CSR Contents And Subjects Commerce Essay

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This chapter will discuss the main areas of the literature regarding CSR contents and subjects as well as how the content of CSR will be discussed. The theories that are created in this chapter will examine CSR from companies' perspectives. The literature that is brought up to do some extent overlaps among other in terms of content. However, in order to have an overall picture of the intriguing all subjects of the issues will be mentioned and discussed separately in this paper project.

Corporate Social Responsibility definition:

It has to be said that there is no common accepted definition of CSR but it's generally understood as "doing more than what is required by law" (Buhmann, 2006).

The most agreeable definition of this vast subject of CSR is offered by 'World Business Council of sustainable development' which defined that CSR as

"Continuing in commitment by business to behave ethically and contribute to economic development while improving the quality of the workforce and their families as well as the local community and society at large" Mior (2001).

Corporate Social Responsibility can also be referred to as "the social responsibility of business encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a given point in time (Carrolll, 2004)

The beginning of CSR

The concept of CSR can be traced back to the 18th century when organizations became to recognize the crucial role of having an efficient workforce .Insufficiencies in food, housing and healthcare had serious negative impacts on the workforce's productivity and keeping these impacts in considerations, companies moved to invest in medical facilities, housing and subsidized food for their own employees. From the organizations' point of view this philanthropic was really coming from an enlightened self-interest (Brown, 2005).

The modern CSR concept started to be commonly used between the 50's and 60's of the last century as a result two main principles. The first principle can be understood in charity suggestion which is that those who are well should give to those less fortunate. The second one is the stewardship principle which claimed that companies have an obligation to serve the public's interest as a return of the power and wealth that companies enjoy from the society they work within and they should therefore serve the society's needs. From other perspective, serving the society changed how companies were perceived by governments, press and other groups which led to the birth of new more socially responsible laws. (Sims, 2003)

CSR today

Nowadays CSR has been the topic of ongoing debates as media interests increased. It has become a trend among companies to actively involve themselves in the public issues. As usual with trend many companies go with the flow while other discuss why and how they can engage in these activities efficiently (Andersson,2006).Consumer start to be more loyal to those companies who take social responsibility and therefore it is considered a growing strategic issues for companies(CSR wire).

successful corporations such as ,McDonald's, General Electric and Ford together with approximately 1,200 other CSR practitioners and experts made sure to attend the annual conference for social responsibility in New York 2006 .The main topic was to discuss the growing interests of CSR among companies. It became popular that sometimes the companies' CSR reports exceed their annual reports. It has become a rich field and lots of businessmen, marketers, corporations leaders want to get into it. The participants of this conference spoke about their own corporate social responsibility and how companies can make the world a better place. (Nocera, 2006).

Social Responsibility in Other Nations

Social responsibility reflects the cultural values and traditions and it also takes different forms in different societies .What may be the accepted custom in the United States, Japan, and South Korea does not necessarily mean it will be accepted in Germany, Brazil, Indonesia, or Ukraine. Drawing the lines as to what is socially acceptable from a global view is often a difficult process.

For example, Japanese organizations have less experience in stakeholder protests as firms in the United States. Victims of environmental disasters have been treated as outcasts when seeking compensation for harm caused by Japanese business activities. Employers' practice may prefer certain groups have been generally adopted as a social practice in Japan. Ever since, Japanese firms have become more opened with the international community, corporate social responsibility has begun to emerge. The corporation's aim of seeking profitability has been faced with stakeholder's demand which forced firms to act as both economic and social entities. Japanese business has responded by attempting to establish a positive working relationship with society.

On the other hand, corporate social responsibility acts in different manners in European countries due to the governments which provide many social services often received as benefits from private employers in the EU countries. For example, debate by governments their representatives over social responsibility issues resulted in the adoption of a social policy for the European Union (EU) countries, named the social Charter. Rather than relying upon private corporate initiatives, governments represented in the EU drafted a public policy which provided incentives and rewards for corporate social actions within the EU.

The social Charter was approved by 11 out of 12 EU members, but not without argument. The United Kingdom was unyielding dissenter, and refused to approve the Charter. The UK stood fast to its own preference for the policy of deregulation considering employment issues, Embodied within the social Charter which refers to the Social Action Program (SAP). The SAP established health and safety guidelines, regulations on working hours, Europe-wide rules for worker consultation, and rules for gender equality at work. Thus European businesses' reply toward social responsibility as matter of compliance with different governmental policy guidelines and program initiatives.

Moreover, business leaders' as well as government official attitudes toward social responsibility varies across cultures and countries. In many parts of the globe developing nations where poverty is wide spread and civil strife is frequent, economic goals and military activities seems to be given higher priority than the pursuit of social goals .Environmental protection, on the other hand, may be considered less critical than having a polluting steel plant that creates jobs. In these cases, social responsibility initiatives by business tend to be slow in coming.

Stakeholders and Corporate Social Responsibility

Regarding this relation, Robert W. Lane, the Chairman and CEO of Deere Company once said, "If you don't have honesty and integrity, you won't be able to develop effective relationships with any of your stakeholders".

