Various Forms Of Corporate Social Responsibility Commerce Essay

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What is corporate social responsibility (CSR)? Before discussing why corporations undertake forms of CSR we must first understand the principles. This essay will go into CSR in depth and applying it to the actions of McDonalds corporation ultimately trying to distinguish between the economic and political perspectives of CSR distinguished by Scherer and Palazzo, and further how if at all you can quantify these actions for comparison and measurement of effectiveness.

CSR has been described as a 'motherhood issue' (Ryan 2002, p. 302) 'the hot business issue of the noughties' (Blyth 2005, p. 30) and 'the talk of the town in corporate circles these days' (Mees & Bonham 2004). There are many definitions of CSR, ranging from the simplistic to the more complex, and 'some…researchers…distort the definition of corporate social responsibility or performance so much that the concept becomes morally vacuous, conceptually meaningless, and utterly unrecognizable'(Orlitzky 2005); however CSR may be regarded as 'the answer to solving the global poverty gap, social exclusion and environmental degradation' (Van Marrewijk 2003). Due to this there is no quantifiable definition for CSR but broadly speaking it can be described as, when an organisation includes social and environmental strategies affecting stakeholders in their operating procedures. (Thomas, 2006:3).

Although CSR has been a discussion topic for the last few decades, it has been thrust into the limelight and focused on by academics due to the increasing globalisation of large multinational corporations; coupled with the decreasing spans of control held by governments and states. "Globalisation can be defined as a process of intensification of cross-border social interactions due to declining costs of connecting distant locations through communication and the transfer of capital, goods, and people." (Scherer and Palazzo 2010:3). With ever increasing size and thus power organisations hold globally, this far out reaches the power of individual states, allowing them to take control both politically and economically of what actions they should and shouldn't do in respect to their environments, and social climates. However with this ever increasing power, comes responsibility and what you now find is organisations based in countries where states fail to implement basic citizenship rights such as third world countries, the duty placed on these organisations by consumers is to assume a state like role in the form of CSR.

Our case study through out this essay will be McDonalds partnerships and environmental initiatives in relation to packaging and waste. McDonalds is a prime example of a global organisation, with over 31,000 stores worldwide in 119 countries over 6 continents. Established in California in 1940 it has grown exponentially to service over 60 million customers globally every day (McDonalds History, 2010). With being such a global organisation comes a lot of scrutiny from states and consumers on operational ethics, especially with growing globalisation as mentioned before. McDonalds have therefore taken to environmental partnerships and education schemes in countries across the globe to illustrate this awareness of ever increasing environmental and political pressures.

In 1990 McDonalds established their Global Environmental Commitment including their partnership with the Environmental Defence Fund (EDF). (About McDonalds, 2010). From 1990 to the present day McDonalds have strived to make improvements to their production and environmental record. Their partnership with (EDF) aimed at the discontinuation of polystyrene 'clamshell' food containers, due to their non-biodegradable nature. This set a benchmark as a large Non Governmental Organisation (NGO) altered from the traditional business strategy of profit maximisation to include environmental performance. (McDonalds Corporation, CSR Press Release, 2010). As of now there are no polystyrene packaging used by McDonalds, replaced with paper packaging that can be recycled, these actions "...provide a 70-90% reduction in sandwich packaging volume, reducing landfill space, energy used and pollutant releases over the lifecycle of the package." (EDF, 2010). More recently McDonalds have gone further than just polystyrene removal, with a movement towards 100% recycled packaging in the Netherlands, "currently 98% of waste is recycled or reused" (Green McDonalds, 2009), such as coffee stirrers and napkins. These 'green' credentials and initiatives, are representative of a move within society and organisational management to try and meet the triple bottom line, spoken about in more detail later. In 2007 McDonalds entered into partnership with another organisation, the 'World wide fund for nature'(WWF) with an aim to not only to increase recycled paper usage but to publish a guide for organisations on how to do this. (McDonalds and WWF, 2010). McDonalds themselves have a paper purchasing policy, guaranteeing the use of recycled paper in all of their restaurants.

Now that we have illustrated McDonalds initiatives with environmental organisations on issues of packaging & waste, we can then look at this in more detail from both an economical perspective and from a political perspective.

The main economic perspective on CSR can be represented by Milton Friedman (1970). His response to the increasing social pressures placed on organisations for CSR, brought on by globalisation, was that organisations should have "one and only one social responsibility of business- to use its resources and engage in activities to increase profits for shareholders." (Turner, 2006) so long as they are "conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom." (Friedman, 1970). To be made clearer Friedman believed firms can quite happily conform to market and consumer demands on CSR and fulfil legal obligations, but should not do any more than what is truly necessary and any more that would be at a detriment to profit. This is supported by Kitzmueller (2010) claiming that "firms, just as any private agent, do not have sufficient incentives to efficiently internalize the costs they cause, governments are well suited to correct such behaviour through regulation or taxation, and ultimately, given perfect government and information, firms just comply." (Kitzmueller, 2010, p.6). McDonalds does not conform to Friedman's view as they go beyond legal requirements in aid of reducing packaging and waste management, not to mention funding campaigns on education at a cost to shareholders profits. An extension of the economic perspective taken by Carroll (1991) illustrates his four building blocks of CSR, within his 'Pyramid of Corporate Social Responsibility'; economic, legal, ethical and philanthropic responsibilities are realised."Beginning with the basic building block notion that economic performance undergirds all else" (Carroll, 1991:42). He further suggests that the pyramid "helps the manager to see that the different types of obligations are in a constant tension with one another." (Carroll, 1991:42). Therefore from an economic perspective Carroll reaches the realisation that ethical and philanthropically CSR does have a place in society today, not just operating to maximise profit for shareholders. (See figure 1.0 in the Appendix for an illustration of the 'Pyramid of Corporate Social Responsibility'.)

