The Emergence Of Corporate Social Responsibility Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Business ethicists come from the works of such as Thomas Hobbes, John Locke and Jean-Jacques Rousseau to state that standard obligation on the firm forced by the societal deal need practical responses to the needs of owner and non-owner groups (Palmer, 2001). Ethics and responsibility are most often un automatically offered as atomized problems for individual decision-makers in the company, which is solvable throughout straight forward function of valid rules and codes of conduct. Related definitions of responsibility are narrow: "issues of corporate responsibility are of smaller scope than the ethical foundations of capitalism" (Goodpaster, 1983, p.3). Ethical questions are limited to external corporate effects like the means of production, in which appropriate questions are held to arise in places such as shareholder and consumer protection and skilled healthiness and safety. Best behavior is set in domination guidelines coming from organizations such as stock exchanges.

Passing from the deference that conventional approaches to CSR show to corporate interests Daly (1996) calls for systems thinking on continuing economic development as an acceptable approach to reshaping the industrial system. The CSR-related research that I concentrate on ethical justification, it defers to the procedures of capital on the other hand. Four aspects explain routine approaches. One, corporations are responsible only for their own behavior and not for capitalism itself. This possibility would explain why most CSR researchers leave indeterminate categories of obligation and forms that the social contract should take and not often consider alternatives to neo-liberalism (Lehman, 1999).Two; a related possibility is that self-regulation is an appropriate normative model for corporate entities (Gray, Owen and Maunders, 1988). Voluntary CSR reporting is unspecified, without evaluation, to properly clear the firm of extra-legal responsibilities. Three, economics is not recognized as a subject of choice. Institutional and legal category, market forces and the validity of corporations to gather private property are reified as part of the "fundamental authority of capitalism" (Goodpaster, 1983, 3), in accordance with its neo-liberal supporting (Lehman, 1999).Moral agency is received with as little significant reflection. Lastly, challenges between the search of economic growth and goals of usual maintenance and social justice are considered, if at all, as unimportant. In their review of the business ethics literature, Bowie and Dunfee (2002) specify that the CSR- related management focused to stay away from affecting on difference between ethical and profit motives.


Influences on CSR practice have a tendency to go beyond or cooperate in somewhat complex ways; e.g., when investment companies spend media dollars to train potential financial customers as to the advantages of social investment funds. They are systematically separate of their internal logics and immediate experimental referents.

I continue by identifying six sets of influences that might encourage social responsibility actions within the company: internal pressures on business managers, pressures from business competitors, investors and customers, and regulatory pressures coming from governments and non-governmental organizations .I concentrate on each serially with respect to (i) its internal logic (the conceptual arguments for and against it); (ii) its experimental remarkable feature in terms of the most recent related research, and (iii) considered opinion regarding its predictions to be a major factor in promoting outcomes consistent with social welfare. The reason for representing these forces and not others is threefold: their close relation to the capital collection procedure generates the externalization dynamic; the personality of customer character in industrial social formations impacts whether 'enlightened consumption' can be a important force promoting CSR; and the direct contact to companies demanded and required by the state and popular mobilizations.


Helpful arguments for CSR focus on market effectiveness and risk management. By adopting a set of practices whose anticipated primary benefits are directed away from shareholders (while, at the same time, following those that are) the firm is possibly situated to take advantages of previously unexpected business opportunities, counter the risk of losing presence in existing markets and establish a presence in emerging ones. Such arguments disregard that managers are not provided convincing incentive to do so (Jones, 1996). Assume (bounded) economic rationality, a company can only be anticipated to undertake and continue so-called societal responsibility activities and initiatives under confident conditions. If the governance structure of a European-American company is functioning correctly with respect to prioritizing the interests of shareholders/owners, then management should pursue only those strategies/projects designed to enhance or keep the company's position across its relevant markets (Shimizu, K. 2005).

I consider three pre-requisites to the useful deployment of any CSR strategy, as follows. First, senior management must have an attentiveness of the content and potential instrumental value of CSR. Operating according to instrumental principles would pass any motivations leading to CSR actions. Porter and van der Linde (2000, p. 131) consider CSR as a competitive driver that requires proper resources. However, for business managers, business is first.

