Defining Of The Corporate Social Responsibility Commerce Essay

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There is a wide variety of terminologies related to social responsibility within companies and that can be quite confusing for designers, even for those that have already some knowledge on the field. Some of the names include: corporate responsibility, corporate accountability, corporate ethics, corporate citizenship, sustainability, stewardship, triple bottom line and responsible business. Fortunately the goal of achieving of a sustainable society remains the same within all these terminologies.

On this report Corporate Social Responsibility deals solely with the social dimension of the "Corporate Responsibilities" and it is related to the Triple Bottom Line pillars of sustainable development, as represented on the next figure (WBCSD, 1999). Thus, the working definition adopted here puts CSR as a continuous business process that contributes to achieve an equitable and social cohesive society. A similar but more detailed definition is provided by the World Business Council on Sustainable Development: CSR "is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large" (WBCSD, 1998).

Figure 1 - Triple Bottom Line translated into Corporate Responsibility

In contrast to this view of "beyond the law" responsibilities some have argued that the only social responsibility of a business organization is to deliver profits to its owners/shareholders. However, although economic responsibilities remain fundamental to business survival, society often has a number of other expectations from businesses that involve since philanthropic donations as well as the promotion of healthcare, childcare, and educational opportunities. These societal expectations are in fact social responsibilities (Hutchins & Sutherland, 2008).

Hence, the "voluntary" nature of CSR as presented on the European Union definition clearly is not sufficient to protect workers and citizen rights and the need for pro-activeness to change our current development problems. Trade unions and civil society organizations argue advocate for a regulatory framework establishing minimum standards (CEC, 2002). A balanced approach between voluntary activities and imposed activities seems to be a more reasonable way forward on this issue.

It is important to emphasize that CSR is much more a process, or a journey, than a objective itself. It usually implies a long term, and quite often radical, transformation of the business (GRAYSON, 2008). Companies have different reactions to the social responsibility challenge. Usually the initial stage of such phenomena involves reactive responses from external pressures (e.g.: setting a social project to compensate for the negative social impact of a given business process). On a more advanced stage (see Porter & Kramer, 2002) companies began to see actual business opportunities on being socially responsible, enhancing both social as well as economical impacts of its activities by treating CSR with a strategic view. Kovács (2008) argues that further evolutions on this direction are characterized by companies having pro-active role on networks to tackle global issues. In all this levels the designer can have an operational, tactical and strategic role.

Finally, the term "corporate" might bring the idea that CSR is suitable only for large multinational companies. The truth is that many SMEs are already implementing socially and environmentally responsible practices without being familiar with the CSR concept or communicating their activities. The CEC (2002) survey had found out that 50% of the European SME´s at that time have already carried out some CSR activity. The study have identified that SME´s community and social engagement was characterised as being local in scope, occasional in nature, and unrelated to business strategy and with the owner/manager as the main driver (CEC, 2002). Thus, in general terms CSR principles can be applied both in large as well as small companies and the size of the company affects solely the tactical approaches for its implementation.

1.3 Historical Background

The belief that everyone, by virtue of her or his humanity, is entitled to certain human rights is fairly new and the application of such belief within companies has an even shorter story. Throughout much of human history, people acquired rights and responsibilities through their membership into a group, ranging from his/her family, to an indigenous nation, a religion, a class, community, or state. The Hindu Vedas, the Babylonian Code of Hammurabi, the Bible, the Quran (Koran), and the Analects of Confucius are examples of ancient written sources which address questions of people's duties, rights, and responsibilities and throughout history they have affected the way of people doing business. In fact, as Flowers (2008) argues, all societies have always had some oral or written system of propriety and justice as well as ways of tending to the health and welfare of their members.

Figure 2 - Timeline on key influences on our current understanding of Corporate Social Responsibility

1.4 A New Epistemology of Design after CSR

Design can play a fundamental role in the definition and visualization of alternative scenarios for companies striving to implement CSR initiatives in the direction of sustainability. In order to achieve such goal design has to re-examine its fundamental concepts such as form, function, client, user, and market, as well as the role of technology, aesthetics and the role of designer itself (MANZINI, 1994). It requires that the integration of wider competencies that enable the designer to move from simple end-of-pipe solutions to more complex issues such as equity and cohesion (see illustration on the next figure). On this perspective the designer needs to wider its impact on the real world from mere design of new products to the promotion of new life styles that result in lesser consumption in the case of richer consumers, or the leapfrog on consumption patterns in the case of poor consumers.