Stakeholder groups draw the lines of the basis for success and failure of the business. Whether Stakeholders or individuals or even groups that have interests regarding their social responsibilities, rights and ownership of organizations and their activities. Customers, suppliers, employees and shareholders are all examples of primary stakeholder group. Each has his own interest in which organization performs or interacts with them. These groups can either benefit from a company's success or be harmed by its mistakes. More importantly, stakeholders are also crucial because they can take action which will cause either damage or assist the organization. Moreover, stakeholders include governments (especially through regulatory agencies), unions, nongovernmental organizations (NGOs), activities, political action groups, and the media.

For the sake of serving their stakeholders more in an ethical as well as social manner, more and more organizations are adopting the model of corporate social responsibility. The term Corporate Social Responsibility covers many other terms starting from corporate citizenship, responsible business and simply corporate responsibility. In other words when organizations build their ethical and social structures in their operating philosophy and integrate them in their businesses model, it is claimed to have possessed a self-regulating mechanism that guides, enhance and ensure its adherence to law, ethics plus norms in carrying out business activities that guarantees serving the interest of both external and internal stakeholders. In other words, the objective of being socially responsible business will be achieved once organization's activities meet or exceed the expectations of all stakeholders.

The pyramid scheme below illustrates a model for evaluating an organization's social performance. The model indicates that total corporate social responsibility can be subdivided into four criteria which are




discretionary responsibilities

Total Corporate Social Responsibility

Figure 1.1 Stakeholders of Organizations

Layers of CSR

Economic responsibilities

The first criterion of social responsibility is the economic responsibility. As the term implies, the business institution is above all, the basic economic unit of society. It's responsible to provide products and services that societies seek, for the sake of maximizing profit for company owners and shareholders. The economic responsibility was carried to the extreme which now is called profit-maximizing view; it was advocated by a Nobel economist Milton Friedman. This view claimed that companies should be operated on a profit-oriented basis, with their sole mission to increase their profits as long as they stay within the rule of the game. The purely profit maximizing view is no longer considered an adequate criterion of performance in the world in general. Treating economic gain in the social as the only social responsibility can lead companies into trouble.

Legal responsibilities

All modern societies lay down ground rules, laws and regulations that businesses are anticipated to follow. Legal responsibility defines what society deems as important with respect to appropriate corporate behavior. Businesses are obliged to fulfill their economic goals within the legal framework. Legal requirements are imposed by local councils, state and federal governments and their regulating agencies. Organizations that knowingly break the law are considered as poor performers in this category. Intentionally manufacturing defective goods or billing a client for work not done is illegal. Legal sanctions may include embarrassing public apologies or corporate 'confessions'.

Ethical responsibilities

Ethical responsibilities include behavior that is not necessarily codified into law and may not serve the organization's direct economic interests. To be ethical, organization's decision makers should act with equity, fairness and impartiality, respect the rights of individuals, and provide different treatments of individual only when differences between them are relevant to the organization's goals and tasks. Unethical behavior occurs when decisions enable an individual or organization to gain expense of society.

Discretionary responsibilities

Discretionary responsibility is purely voluntary and guided by an organization's desire to make social contributions not mandated by economics, laws or ethics. Discretionary activities include generous philanthropic contributions that offer no payback to the organization and are not expected. Discretionary responsibility is the highest criterion of social responsibility, because it goes beyond societal expectations to contribute to the community's welfare.

2.1 Content of Corporate Social Responsibility

The areas that will be discussed in this section are firstly benefits of companies' corporate responsibility, and later the areas and aspects that companies' could assume responsibility over and encompass in their CSR work which becomes the content of their CSR.

2.1.1 Benefits of CSR

Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community, and civil society in general, both now and in the future. Evidence is now emerging that there is a genuine business case for taking CSR seriously. The benefits involve many dimensions of business activities: investor relations and access to capital; competitiveness and market positioning; employee recruitment, retention, and productivity; and the mitigation of litigation risk.

Development of Reputation

The review of relevant literature on CSR shows that a firm's reputation remains a significant benefit that affects almost all levels of the organization. According to Stephenson (2009), corporate social responsibility programs can effectively build and enhance firms' reputations. Through the development of a solid reputation, the organization can expand its business, attract new customers, improve shareholder value, and improve outcomes for the community. Additionally, the organization can achieve a competitive advantage because of its positive image. The development of reputation through corporate social responsibility has worked well for organizations such as Ben & Jerry's, Microsoft, and Starbucks. Because of their commitment to CSR, these organizations have been able to differentiate themselves, creating a true competitive advantage (Stephenson, 2009).