Common considerations come second and given that only such considerations would not open an usable weakness (O'Dwyer, 2003). The pattern simply prevents general improvements consistent with social welfare. Problematic here contain the intersection of CSR with managers' personal values close to payment packages based only on economic act; the necessitate to estimate the net economic impact of a proposed CSR strategy even in the lack of clear and apparent metrics, and the resources, capabilities and leadership to fund and manage CSR strategies (Adams, 2002; Jones, 1996).

Furthermore, CSR practice is formed by legal frameworks mandating that corporations focus on economic performance and managers' remuneration being tied to that performance. Researchers note that business managers charged with operational CSR in their companies filter such initiatives throughout an economic lens. O'Dwyer (2003), after presenting the results of interviews of senior executives in a number of Irish public listed corporations, points at "structural pressures" and "perceived barriers" to a more incorporated employment of CSR. An interview-based revision on German and UK managers in chemical and pharmaceutical companies finds that managers view CSR initiatives as subsidiary to the main game of economic performance (Adams, 2002). Reflecting this main concern, personnel charged with the task of producing CSR reports were functionally separated from accounting departments. The separation of CSR from center operations is commented in other contexts. Dick-Forde (2005), interviewing managers in a partly nationalized Caribbean corporation, comments on the under-funding of environmental management/reporting functions and their loneliness from strategic management and management accounting processes.

Managerial relegation of the CSR reporting task to public relations departments (rather than to cost/revenue centers under the scrutiny of accountants) would clarify its observed ineffectiveness to date. Despite the common promotion of the 'business case' for CSR, the line of research linking CSR disclosures to practice has created incoherent results, and it cannot be said that the option and amount of disclosure reflects the extent of performance (King and Lenox, 2003). Business managers are faced with the performative equation of maximizing the space between revenues and relevant costs. Managers might give CSR more attention if they could expect CSR actions to help maximize that gap. Captured by this short termism, managers would be unwilling to accept the cost imposts of CSR if they could not eagerly agree on the possibility of an economic return.

Second, companies may be forced to react to the first-mover CSR strategies of their competitors where they believe that failing to do so would disadvantage them vis a vis market positioning. Strong appearance effects are observable across industry and strategic assembly levels where a particular first-mover's CSR efforts get wide positive publicity among dominant shareholders (Bansal and Roth, 2000).

Even where the CSR strategy has not been proven a 'winner' (in terms of net payback), other companies will copy it because they perceive the costs of not doing so are prohibitive. An entire industry sector can thus behaviorally migrate to the position where it adopts non-rational responsibilities that transfer wealth to non-vested shareholders. For instance, in Australia during the 1970s, most employers in the misuse set industry held generous family leave provisions significantly in excess of legal mandates and irrespective of labor market conditions (Brooks, 2005).

A third difficult part of firm CSR concerns the wide range of definitions and orientations. Definitions are declarative and based on experience, convenience and experimental practice. In addition, priorities of companies differ with respect to determining which shareholders benefit and to what extent. For instance, the Body Shop's CSR activities famously focus on promoting human rights and environmental sustainability of its wholesalers, while those of Starbucks more narrowly target employee welfare. A firm can be quick to respond towards one shareholder group and at the same time exploitative of another, making somewhat of a mockery of the ethical lineage of the CSR concept.

Additionally, the corporate responsibility research from the management field, in the central, leaves unquestioned the definitions of responsibility and sustainability adopted by an organization based on the appropriation of excess value, cost minimization and the production of needless products and services.

By overlooking the essential dynamic of business, the research encourages its reader support to engage in responsibility actions that do not change the relation of Business first (profit and market share) and Society second (other shareholders in line after stockholders).

In short, CSR force acting within the firm is unlikely to encourage more than external expressions. Structural and legal environments declare only instrumental forms of CSR. Unless and until managers' payment packages to force them to identify negative economic externalities generated by their companies, accounting models will not be adapted to take into account such 'environmental' and 'social' costs.

Basically, while some CSR initiatives might create positive or justifying effects on externalities, they cannot fundamentally change the externalizing engine that powers every business firm and is the primary source of capitalist pathologies.


