be seen in the stakeholder view of the firm, where the firm must also rank its stakeholders, and determine which actions must be taken to support them, as well as which stakeholder groups and concerns are most important.
Models such as these have helped to shape overall levels of CSR practice development in the contemporary business environment. In particular, Payne and Raiborn (2001, p. 157) demonstrate that businesses are becoming more aware of expectations of their social responsibility by considering the nature of their value chain, which encompasses most of their stakeholder groups. This allows businesses to understand the concerns of their stakeholders regarding the social responsibility of the business, and how this responsibility should be prioritised against economic and legal responsibilities. This implies that modern CSR can be viewed on a continuum, where businesses choose to operate at a single point on the continuum based on the weight of their stakeholder demands. Evidence from the study indicates that the majority of companies are tending towards the lower end of this continuum, focusing on simply complying with laws and minimum requirements, and not making significant process towards sustainable development. This implies that contemporary CSR practices are failing to address the primarily social, ecological and financial challenges, but that this failure is due to the stakeholders in organisations failing to prioritise addressing these challenges over and above other organisational goals and actions.
Indeed, this lack of stakeholder imperative is supported by studies into the relationship between corporate social responsibility and the economic and financial performance of companies. Pelozo and Papania (2008, p. 169) note that this relationship is always highly ambiguous, given the disparate number of stakeholders in a firm, and the unwillingness of some of the most powerful stakeholders to reward or punish firms purely on CSR grounds. Indeed, their results indicate that companies only see significant benefits from their CSR activities when they are perceived as being highly socially irresponsible. When a company has achieved a reasonable degree of social responsibility, it does not engage in greater levels of activity as the rewards will not match the costs of the investment, and the resultant punishment from disappointed shareholders. This not only indicates that there is insufficient stakeholder pressure to drive truly effective CSR practices, but also that there is a conflict between companies' primary social responsibility to increase profit, and their discretionary responsibilities to be ethical, philanthropic and address social challenges (Carroll, 1991, p. 39). As a result, until stakeholders begin to sufficiently reward higher levels of social responsibility, current CSR practices are unlikely to succeed in addressing the most pressing social issues.
This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.Examples of our work
This view is also held by Pitelis (2001, p. 111) who notes that current economic approaches have "an impoverished view of virtuous human behaviour in general, and corporate social responsibility in particular". Specifically, the dominant approach to modern economics is to focus on the maximisation of wealth through the efficient allocation of scarce resources, with the aim being to maximise overall utility levels. This model of free market economics, which is the basis for much of the contemporary global capitalist economy, is effectively free of innate ethical concerns, and does not value socially responsible behaviour. This leads Pitelis (2002, p. 111) to conclude that businesses will not be motivated to address the trio of challenges facing the modern world until a different approach to economics can be formulated, based on sustainable resource creation and the use of responsible behaviour as a performance measure (Pitelis, 2002, p. 111). This argument is also supported by DesJardins (1998, p. 825) who analyses contemporary CSR practices and finds them all flawed due to their basis in classical and neoclassical economic models. This implies that not only are new economic models required, but also new CSR practices and alternative views of sustainability.
However, in spite of these negative assessments of current CSR practices, it should be noted that the social responsibility of business continues to grow in importance, as companies look to report their social responsibility performance alongside their financial results. This indicates that whilst the current economic model remains, companies are beginning to see their social responsibility actions not just as something to support their economic goals, but as individual performance measurements that should be monitored and reported on in a unique way. This is supported by Sweeney and Coughlan (2008, p. 113) who note that when reporting CSR, "organisations are taking a focused stakeholder view of CSR rather than a wider view as would be expected from the ambiguity of definitions of the concept". In particular, the CSR reports of companies tend to be consistent both with the stakeholder theory of CSR, and with the CSR communications literature, showing that CSR reporting is focused on fulfilling the expectations of key corporate stakeholders.