Improving Organizational Efficiency

Improving organizational efficiency is also a recurrent theme that has emerged in the context of this investigation. When organizations develop corporate social responsibility programs that meet the strategic needs of the community as well as the strategic needs of the organization, value is created for all stakeholders. For the organization, increased efficiency can improve operations and allow the organization to expand both its business and its profits. This can create a financial competitive advantage for the organization that can be used for market dominance or expansion of the market to include new products. This reality is clearly seen by the development of the Prius by Toyota. By increasing the efficiency of operations and meeting an important social need, Toyota was granted a unique financial advantage over all other car manufacturers. Presently, the organization can use its financial position to offer increased benefits to shareholders and to expand its product line and further improve its competitive financial advantage.

Improved Operations and Products

Finally, corporate social responsibility programs provide the organization with a number of advantages that can be exploited to improve operations and the quality of the products produced by the firm. CSR programs enable the organization to earn higher revenues and profits which can be translated into the development of improved products offered by the firm. This process further facilitates the development of the organization as one that has superior products on the market. Improved reputation will lead to an increase in sales, revenues, and profits, which will in turn result in the development of more corporate social responsibility programs for improving the community, environment, labor practices, health, and safety. Arguably, the business justifications for the development and implementation of CSR for competitive advantage are quite extensive. Even when examined in generic terms, the competitive advantages that can be achieved from corporate social responsibility programs are quite extensive. The challenge in this case appears to be for organizations to effectively integrate CSR programs such that they can provide all of these benefits for operations and outcomes.

2.1.2 Areas of CSR that firms are responsible for

According to (Andriof and McIntosh, 2001) CSR is neither philanthropy nor a study of a business ethics, it is more of a version that business leaders have besides making money. Those responsibilities have impact on almost everything that company does and will affect both insides and outsides the company. in order to make more manageable this can be divided into four distinct areas:

The environment

The workplace

The community

The marketplace

These four are the most aspects companies focus on, work with, and develop special programs within. These aspects will also have an impact such as monitoring and changing the way they conduct business within the organization.

Companies those are engaging with the corporate social responsibility start to lose their traditional way of conducting businesses rather than focusing on making profit and in through this pay more attention to employees, environment, and communities. Those who practice CSR believe that employees are significantly productive when they get fair wages and work under good conditions. Not only that, they also believe that any company will be successful in long run if the community has a low crime rate and well developed infrastructure include education, healthcare. Companies which took environmental issues in mind while processing their all operations in the sake of earning a high degree of loyalty from customers and other companies in return. nowadays companies' reputation is almost as important as price when a decision of purchasing the product is taken which explains related state from (Andriof and McIntosh's 2001) areas of CSR. Sen and (Bhattacharya,2004) provide below a number of CSR activities that companies can engage in.

2.1.3 Activities of CSR

According to Sen. and (Bhattacharya, 2004), there a lot of corporate social responsibilities initiatives and these can be categorized into six categories of activities within CSR. Those activities are more in depth descriptions of different ways of companies to engage within CSR. Companies can get involved in one or more of those activities. The chosen criterions are based on what CSR activities that customers consider important and therefore the company has to invest money, time and goods. The six different types of activities are:

Community support: the company can provides and support several programs in their community such as arts, health, education, and housing initiatives for those who are poor but also generous and innovative giving accurse.

Diversity: the company works for and supports the diversity of sex, race, family, sexuality, and disability.

Employee support: the company supports questions regarding safety, job security, profit sharing, union relations, and employee involvement.

The environment: the company uses environmental friendly products such as ozone depleting chemicals etc. They have a well-developed dangerous waste management and pollution control and recycling system. They also avoid testing methods involving animals.

Non- domestic operations: the company ensures that operations in counties with human rights violations and labor practice such as sweatshops are prevented.

Product: the company produces safe products and developed new innovations.

(Johnson, Scholes and Whittington 2008) discuss the same issues when describing the internal and external aspects of corporate and social responsibility. They present the checklist for what organization should be practically responsible for. These are defined internal and external aspects of what areas the companies' activities can affect. Internal aspects of the any company activities includes: employee welfare, working conditions, job design and intellectual property. External aspects includes :environmental issues ,products ,markets and marketing, suppliers ,employment ,community activity and human rights .(Kok ,Van Der Wiele ,McCenna and Brown 2001) agree with Sen. and Bhattacharya (2004).and Johnson,Scholes and Whittington (2008) regarding the activities/aspects of CSR but provides a more extensive framework .

2.1.4 CSR Aspects

(Castka et al, 2004) claimed that "there is no single authoritative definition of CSR. The CSR agenda seems to be loosely defined umbrella embracing a vast number of concepts traditionally framed as environmental concerns, public relations, corporate philanthropy, human resources management and community relations. Koke et al. 2001, "present in a table 2.1 a framework where the concepts mentioned above are taken in consideration. This framework was developed to help companies to reflect on their current CSR position and stimulate movements in the preferred CSR direction. Issues that are important when discussing CSR are classified into fourteen aspects that are connected to the external environment, the internal environment or both.

Table 2.1 Aspects of CSR

External Environment

1.Social responsibility and new opportunities:

2.Community relations:

3. Consumer relations:

4. Suppliers relations:

5. Natural environment (e.g. pollution and packaging) and future generations:

6.Shareholders relations:

Internal environment:

7.Physical environment :

8.Working conditions:

9.Minorities /diversity :

10.Organizational structure and management style:

11.Communications and transparency:

Contributing to solving or reducing social problems.