Professionals apply different terms to illustrate managed investment products offering portfolios screened against social considerations. I use the term social support to indicate a unit trust that markets its use of self-selected social and environmental policies in portfolio construction. At first blush, the concept of social investment widens the customary conception of stockholder value by expressing retail investors' ethical values in terms of arguments advanced by the deep ecology movement (Gray, 1992). In practice, social funds use the instrumental argument as a marketing tool. The line is by unifying all externalities and pricing goods and services accordingly, invested corporations will benefit by positioning themselves to take advantage of market opportunities and keep away from imposts from the state. Such benefits are anticipated to flow through to the investor in the form of increased capital gains and strong dividend policies (Statman, 2000): a win-win-win result for investors, invested corporations and stakeholder groups.

Certainty in the influence of this argument is found in Cowton (2004). The evidence at hand suggests that most institutional investors do not use direct or indirect pressure on invested corporations to practice CSR. Some large income funds - the California Public Employees' Retirement System and the UK-based Hermes are examples - have on instance exercised or exposed to exercise proxy voting rights to force management to discontinue or adopt certain actions. Such practices, while not trite, are isolated. To critic from investment mandates, most institutional investors are yet to be persuaded that social responsibility is an instrumental argument for wealth generation. (In this context, it is unsurprising that social funds accept unaudited corporate self-reports as proof of practiced CSR (Haigh, forthcoming(c); Mays Report, 2003)). Moreover, social funds have accounted for a very small section of funds under management (no more than four-tenths of one percent) since start (Haigh and Hazelton, 2004). Small market shares limit the abilities of public funds to directly use pressure on share prices or to gain access to executive managers (and so influence corporate behavior).

The second section of the line of argument contends that social funds will outperform managed investments that do not clearly take into account social considerations. Studies neither confirm nor disconfirm systematic differences between social and ordinary investment products. Any other anticipation, as it did Gray, Owen and Maunders (1988), strikes us as ludicrous. Most social fund portfolios are modeled on mainstream stock market indexes or tailored variants. Most mainstream Australian equities mutual funds choose their stocks from the Standard and Poor's ASX200/300, which shows the largest 200 and 300 corporations by capitalization listed on the Australian Stock Exchange. Over the period June 2002 to June 2004, the 16 largest Australian social funds (95 percent of the Australian market) held stock in most of those corporations. Clearly, social mutual funds are forced by pressures to keep economically competitive portfolios. To survive, institutional investors must sustain a focus on continuously maximizing economic performance earned on investments in large corporations.

Studies of retail investors discover mixed levels of commitment. Milne and Chan (1999) use a test to measure the positive impact of corporate social disclosures on subjects' buying decisions, finding limited support. The review studies of Haigh (forthcoming [a]) and Mackenzie and Lewis (1999) remind that social investors had invested most of their discretionary investable wealth in an ordinary investment products. Studies of institutional investor demand for CSR reports also show mixed and inconclusive results (c.f., Freedman and Stagliano, 1991; Patten, 1990).

Finally, the argument that social funds might produce CSR-type outcomes across industrial sectors is questionable. The outperformance case relies on a social fund differentiating itself in the pack. Most ordinary financial institutions have offered social investment products for a number of years; as such, managers of societal funds struggle for market share and view investment criteria as providing a competitive advantage, much as might any fund manager. Manufacturing distinctions between portfolio screens neutralize the potential that social funds might use collective pressure on invested corporations and produce observable outcomes in industrial divisions. Beside, a low market share, the influence that publicly authorized social funds might use operations of corporations is negligible (Haigh and Hazelton, 2004).