Figure 3 - Evolution of Design Concerns over Sustainability

According to ICSID (2008) one of the main tasks of design is to seek, discover and assess structural, organizational, functional, expressive and economic relationships, with the task of enhancing global sustainability and environmental protection (global ethics); giving benefits and freedom to the entire human community, individual and collective; final users, producers and market protagonists (social ethics); supporting cultural diversity despite the globalisation of the world (cultural ethics); giving products, services and systems, those forms that are expressive of (semiology) and coherent with (aesthetics) their proper complexity. A search for equity is an underlying principle within this definition of design and one that has far reaching implications on the design practice and theory.

2 CSR BENEFITS FOR THE COMPANY

2.1 Increase in Profits

A report released by Goldman Sachs (GSSustain, 2007) on six industrial sectors - energy, mining, steel, food, beverages and media - found that companies considered leaders in implementing environmental, social and governance policies designed to create sustained competitive advantage had outperformed the overall stock market by 25 per cent since August 2005. Within their own sectors, 72 per cent of these leading companies had outperformed their peers over the same period GS Sustain 2007 (GRAYSON et al., 2008).

CSR can contribute to an increase in profits by reducing costs on business processes. Porter & Kramer (2002) give the example of philanthropy directed towards a university on company related fields of competencies, leveraging its resources with local resources. Implementing an in-house training or research facility would often be far more expensive.

Nevertheless, as any business process alone, CSR is not a guarantee of corporate survival and profits. Indeed, the WWF report "To Whose Profit? Building a business case for sustainability" make it clear that while there are strong signs of a positive correlation between CSR and bottom line profits, companies that ignore CSR still prosper (CICERO, 2007). Furthermore, one of the main criticisms to CSR is the possible incompatibility of applying it fully when the very nature of a business is to make profit. Indeed, "competition" and the search for profit on a free market is a paradox with the rather more open and cooperative approach required by most CSR initiatives. This situation often leads to a cynical view of the true business motives with CSR. The consumer or even the community that gets the benefit of a CSR initiative might see this as an instrument to provide further profits to the business.

2.2 Brand differentiation

Brand differentiation is perhaps one of the most widely uses of CSR from a corporate strategy point of view, even in commodity markets. In marketing terms, within CSR brand promises need to be replaced by brand integrity (KOVÁCS, 2008). Building a brand reputation on the issue of CSR often requires a long term process and can be a competitive advantage difficult to be copy by competitors. At the same time, as argued by CEC (2002), bad social reputation flows quite fast downstream on the supply chain and can even hamper the operation of a given company depending on the sensitiveness of the consumer and local authority to corporate social responsibility.

2.3 Human resources attractiveness

It is increasingly hard to attract bright young talents to companies and even entire industrial sectors that do not have a good profile on CSR. Industries such as construction have bad public images and perceived as being dirty, dangerous and dull (3D's), with adversarial relationships at all levels and great social and environmental insensitivity. Such situation makes it hard the recruitment of new young talents. Indeed, a Wall Street Journal Almanac Pol: of high school-aged vocational technology students ranked "construction worker" 248th out of 250 possible occupation choices, ahead of "dancer" and "lumberjack" and just edged out by "cowboy" (SANTOS, 2008).

2.4 Development of staff competences to deal with complexity

Dealing with complexity is an important asset on staff competencies, particularly when the company works in various geographical areas or when their product/service is subject to public scrutiny. It is also virtually impossible to emulate complex problems on the classroom or on artificial settings for learning activities. Thus, CSR initiatives can be seen as an instrument to generate such competencies which then could migrate to other functional activities throughout the business where complexity is present.

2.5 Reduction of risks through better stakeholder relationships

Corporate social responsibility is fundamentally a comprehensive multi-party effort that needs to involve stakeholders ranging from governments, non-governmental organizations to citizens and others (CANADA, 2006). The involvement of stakeholders can bring direct benefits on the reduction of risks on investments, particularly when local support is required to avoid business disruption. CEC (2001) argues that the familiarity of companies with the local actors, the local environment traditions and strengths is a strategic "social capital".

2.6 Understanding the behavior of potential markets

Conventional marketing techniques have difficulties to capture the depth of requirements of certain markets such as low-income families and that in turn creates a burden to innovation in products and services. Thus, CSR initiatives can also help a company to rethink its products/services and even open new markets that were otherwise not seen as such by marketing personnel. Very importantly CSR initiatives help to bridge channels with the potential partners and consumers that can be accessed by the company on future business transactions.