Extent of openness and support to people around the organization and to (local or national)government, stakeholder groups, action groups, churches, educational institutes, health care institute, and others.

Extent of openness toward consumers; recognition of rights of consumers: safety, information, free choice, and to be listened.

Extent of openness toward suppliers; recognition of rights of suppliers: information, participation in design.

Execution of legal requirements, research into current and future technical and environmental developments, environmental issues regarding packaging (recycling).Respect for biodiversity and needs for future generations.

Extent of openness regarding social effects of activities of the organizations (especially with regard to investment decisions).

Safety, health, ergonomic aspects, structure and culture.

Demand in relations to recruitment, selections promotions, part-time work, working on Sundays, medical aspects, and retirement aspects.

Extent to which attention is given to minorities, diversity, multiculturalism

Empowerment, involvement.

Top down and bottom up communication, use of information technology review of information flows: relevance, timeliness, detail, accuracy.

12. Industrial relation:

13.Education and training:

Internally &Externally

14.Ethics awareness :

Extent to which communication takes place about expectations, needs, values, and norms in society.

Needs of employees, current and future knowledge and skills ,review of training ,budget, personal development ,quality assurance of training process, ,evaluation of training process.

Attention within development and training and communication for ethical subjects and aspects in relation to work and the business ;involvement of employees in developing codes of behavior, values, ethical codes, and the way employees are addressed to those aspects ; simulation of abroad ethical discussions with all parties.

Source: Kok et al. (2001)

(Kok et al,2001), state that 'there are several good reasons for driving companies to use framework like the one in table 2.1 .It can be used as a part of the CSR planning process both strategically and operationally to show and evaluate current internal and external practices. It can be considered as a way to identify the strategic and practical CSR points of strengths and weaknesses. It simplifies the development of CSR improvement plan and provides basic data for the measurement of the CSR implementation in the organization. It also identifies the ones able to contribute to the CSR work and makes the participants.

2.1.5 CSR policy levels

Kok et al. 2001 continue to state that companies have one out of different policy levels in connection with each of the following 14 aspects .Improvement in the company's CSR can be accomplished by moving towards the next policy level.

The first policy level, the ad hoc policy, is in reality no policy The only times social issues are given any attention are when the cost are neglecting them are two high and potentially when legal action is made against the company.

The second policy level, standard policy, is that policy strictly follows the law. Only when legal requirements exist will the company integrate in the business practices.

The third policy level, planned policy, is when the law is followed and also when other parties that have a direct relation to the business performance is taken onto consideration.

The fourth policy level, reviewed policy, is when the company believes it has legal and moral obligations to society. All parties are involved in the companies' decision making and ethics awareness is a key work of organization (ibid).

2.1.6 Codes of conduct

Closely related to the company's policy is the company's code of conduct which is defined by international labor organization (ILO, No Date) as:" companies' policy statement that defined ethical standard for their conduct". They further state claims that there is a clear variation in the content of companies' codes of conduct. Leipziger (2003) agrees with ILO's definition and continuously claimed that one characteristic of codes of conducts is that they are either internal or specific and different from what is usually called standard that are boarder in scope and can be applied wider geographically and industrially as well.

The institute of business ethics also refers to the code of conduct as code of ethics or ethical policy and statement of business practice, and set of business principle which clarified that companies view the code of code differently .Lohman & Steinholtz (2003) state the key issues can effects what a company code of conduct contains is that the industry that company works within and which activities the company is involved with. They continue to say that a code of conduct can contain areas such as: labor rights, human rights, bribery and corruption, environmental concerns and more.

According to (Leipziger,2003) an effective code of conduct can serve to: "Raise awareness of corporate responsibility within the company, help companies to set strategies and objectives, assist companies with implementation and control of values, help companies avoid risk foster dialogue and partnerships between companies and stakeholders, enhance unity and identify among divergent companies". The code of conduct 's importance, when trying to foster dialogue and partnerships between companies and stakeholders is receiving much space within literature today and therefore the area of CSR and company's stakeholders are discussed further below.

2.1.7 CSR Stakeholders

Johnson, Scholes and Whittington's (2005) definition the concept Corporate Social Responsibly includes the phrase "obligations to stakeholders", which shows the importance of stakeholders in such tasks. Stakeholders are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends". Interfering interest from several stakeholders are common and usual, compromises throughout different stakeholder's expectations are achieved, because all expectations cannot be accomplished all in once.

While implementing corporate and social responsibility it is crucial to identify stakeholder groups targeted by the organization as well as prioritize between different stakeholder groups. For example a company highly vulnerable to criticisms usually prioritizes media and non-governmental organizations to a further extent than a company not as vulnerable to criticisms (Lohman &Steinholtz, 2003)

2.1.8 CSR initiatives

Kotler and Lee (2005) mention that they have identified six major initiatives in the era of Corporate and social responsibility, and the most of corporation's CSR activities falls into one of these six initiatives. These initiatives have different potential benefits and possible concerns. Table 2.2 briefly describes the six CSR initiatives called cause promotions ,cause related marketing ,corporate social marketing, corporate philanthropy ,community volunteering ,and socially responsible business practices and also potential benefits and concerns.