Such a challenge is closed to answer: CSR only becomes operational within financial services if presenting itself as an instrumental argument. In short, research and practice suggests that corporations with stock held by social funds are more likely to ignore than to notice calls for social responsibility actions. Apply to consider retail consumers, studies have been published since the 1970s focusing on demand characteristics of customers of products and services to which are attached green characteristics: 'natural' cosmetics, recycled paper, eco-vacations and such like (Crane, 2001; Shrum, McCarty and Lowrey, 1995; Davis, 1994; Drumwright, 1994; Marks and Mayo, 1991; Kinnear, Taylor and Ahmed, 1974; Fisk, 1973). Prothero (1990) evaluates eco-consumerism as a strategy to capture new markets. Smith (1990, p. 88) gives reasons for the place of ethical purchase behavior alongside legislation, market forces and individual moral obligation. Theoretically, customers can promote CSR practice through their purchase decisions in product-markets. If customers are constantly willing to pay some form of premium for CSR-affiliated products (or brands or reputations), producing companies will achieve competitive advantage, thus forcing non-CSR companies to transfer to similar positions. This is an addition of the basic concept of customer power, which has been applied elsewhere in modeling citizenry manners in political 'markets' (cf., Jones, 1993).

The theoretical argument that eco-consumerism can promote social welfare is flawed in three respects. One, the practice of purchasing customer goods and services to track social and environmental goals essentially accepts the assumptions of neoclassical economics (Smith, 1990, p. 185). The incapability of that model to address distributive equity within and without economic markets is obvious. Two, treating social and environmental questions as secondary to the purchasing act enriches use and reifies the legitimating myth of customer sovereignty, when an informed assessment of retail industries would show that consumers have very little say over what they buy and even less over means of production. Dugger illustrates processes by which monetarist economic policies in the late 20th century, and company mergers that took advantage of such policies, formed rather than responded to markets. Such behavior suggests that corporations do not change operations to meet the demands of customers (Dugger, 1989, p. xi). And three, the plan of capitalist pathologies being addressed by the pathogen, as it were, is difficult. As Heilbroner (1985) describes, capitalism is not only about producing goods and services, but also about producing people, in the sense of confident and particular forms of main realization. The existing individual may be incompatible, alienated, and so forth, but he or she still contributes to the reproduction of capitalist institutional structures and social relations through obligatory acts of consumption and effort. Furthermore, I observe problematic experimental relationships between companies' CSR behavior, customers 'perceptions of that behavior, and consumers' purchasing behavior. As an pattern, a recent study by Bhattacharya and Sankar (2004) finds that despite indications that eight in ten Fortune 500 corporations address CSR issues and that eight in ten survey respondents stated they considered CSR when making purchasing decisions, strong linkages between corporate CSR initiatives and actual customer purchasing models did not appear. Most subjects in the study were uninformed of corporate CSR activity and those that were aware were reluctant to pay premium prices for CSR-embedded goods.

Totally, this discussion on investors and customers, the notion that a moneyed level treating itself to ethical luxury will in some way serve to modify basic capitalist dynamics seems absurd. The literature on consumer boycotts does little to challenge our perception (c.f., Tyran and Engelmann, 2005; John and Klein,2003).From the point of view of encouraging corporations to practice CSR, both eco-products and social investment products recommend little promise of essential change except to act as a soothing to individuals' consciences (Haigh, forthcoming [a]). I do not believe customers can be counted on to promote CSR outcomes. Indeterminate associations between consumers' perceptions, attitudes, values and behaviors would bar CSR from the cost/benefit discussions of most manufacturing companies. Furthermore, as companies' overall competitive approaches and differentiation strategies increasingly integrate CSR initiatives, the quality of information transmitted to customers becomes captured by the marketing function, leading to confusion, cynicism and exit choices (Biddle, 2000). Green consumers, perhaps more at risk than other customer groups to focused emotional advertising (Dacin and Brown, 1997), might suspect opportunism on the part of manufacturers and suppliers - the undesirable selection of neoclassical agency theory (Kulkarni, 2000). Such perceptions, if held, might account for relatively muted customer demand for such products and services (Schwartz, 2003; Mason and Bequette, 1998).