Unfortunately, the power of these CSR reports, and the concept of CSR reporting in general, is undermined by the absence of any generally accepted principles of CSR reporting, and the lack of any auditing requirements that perform the same job for CSR results as accounting principles do for financial results. Morimoto (2005, p. 315) discusses the lack of these principles, noting that whilst CSR is generally accepted as being an important social aspect of corporate activities and sustainable development, there is almost no agreement regarding its measurement. Unfortunately, overcoming these issues is likely to be difficult, given the lack of formal studies into the concept, and academic and institutional discussion around the nature of CSR reporting and measurement. As a result, CSR reporting increasingly becomes more a case of designing effective marketing communications, with companies being able to report their CSR activities outcomes to their stakeholders with no concern around any official challenge to their reporting methods or the reports themselves. This implies that even if contemporary CSR practices were effective, companies are motivated to focus more on embellishing their reports, and engaging in CSR activities which have maximum publicity impact, rather than actually engaging in CSR practices that address the key challenges facing the modern world.
Indeed, CSR in general is a voluntary concept for modern businesses, tending to be more of a marketing consideration than an operational one. This is reflected in actual corporate social responsibility reporting practices, with Carrasco (2007, p. 458) noting that "the information that enterprises are prepared to give is not homogeneous. So it is not possible to compare business behaviours". This not only stretched to issues reporting the nature of CSR activities and the 'social balance' that companies create, but also encompasses the fact that social concerns tend to vary across countries. As such, it is relatively simple for organisations to simply outsource their less socially responsible activities to countries where the activities will not be seen as socially irresponsible, and companies can make numerous claims about their responsibility levels, and hence the apparent degree of irresponsibility is lessened. This is reflected in a study by the European Commission (2002, p. 1) which notes that consumers are increasingly realising that levels of global market governance have developed far faster than levels of global social governance.
This is supported by the ILO (2004) which argues that new approaches are needed to ensure effective governance not only of international economic factors, such as protectionism and free trade, but also international social, and environmental factors. This raises the concern that, even if CSR theory and practices are updated to move away from their current neoclassical basis, they may still not be sufficient to motivate businesses to address the key challenges facing the modern world. Such concerns have led authors such as de la Cuesta González and Martinez (2004, p. 275) to question whether CSR practices should be complemented with a compulsory regulatory framework, not only regulating reporting but also CSR activities. This is driven by the recognised failure of voluntary CSR in some areas such as Spain, where ongoing economic issues have led to CSR priorities falling far behind other business concerns. The lack of an effective regulatory framework for CSR is also cited as being a reason for the low level of private sector initiatives and social spending, versus public and charity initiatives. Whilst this study concludes that a formal framework may not produce net benefits, it does indicate that governments should be more proactive in encouraging and monitoring CSR activities, to ensure that corporate rhetoric more accurately reflects reality (de la Cuesta González and Martinez, 2004, p. 275).
In conclusion, the way that CSR has developed over time, combined with the numerous different theoretical and conceptual perspectives on the issue, has meant that CSR is still troubled by high degrees of ambiguity, and concerns that modern CSR practices are still primarily driven by instrumental profitability concerns. Whilst there are some studies in the literature that indicate that some businesses are actually attempting to behave in an absolute ethical manner, the majority of contemporary CSR debate and practice indicates that CSR is not successfully addressing the challenges facing the modern world. In contrast, whilst companies are actively encouraged to behave in a responsible manner, and punished by stakeholders for behaving irresponsibly, they are not rewarded for putting in significant extra effort. The main reasons for this are a lack of stakeholder prioritisation for CSR initiatives over other business concerns and a lack of formal methods for assessing CSR activities and reporting effectiveness. Solving these issues is likely to be difficult, as the modern economic system continues to support monetary and profit consideration over social considerations, and there is insufficient level of debate and agreement over the nature of CSR to mandate any formal assessment methods. As such, this implies that contemporary corporate social responsibility practices are unlikely to ever make significant contributions to the trio of challenges facing the modern world, unless significant ecological, social or financial changes cause major increases in stakeholder attitudes regarding said challenges.