Table 2.2: CSR initiatives and their potential benefits and concerns

CSR initiatives

Potential benefits

Potential concerns

Cause promotions

Supporting social causes through promotional sponsorships

Build corporate reputation

Attracts and retains a motivated workforce

Supports marketing objectives

Build strong community relationships

Visibility for corporate efforts can easily be lost

Coordination with cause partners can be time consuming

Staff time and involvement can be significant

Promotional expenses can be significant

Consumers can be skeptical of corporate motivations and commitment

Causes -related marketing

Marketing a contribution or donating a percentage of revenues to specific causes based on product sales or usage.

Support marketing objectives

Builds strong community relationships

Coordination with cause partners can be time

Staff time and involvement can be significant

Promotional expenses can be significant

Consumers can be skeptical of corporate motivations and commitment

Corporate social marketing

Supporting behavior change campaigns

Corporate philanthropy

Making direct contributions to a charity or causes

Builds corporate reputation

Contributes to general business goals

Attracts and retains a motivated workforce

Supports marketing objectives

Build strong community Build

Builds corporate reputation

Builds strong community relationships

Attracts and retains a motivated workforce


Visibility for corporate efforts can easily be lost

Tracking resources expenditures and value can be difficult and expensive

Visibility for corporate efforts can easily be lost

Tracking resources expenditures and value can be difficult and expensive

Community volunteering

Providing volunteer services in the community

Builds corporate reputation

Builds strong community relationships

Attracts and retains a motivated workforce

Visibility for corporate efforts can easily be lost

Staff time and involvement can be significant

Tracking resources expenditures and value can be difficult and expensive

Social responsible business practices]

Adopting and conducting discretionary business practices and investments that support social causes

Build corporate reputation

Contributes to general business goals

Builds strong community relationships

Reduce operating costs

Reduce regulatory oversights

Attracts and retains a motivated workforce

Visibility for corporate efforts can easily be lost

Efforts may require external expertise

Consumers can be skeptical of corporate motivations and commitment

Source: Adopted from Kotler &Lee (2005) p.25, 258-259

2.2 Factors influencing corporate social responsibility

This section will be discussing the major factors that have great influence on the corporate social responsibility as well as the global factors that firms have to consider while going from domestic market to foreign markets will be discussed. Due to the globalization and the evolving of international businesses, people have to interact with others from different countries and cultures to become successful. Even though the foundation of the CSR is equally worldwide, there are differences in the context between countries. These differences regarding the responsibility of Social Corporation are reflections of four main factors which are culture, regulation and laws, NGOs and global standards. Since these factors differs from country to country, there are different values that will influence the society's expectations about the company (Burton, Farh, Hegarty, 2002) When establishing CSR in the home country the company evaluates the options in that country. However the CSR that is based on the factors in the home country will not necessarily will be appropriate for the global CSR. An organization has to identify the differences among these factors both home and foreign country in order to choose an effective approach to the CSR.(Galbreath,2006).The literatures used were selected because of their relevance and that they are often referred to in other previous studies with a global CSR.

2.2.1 Culture factors

Observing the culture factor is crucial to look at Hofstede's cultural dimensions .Hofstede studied IBM employees from 70 countries and based on this he analyzed countries regarding different culture behaviors. His dimensions give an insight into other countries' culture to be more effective when doing business internationally (Greet-hofstede.com).

Individualism and collectivism

In (Phatak et al.2005) Hofstede referred to individualism as "a social pattern that consists of loosely linked individual who view themselves as independent of groups and who are motivated by their own preferences, needs, rights, and contracts". They also define collectivism as a social pattern that consists of closely linked individual who view themselves as belonging to one or more groups and who are motivated by norms, duties, and obligations identified by these groups. These definitions indicate that firms which operate in individualistic societies are expected to care less about the company's impact on society .However, Ringov and Zollo (2007) state that this dimension has no significant influence on the social and environmental performance based on their research.

Power distance

According to In Phatak et al. (2005) power distance is described as "the extent to which extent less powerful members of institutions and organizations within a country expects and accept that powerful is disturbed unequally". Ringov and Zollo (2007) claim that companies that operate on countries with low power distance discuss social and environmental aspects openly and therefore perform better in this area than those with a high power distance. They further claim that countries with high power distance consider more business practices as ethical compared to low power distance countries. They conclude that this dimension effect the social and environmental performance.

Uncertainty avoidance

The extent to which a member of a culture feels threatened by uncertain or unknown situations" is the meaning of Uncertainty avoidance provided by Hofstede in Phatak et al. (2005). Ringov and Zollo (2007) state that organizations that operate in a country with high level of uncertainty avoidance will have harder socially adaption as well as complicated environmental demands and therefore will take less initiatives regarding those issues. However, their research does not support this theory and has no obvious impact on both social and environmental performance.