Authorities are yet to require substantive legislation requiring sustainability reporting of all large organization (Gray and Milne, 2002) and a standard of government responsiveness to CSR has not emerged. Governments have tendency to tax externalities since the 1970s by using shifting combinations of marketable permits, direct regulations and corrective market mechanisms such as emission standards (Abelson, 2002, p. 155). In the United States, the Toxics Release Inventory and other environmental statutes is managed through the Environmental Protection Agency and supplemented through a decentralized state-by-state procedure. Some European Union governments have established legislation to make environmental reporting mandatory for firms. Since 1995, the Dutch government has presented personal income taxation exemptions to retail investors in a reportedly successful try to excite environmentally sensitive energy, agriculture and technology projects. Debentures issued to fund projects which are qualified by the government environmental agency carry concessional taxation paybacks for debenture holders (Richardson, 2002). Other governmental environmental initiatives start at the EU level. The Restriction of Hazardous Substances (ROHS) legislation will be appropriate throughout the EU from July 2006, banning products containing any more than trace amounts of dangerous substances such as lead or mercury. The Waste Electrical and Electronic Equipment Act commenced in the EU zone in 2004, mandating that electronics manufacturers accept and recycle used electrical products. The Registration, Evaluation, Authorization and Restriction of Chemicals directive requires that EU-registered companies register chemicals used in manufacturing processes. The EU rules are generating global consequences as part suppliers must ensure fulfillment if their parts end up in products sold in Europe. China's Ministry of Information Industry, for instance, has declared that it is establishing its rules on ROHS.

Lehman claims that critical estimation of the state is necessary if reformist research agendas are to "tackle the entrenched interests of corporate power and prestige" (1999, p. 236). Famous books detail the weaknesses in government policies and the unwillingness of governments to be branded as anti-free trade, as major CSR researchers consider regulation as a natural attachment to improving the social performance of business, dependent only on the correct design of market incentives (Porter and van der Linde, 2000, p. 156). It is not likely that governmental regulatory pressures can be counted upon to encourage CSR outcomes at the industry and firm levels, for four basic reasons.

A basic problematic relates to the costs of ensuring fulfillment, which may prove excessive either for large companies employing high levels of outsourcing, such as Dell, or with respect to fresh layers of governmental inspectors, count to what many observers already recognize as a bloated EU central bureaucracy.

Imposing regulatory fulfillment costs on the business division increases companies' non-productive expenses and negatively effects competitiveness in international markets where such regulations are not in force.

Furthermore, lobbying activities of business groups and the unwillingness of business to distinguish the costs of generated externalities leads to superficial treatments of environmental reporting legislation, both by regulators and the regulated.

To show, the Australian Conservation Foundation successfully lobbied the Australian government in 2004 to amend financial services legislation to need the disclosure of any environmental and social considerations used in customer investment products. The Australian initiative follows from the British Pensions Act 1995; since July 2000, trustees of British occupational pension schemes have been required to reveal such policies in Statements of Investment Principles (Statutory Instrument 1999). Both the British and Australian legislation was helped by the lobbying labors of practitioners' associations (Haigh, forthcoming [b]); accordingly, investment managers are permitted to define the scope, terms and content of related disclosures. As the requirements are silent on audited disclosures, investors have little cause to wait for that the quality of information will improve (Haigh, 2004).Three, the control of economic rationality (Gorz, 1987) and its colonization of non-corporate institutions (Deetz, 1991) means that capital has already won the discursive battle, though not necessarily through the Trojan horse of CSR itself. The level to which governments have adopted national economic competitiveness as their reason for living has led to capital and the state becoming almost indistinguishable from each other with respect to public policymaking: e.g., environmental taxation (Chomsky, 1999). Four, to require more aggressive environmental and social regulations on business would require that states like a significant degree of autonomy from corporate and finance capital. In recent decades, globalization has empowered capital as the level of institutional pluralism has declined. Individual states are presently much more dependent on capital than is capital on any individual state. Bourdieu (2001, p. 14) notes that states promote market power by endorsing the very policies that have a tendency to transfer them to the sidelines. To expect that the "left hand of the state" (Bourdieu, 2001, p. 34) would price itself out of trades throughout application of aggressive regulations attacking negative externalities is unrealistic.


Organizations created from popular mobilizations, after this referred to as promotional nongovernmental organizations (NGOs), unite in various formal and informal alliances with other organizations located in institutional capital. Our categorization of NGOs follows Smith's (1990, p. 108) differences between sectional, promotional and anchored pressure groups. Sectionals care for the benefit of a particular component of social systems; promotional search for to tackle what they consider as pressing ecological or humanitarian problems; anchored show as promotional but are stranded in sectionals.