4 DRIVERS/BARRIERS FOR CSR

In order to allow a designer to understand his/her role within a CSR initiative it is important he/she understand the various motivations that could drive a business (and a businessman) to invest company assets into social responsibilities. It is important to call attention to the fact that these CSR drivers could also be understood as barriers for CSR on those situations when they are absent. Hence, the focus of the designer on his/her creative process would include actions to overcome such barriers or to induce the introduction of these drivers.

4.1 Ethical consumerism

Social and environmental awareness from society, and in particular from consumers, serves as a mediator to extend not only governmental, but also voluntary regulations further in the supply chain and even beyond the immediate supplier of a given product/service.

Ethic-based consumption, driven mainly by today´s faster and cheaper access to information (e.g.: internet) is risen and it is affecting the decisions of an increasingly amount of people worldwide. These are a new generation of consumers that use their buying power to drive the implementation of ethic principles into businesses (and countries) around the world. Next table shows examples of products/services that characterize this type of consumer:

Table 1 - Examples of Consumables on Ethical Consumerism (Based on The Cooperative Bank (2007)

Though still a small portion of the overall market, the rise of ethical consumerism has evidence in most developed countries as well as on developing countries. In the UK, for instance, household expenditure on ethical goods and services has almost tripled 1999 and 2006 (see figure below). On average, every British household spent £664 in line with their ethical values in 2006 compared with just £366 in 2002, an increase of 81 per cent (THE COOPERATIVE BANK, 2007).

4 DRIVERS/BARRIERS FOR CSR

In order to allow a designer to understand his/her role within a CSR initiative it is important he/she understand the various motivations that could drive a business (and a businessman) to invest company assets into social responsibilities. It is important to call attention to the fact that these CSR drivers could also be understood as barriers for CSR on those situations when they are absent. Hence, the focus of the designer on his/her creative process would include actions to overcome such barriers or to induce the introduction of these drivers.

4.1 Ethical consumerism

Social and environmental awareness from society, and in particular from consumers, serves as a mediator to extend not only governmental, but also voluntary regulations further in the supply chain and even beyond the immediate supplier of a given product/service.

Ethic-based consumption, driven mainly by today´s faster and cheaper access to information (e.g.: internet) is risen and it is affecting the decisions of an increasingly amount of people worldwide. These are a new generation of consumers that use their buying power to drive the implementation of ethic principles into businesses (and countries) around the world. Next table shows examples of products/services that characterize this type of consumer:

Table 1 - Examples of Consumables on Ethical Consumerism (Based on The Cooperative Bank (2007)

Though still a small portion of the overall market, the rise of ethical consumerism has evidence in most developed countries as well as on developing countries. In the UK, for instance, household expenditure on ethical goods and services has almost tripled 1999 and 2006 (see figure below). On average, every British household spent £664 in line with their ethical values in 2006 compared with just £366 in 2002, an increase of 81 per cent (THE COOPERATIVE BANK, 2007).

4.3 Ethics Values of Investors

Fortunately there is a growing number of investors with unselfish social and environmental values which are now pushing capital markets to create "sustainable investments" options. According to EC (2001), investors demand better disclosure and transparency of companies´ practices, rating agencies based on their methodology and investment management of SRI (socially responsible investment) funds and pension funds.

These shareholder-led initiatives have put CSR on the agenda of corporate boardroom. According to Grayson (2008) around 83 per cent of leading Dow Jones Sustainability Index (DJSI) performers have appointed a CSR committee whilst the same can only be said for 21 per cent of the Dow Jones World Index of all companies. The adaptation of the structure of the board to address sustainability issues has ensured a better quality and depth of overall formulation and implementation of sustainability strategies (GRAYSON, 2008).

One of the barriers for CSR on the investor´s side is the demands for short-term profit that is still is paramount, particularly in today's markets where the companies who don't optimise their earnings become immediately vulnerable. In such condition CSR might be put as secondary criteria since it has a long-term future connotation if it does not provide a clear contribution to the business competitiveness (HUTCHINS & SUTHERLAND, 2008).