Masculinity and femininity

Going back to Hofstede, it defines masculinity as "pertains to societies in which social gender roles are clearly distinct "and femininity as" pertains to societies in which social gender roles overlap". Companies that work in higher level of masculinity countries are anticipated to prioritize material success and progress than cooperation which is known to be a sign of weakness. Ringov and Zollo (2007) research supports the theory that claims that dimension has an impact on the social and environmental status.

Burton et al.(2000) indicate that understanding of the culture of the country that a company wants to establish in is crucial to understand. Phatak et al. (2005) mentioned that the child labor is a common Childs' rights violation in developing countries and few companies have avoided it in their all productions lines. It is not unusual that children are working 12 hours a day for extremely low wages. In many cultures it is considered not only unethical but also against labor laws to workers while in other cultures this is about surviving and keeping the children out of the streets and doing crimes. Galbreatth(2006) argues this dilemma and found out that it is a fundamental issues whether a company should establish their CSR based on the country's or the foreign country's cultural standards. Companies might choose to not operate in the countries where they have major differences than the expected from their CSR. In some cases they might use an adapted CSR to the foreign country which is different from the one used in the home country. Galbreath (2006) stated Sony as an example, Sony has standardized and implemented a global CSR worldwide. Using a universal CSR globally can be preferable in some regions but it is important to differentiate cultures in order to acknowledge when and where adoptions are necessary. (Burton et al.2000) supports the theory that different culture will react differently to a company's CSR.

Andriof and McIntosh (2002) explain that cross-culture factors are becoming important when doing international business. That there will not be a successful business if there is no understanding for the other party's culture beliefs, religion, and values. This should also be taken into consideration in the home country since there are different people with different background, religion, and cultures integrated in the modern societies. These aspects are becoming more important in business's CSR today. Another way to look at the culture besides Hofstede's cultural dimensions is by viewing it through what (Kampf,2007) refers to as a cultural system.

2.2.2 Cultural systems and corporate social responsibility

According to (Genest, 2005) international corporate social responsibilities are more complicated than they seem, nevertheless given cultural standards among universal practice, all categories of corporate philanthropy procedures are required to be aligned with the culture values regarding specific countries and suit multicultural stakeholder's that MNCs have in the global market currently.

From another point of view, Kampf (2007) states that generally the most holistic way to overlook at CSR through different cultures is by cultural system perspective (figure 2.2).The main reason for using culture system model is that the model tries to illustrate both stakeholders and their interference with the company, this by presenting the company as a part of the cultural system (one part of institutional consequences) instead of the hob of the system.

Institutional Consequences

Firms (the company)

Trade associations Investors NGO'S

Outside influences:

World Economy Technology


Coming from:

Employees Communities Customers Managers

Origins or Ecological factors:

Political groups Governments Suppliers

Figure2.2: The Company and its stakeholders situated in a cultural system

Source: Kampf (2007).

Continuously, Kampf claims that his system does not completely separate culture from history, policies, or law rather than it looks at culture as the system whereas context, norms, and institutional consequences contribute. However, external impacts such as globalization affect culture within a culture/country, more specifically cultural system functions differently depending either on the origin or ecological factors, the norms and institutional consequences that are established by stakeholders who affect and interact within each other. For example both Denmark and the U.S are influenced by external effects in CSR while the origins or ecological factors vary. The Danish government has given for long time extensive social services for their people in comparison to the American government. The norms differ as an outcome whereas Danes have a higher level of concerns for the social welfare and that businesses interfering through high taxes while Americans have a higher concerns for shareholder's money and that businesses contribute by choice. The institutional consequences are that companies are already involved in offering social welfare in Denmark without a need to communicate their CSR to the same extent as American companies that do not automatically provide to the social welfare in the same extent.

According to (Kampf,2007) "The cultural systems approach is to understand corporate responsibility opens up the opportunity for researches to explore the connection between local culture in which multinational company headquarters are suited and the global influences which are becoming increasingly important and influential business becomes increasingly globalized". One part of the cultural system that is getting much more interest in the current CSR debate is the nongovernmental organizations.

2.2.3 Non-governmental organization

Princeton University's WorldNet defines non-governmental organization NGO as "an organization that is not part of the local or state or federal government". (John,2001) states that NGOs usually are either ideas -based or identify-based or both. Ideas-based NGOs focus on "human rights, education, equality, environmental sustainability, etc ".While identify -based NGOs focus on "indigenous, female ,homosexual, etc". Many NGOs have causes that are crossing and combing these two bases. (Galbreath, 2006) classifies the NGOs into three different groups that are based on what they do. There are operational, advisory, and advocacy .Operational NGOs offer their services to the society in areas such as education, health, disaster relief. Advisory NGOs offers different advice and information and works as consultant. Advocacy involve in lobbying activities with governments and other organizations in order to influence their decisions concerning policies for business. The question whether to customize the CSR to the host country due to the impact of NGOs in that country needs to be discussed by company when going abroad. The decision whether to customize or might not vary and is based on the company's policy and goals.