Ethicists imagine promotional NGOs as the natural facilitators of CSR based on their marginal membership of corporations (Guay, Doh and Sinclair, 2004). Promotional are recognized to buy stock in corporations so as to either call special meetings to put voting resolutions on single issues or to attend general meetings to vote on matters such as those affecting board compositions. As an example, the Australian Wilderness Society located shareholder resolutions at the annual general meetings in 2002 of two national Australian banks. The answers were drafted as a response to the banks' holdings in a business engaged in old-growth forestry operations and required to change the banks' articles of association so as to forbid those specific investments. In the 1990s, Greenpeace New Zealand positioned an alternative resolution in a forestry company, seeking to vary the environmental effects of the said corporation's wood-chipping processes.

More often, shareholder activists warn a special meeting to get access to management (Whincop, 2003). Promotional and anchored NGOs have also required occasional collaborations with public corporations and institutional investors. As samples, the Interfaith Center on Corporate Responsibility, constituted by churches and investment managers, organizes and documents shareholder resolutions to be located to US corporations, while the US Friends of the Earth targets many of its publications and activities at mutual funds.

The Global Reporting Initiative, which I characterize as an anchored NGO, explains the institutional imprison of promotional NGOs. The GRI was created in Boston in 1997 after the Coalition for Environmentally Responsible Economies protected a financial grant from the United Nations Foundation and is designated as a UN Environment Program Collaborating Center. The GRI issued its Sustainability Reporting Guidelines in 2002, which were followed by a second edition, known as G2, in 2004. (A third addition is slated for 2006.) G2 lists hundreds of measures that signers can choose. Supposedly, all derive from a 'triple bottom line' approach: the management doctrine that shows accounting profits by reference to impacts on employees and urban/nonurban environments.

It is not the purpose of this paper to address the doubtful input a triple bottom line report might make to environmental and social benefit .However, the industrial sectors stand for GRI reporters position to legitimating benefits. 363 of the 429 GRI signers, or 84 percent (December 2004), were in politically visible industrial sectors: retail products, financial services, health care, telecommunications, creation, mining and energy. 17subsidiaries Company of the British American Tobacco Group counted as GRI reporters. Companies engaged in politically perceptive operations are noted as quick to report their status as GRI reporters (Moermann and van der Laan, forthcoming[a]). Legitimating as a rousing factor in CSR disclosures is not latest (Gelb and Strawser, 2001; Guthrie and Parker, 1989). While legitimating might support the instrumental argument for CSR, it carries certain other cost. In the sense that the motivations of promotional NGOs are substituted with those originating in the business division, as claimed by Dugger (1989, p. 144), corporate signers to G2 infect the GRI memberships of less main promotional NGOs. The GRI markets its information as bringing an improved financial bottom line and providing avenues for new markets. In opposition to this line of argument, promotional NGOs struggle for their agendas to be recognized in other than an economic discourse (O'Dwyer, Unerman and Bradley, 2005). An ongoing partnership of the GRI, the UN Environment Programme Finance Initiative (UNEPFI) and European investment banks explains the dominance of economics. Amongst the UNEPFI's working program of climate change, military conflict and water, the importance of a lack of available hygienic water in large areas of populated Africa reduces to economics.


Such a citation provides us with a proper mechanism to close this brief paper. It indicates that 'win-win' zones exist where result come with CSR can also be beneficial opportunities for business activity. Yet many zero-sum situations come up where a CSR outcome will be a drain on corporate profits; or where an action to improve profitability will generate some form of negative externality. The CSR literature focuses awesomely on the previous both in terms of making the conceptual case as well as in the numerous empirical investigations of the relationship between CSR and profitability. The text is much weaker with respect to dealing with the end two varieties of zero-sum cases. I would recommend this weakness is due to an inability - or refusal - of mainstream CSR scholars to affect an actually critical approach to the study of CSR, the business and the general political economy of capitalism.