4.4 Globalization

Globalization with its characteristic cross-border trade, multinational enterprises and global supply chains, is contributing to raise CSR concerns, particularly to human rights and environmental protection, among other things (CANADA, 2006). It has contributed to disseminate sustainable principles, even on those markets where there are little local pressures for its application, affecting over several echelons in the upstream and downstream supply chain. The positive effects, particularly downstream on the supply chain, include an increasing number of companies accepting voluntary (industry) agreements (KOVÁCS, 2008).

Globalization has reflected on more close attention to health and safety practices as well as discrimination and child labour. Globalization (and consumers access to global information) has resulted to a situation where companies can no longer continue outsource the selection of sub-suppliers to their direct foreign suppliers - they need to be informed about the actors in their extended and even ultimate supply chain around the world (KOVÁCS, 2008

4.5 Technology

New technologies, particularly on the field of Information and Communication (e.g.: internet, mobile phones) have opened new possibilities for consumers track corporate activities and to disseminate information about them. Nongovernmental organizations now regularly draw attention through their websites to business practices that they view as problematic (CANADA, 2006). It has also enabled collective actions from consumers that otherwise would be too expensive and complex to be carried out globally.

ICT is also one of the enablers for the sudden growth of corporate networks tackling issues related to CSR (ex: World Business Council for Sustainable Development). The share of knowledge on social responsible practices among corporations is becoming increasingly easier and faster and even an expectation for those companies enrolling on this journey.

The LENS (Learning Network on Sustainability) is a good example of technology affecting the dissemination of sustainability knowledge. This European funded project integrates 7 universities from Asia and Europe and uses a web-based platform to produce an open learning e-package, a modular package of teaching materials (texts, slide shows, audio, video, etc) and tools for designers that design educators worldwide will be able to download (free of charge), modify/remix and reuse (copy left).

4.6 Enforced and Voluntary Regulations

In most countries CSR is pushed by government regulations and policies as well as NGO´s pressures. Rudge (2008)argues that markets work optimally only if embedded within rules, customs and institutions. Whilst markets themselves require these to survive and thrive, society needs them to manage the adverse effects of market dynamics and produce the public benefits that markets undersupply. Rudge (2008) calls attention to the fact that market pose the greatest risks to society and business itself when their scope and power exceed the institutions that allowed it to operate.

Nevertheless, governments, particularly in some developing countries, may lack the institutional capacity to enforce national laws and regulations against transnational firms doing business in their territory even when the will is there. On these countries governments may also feel constrained from enforcing human right principles by having to compete internationally for investment. Similarly, home States of transnational firms may be reluctant to regulate against overseas harm out of concern that those firms might lose investment opportunities or relocate their investment elsewhere (RUDGE, 2008).

Hence, whilst there is a significant role for governmental regulations on CSR there is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues related to CSR (CANADA, 2006). CSR implies following regulations and, at the same time, going beyond it. It means conducting business in a way that is consistent with morals and values of society but "not necessarily required by law". It involves, for instance, acceptance of voluntary agreements and a search for innovative solutions based on CSR principles. Examples of international frameworks/guidelines that are not legally binding include the Global Reporting Initiative; the United Nations Commission on Sustainability Framework; UN Global Compact; the ILO's Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy; the OECD Guidelines for Multinational Enterprises (CEC, 2001; KOVÁCS, 2008).

Fortunately, industrial spillovers of social and environmental demands mean that companies need to take even standards, legislation and requirements based on industrial agreements that are not targeted at them, if such social/environmental demand is extended to them via their customers (KOVÁCS, 2008). Thus, a voluntary agreement might turn into an "obligatory requirement", pressured by competition and customer expectations.

4.7 Crises and Catastrophes

On large multinational companies, shareholders expect companies to take action on global catastrophes. Such actions bring the dividend mainly on image and brand reputation, which regardless of the company true goal, is a necessary part of the business dynamics.

Similarly, when countries or an industry faces economical, social or environmental crisis or catastrophes it usually brings large risks to the very survival of the business and, at the same time, an opportunity for fundamental business changes. In such situations it is more likely that the company can survive through the crisis if it has strong local support based on its previous CSR initiatives.

4.8 Ethics training inside corporations

Outside of company boarders both worker and top executives are furthermost citizens. As citizens they are affected by the rise of ethical values on today´s society. Such increase in social/environmental awareness is pushed even further by the growing amount of in-house training on CSR, with companies implementing whole departments on this issue and even presenting job careers focused on CSR (WELFORD & FROST, 2006 apud HARWOOD & HUMBY, 2008).

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