(Freeman, 2006) emphasizes that "the power and impact of NGOs cannot be overstated, emerging from almost nowhere to challenge multinational corporations". He exemplifies this with Nike and Gap who were accused by NGO's that there were using sweetshops .After this a lot of companies in different sectors have been confronted by NGO's regarding different issues. This showed up in this business have gained a lot of respect for NGOs ability to solve out these types issues. Furthermore he claims that the NGO's are institutions that influence business to engage in CSR more than most of others. NGOs expect companies' willingness to admit when they have major problems or less performance as the most important aspects due to transparency. Two multinational companies that had been earlier accused by NGO solved the problem by setting a new standard for transparency .Nike and Gap chose to show the public all their suppliers and what problems they had with violations with their own CSR. Freeman (2006) concludes that "NGO relations are becoming almost important as investor relation especially from a corporate reputation and communication perspective".

(John, 2001) said that the developing CSR trend and its unstoppable popularity have arisen as a result of the pressure that the NGOs have on companies. NGOs lead companies to be "good citizens", which means supporting the NGOs objectives. NGOs often apply pressure on companies not behaving ethically correct but they are also involved in applying pressure in companies not behaving legally correct.

2.2.4 Laws and Regulations

Legal responsibility is a crucial component of global CSR according to Carroll (2004).Companies have to follow the law in each country since it sets the norms of what acceptable and unacceptable. If laws and regulations are not obeyed it can damage the country's reputation and image on the market. All countries have suctioned legal systems which vary in each country. This implies that the expectations on the company will also vary. Significant differences have to identified before going to the business in foreign country.Galbreath (2006) says that laws are generally imposed by government when the companies and the market have failed to "ensure fair competition, safe products, air and equitable working conditions and a clean healthy environment ".Laws are also developed by respect to different social responsibility aspects, usually demanded from agencies or organizations within that area.

From what mentioned earlier, it has to be said that there are also laws that are more global, Phatak et al. (2005, p.129-131) reported OECD convention on combating Bribery of Foreign Public Officials in global Business Transaction. It was adopted in 1997; nowadays 35 nations have approved this convention. They further stated that the international legal environment consists of three levels of laws:

The law in home country.

The law in foreign country.

International law.

The biggest difference between countries' laws and the international law is that is an agreement between countries and not a decision taken by central authority.

According to one of OECD's reports compliance with law is the dominate factor that influences the companies' codes of conduct. They also state that almost of all the commitments in the 246 codes that they have analyzed are applied both in the home and foreign country. Besides these legal compliances all companies have commitments extent those regulated by law. A research made by (kuskusu and Zarkada -Fraser ,2004) on differences between Australian and Turkish companies showed that laws regarding product, contracts and industrial relations are equally important in both countries, However it also shows that there were some differences in how the environmental and anti-discrimination laws are considered important in each country. The Turkish companies care less about these laws then the Australians and this can be due to the lack of regulations in these areas in Turkey.

Galbreath (2006) adds that the regulatory environment in the country that the company will operate in when going abroad is an important factor that needs to be considered in CSR. Companies face the decision whether to regard the home and/or the host country's' laws in the CSR .He clarifies this by giving example "if a firm adopts a reciprocal strategy with respect to CSR in the home country and implements environmental production standards that go beyond those required by law as a part of that strategy, should the same policy be adopted in a host country of operation where environmental laws' don't even exist? "Issues such as this one have paved the way for more discretionary guidelines due to the legal inconsistencies worldwide.

2.2.5 Global standard and codes of conduct

The number of companies that integrate global standards and codes of conduct in their CSR have multiplied in the last decade and have become increasingly important in emerging markets which indicates that is has become even more essential for MNCs to incorporate standards and codes of conduct in their business (Fliess, 2007).Global standards, codes of conduct and frameworks within CSR area are topics that are receiving very much interest by companies and researcher at this moments. But global standard and codes of conduct are not something new, standards and codes have been signed between government ,organization and companies ever since 1948 in order to constitute some kind of moral authority and create guidelines for MCs (Phatak et al.,2005,p.251).Leipziger (2003) and Brown(2005)agree when saying that it could be very troublesome for companies active in CSR to negative through jungle of the sounds of standards and codes makes it impossible to review even a fraction of them in this study.

Leipziger (2003) states that some initiatives that are wide in scope also implemented throughout the world by MNCs are: the OECD guidelines for multinational enterprises the united nation (UN) global compact, and the global Sullivan principles for social responsibility.

The OECD guidelines for multinational enterprises are one of the most comprehensive guidelines and many countries are not OCEDs members have declared their commitments of these guidelines. Some of the areas treated in the guidelines are: general polices disclosure, employments and industrial relations, the environment, combating bribery, science and technology, competition, and taxation (OCED .org).

Other codes and standards that are more focused in specific areas such as human rights, labor rights and the environment consists of amongst others: the universal delectation of human rights, social accountability 8000(SA 8000), Ethical trading initiatives, The CERES principles, the natural step, the business principles for countering bribery, and the international labor organization: tripartite declaration of principles concerning multinational enterprises and social policy. There are exists global standards and codes for implementation of CSR .i.e. Accountability 1000, Global Reporting Initiative as well as certification systems such as OHSAS 18001 that deals with occupational health and safety, and ISO 14001 That deals with environmental issues.

2.2.6 National and regional standards

Not only global standard affect MNCs' CSR. Codes and standards are developed so that companies can act in an ethical way but ethics is not universal. Countries and culture are differ from each other in how they perceive ethics and therefore the codes and standards within countries and cultures differ (Donalson, 2001) .To illustrate this he says that even criminal gangs have their codes. The importance for companies to comply with different local /regional standards differs depending on where companies do business. For example company licenses issued to the companies that comply with local/regional environmental l standards amount 99 in the U.S (Green Seal),1756 in Japan (Eco-Mark program),and 223 in Sweden(Good Environmental Choice).There are also differences in how difficult these standards are to obtain in different countries. For example in Sweden and Spain there are relatively few requirements for companies when complying to national standards and as a result quit easy to obtain which is the contrary to Canada and Korea who have a vast number of requirements for companies' that wants to comply with the national standards (Fliess, 2007) The author continues to say that these national standards differences are just one of a large number of factors that show countries' commitment towards CSR.

2.2.7 The state of responsible Competitiveness

The degree of responsible Competitiveness in a country affects the CSR expectations that stakeholders have toward companies conducting the business within country. Al Gore says that countries that have a high degree of responsible Competitiveness help the companies to do the right thing through public policies and citizens action and increase CSR demand on companies. Some of the twenty one factors that affect the degree of responsibility competitiveness in a country which in turn effects the expectations of companies CSR work are: the signing and ratification of environmental treaties ,ratification of a basic' worker rights ,the tax environment ,strength of audit and accounting standards, ratio of ISO certification, the level of corruption, press freedom ,transparency of transactions ,and NGO memberships (MacGillivray,2007).

2.2.8 Corporate Social Responsibility: International and local impact

One thing that is for certainty is that there is a growing pressure on businesses to play a role in social issues and in the community that they operate; a trend that is emerging both globally and locally (Mallen, 2008). Ideally, this pressure is not likely to stay the same but it is more strongly to increase. The desire of individuals, NGOs, the government and the society at large to get 'something' back from operation of companies in their communities is up surging. In the past, companies used to see social responsibility only as a voluntary but with the lapse of time, many companies, especially multinational companies, are making social responsibility as part of their corporate policies. They have embraced the concept saying that "it is simply good for our business" (Source Watch: 2007). Indeed, these companies consider their social responsibility as something important to be inculcated into their business objectives.

Although the concept of CSR is not a new one (Hopkins, 2004), it is not fully embraced by everyone and a lot more people happen not to even understand this concept. The commitment of resources of corporate bodies towards social development issues has been with us for quite some time now but not everybody shared this view or celebrated this concept. Prominent amongst them is one of the world's greatest economist; Milton Friedman. He did not believe that corporate bodies had should meddle in social affairs; neither should they have any responsibility towards the community. As a strong activist of capitalism and a critic of CSR, Friedman emphasized the need to ensure that corporate bodies' managers use the monies and resources of businesses in a way that is in the interest of the businesses and nothing else (Friedman, 1970). For instance, he believes that if committing resources to reduce pollution as a 'social responsibility' of the firm would reduce the profits of the businesses in such a way that is not beneficial to the business, and then it should not be done. In his book Capitalism and Freedom, Friedman is said to have referred to corporate responsibility as a "fundamentally subversive doctrine".

It is a wonder that theorists like Friedman and his followers believed that corporate bodies giving something back to the society that they have taken from should be considered subversive. Although Friedman's argument was strong and captured global attention, the upsurge of CSR has continued. The proponents of CSR arguing on the basis that, over the years the social cost of businesses has increases coupled with the fact that corporate bodies have gained much power and influence. In these contexts of market failures, it has become imperative for businesses to pay heed to social issues due to this increased vulnerability of society to the corporate entity. Again, the growth of governments' inability to fulfill their basic responsibilities to society and to properly manage business activities and the market structures of a free market society in order to avoid over exploitation, means that the acceptance of social responsibility by the corporate world has become very inevitable and important (Amalric and Hauser, 2005)

Currently, in most developed countries, the debate is no longer whether it is important for corporate bodies to assimilate the concept of CSR or not, but the extent to which "CSR principles can influence corporate decisions and practices and how business can best address its social responsibilities" (Idemuia, 2007). According to the United States Social Investment Forum, over $US1 trillion in assets are under management in the United States in socially and environmentally responsible portfolios (Hopkins, 2004). This shows the increasing commitment of corporations to contribute towards various aspects of social development.