However is this view to simple, of all or nothing. Friedman believed in only doing enough CSR to be legal, but why then have so many multinational corporations who now represent a law unto themselves take part in CSR that is at a detriment to profits? Is it because CSR is shifting from just legal liability to greater social and environmental expectations? (Young 2008). "Corporations now govern society, perhaps more than governments themselves do" (Bakan, 2004). Henderson (2001), agrees in basis with Carroll, however has shown three levels of CSR perspectives, economical, environmental and social, placing equal importance on all three aspects. "Therefore organisations should measure all three independently with an aim to meet a 'triple bottom line' rather than focusing on profitability and shareholder value." (Henderson, 2001:15). "CSR holds that only by acting in such a way can businesses meet 'society's expectations', and earn from 'society' their informal 'licence to operate'. Hence a commitment to corporate citizenship is the key to long-run profitability for individual firms, and to ensuring public support for the market economy. Capitalism has to be given 'a human face'." (Henderson, 2001:15). In essence Henderson economic perspective shows that by appearing to partake in CSR for the benefit of consumers, despite affecting short term profits, will long term create greater profits and sustainable market conditions. McDonalds have done exactly this, realising the potential for long term profitability by creating a human face and appearance of an ethically minded organisation, in essence the need for a 'triple bottom line'. They realised the importance of the triple bottom line perhaps before other organisations, in that they were the first organisation to join in partnership with EDF in 1990.

"In recent years corporations have been asked to play a key role in addressing issues that appear to go beyond their primary economic function, for instance corporations are increasingly being urged to tackle issues like global poverty, human rights, and climate change" (United Nations, 2006). In the article written by Scherer and Plazzo (2010), they "propose a new perspective on what we call 'political CSR'. In a nutshell, political CSR suggests an extended model of governance with business firms contributing to global regulation and providing public goods. It goes beyond the instrumental view on politics in order to develop a new understanding of global politics where private actors such as corporations and civil society organisations play an active role in the democratic regulation and control of market transactions. These insights may enrich the theory of the firm with a more balanced view on political and economic responsibilities in a globalised world." (Scherer and Plazzo, 2010:3). This very threat by social activism, bad press and institutional power associated with it can lead an organisation to integrate CSR as part of its corporate strategy. In the case of McDonalds there decision to be the first to join EDF set a benchmark in the global self-regulation of organisations; what followed was other market leaders and organisations joining the partnership and including CSR within their business strategy to remain competitive. Thus transforming the role of a state from the 'guarantor of society's progress' (Donzelot, 1988, p. 395), to the protector of economic and corporate interests. In doing so states are using the ideology that progress can be achieved by allowing global competitiveness. Therefore 'the most powerful promoter of commercial organizations as the means of fulfilling its public obligation….Public decisions rest more and more on the economic rather than in the political sphere' (Deetz, 1992, p. 20). These theories are illustrated by McDonalds as within the competitive environment without government intervention, they took it upon themselves to enter into 'green' partnerships. Therefore taking the onus away from governments and state's and allowing market conditions to cause the shift into reducing packaging at an accepted cost by shareholders to profits, with the realisation of the benefits long term.

However to every coin there is always a flip side. "The greatest potential for harm of this kind arises from attempts, whether by governments or by businesses in the name of CSR and 'global corporate citizenship', to regulate the world as a whole. Imposing common international standards, despite the fact that circumstances may be widely different across countries, restricts the scope for mutually beneficial trade and investment flows. It is liable to hold back the development of poor countries through the suppression of employment opportunities within them." (Henderson, 2001:17). Henderson identifies that someone's welfare will always be harmed by organisations as they operate for profit. This is amplified by globalisation, suggesting that organisations don't safe guard citizenship rights. McDonalds, packaging is produced with low labour costs and therefore low wages for workers, this may actually be detrimental to the labour market in less well developed countries. Another negative from this push by McDonalds for greener operating procedures, is that it can cause market uniformity and therefore lack of competition. This can stunt growth in the market as a whole or economy as firms are not operating profit maximisation strategies.

The debate about the place of CSR in the global economy will be never ending, however theorists such as Scherer working with both Plazzo and Smid, hold the views that organisations, 'should take responsibility for the improvement of world-wide social and environmental conditions'. (Scherer and Smid in Windsor 2001, p. 245). Ultimately however once we take into account Henderson's views, the answer to the question of whether organisations should undertake CSR and to what end, becomes murkier and more complicated. McDonalds are an example of an organisation that have remained the worlds largest fast food chain for the last decade based on their ability to appeal to consumers ethics in an ever globalising world, with government intervention becoming less and less. Perhaps this understanding now of political and economical CSR perspectives, with political encompassing economical but removing it from the responsibility of governments and into the hands of organisations in free markets. By doing so, decisions on CSR are left to consumers who have shown to value an organisations ethics and environmental strategies, therefore organisations have to self regulate to remain competitive. Without creating an environmentally minded business strategy you present an opportunity cost; organisations would loose business from ethical consumers and this would affect shareholders profit margins. Therefore by making a small investment short term into ethical branding and in McDonalds case green partnerships with EDF, as a shareholder you produce higher profits long term. This combines both economical and political perspectives allowing them to work hand in hand.

Bibliography

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Websites

About McDonalds, 2010. http://www.aboutmcdonalds.com/mcd/csr/about/environmental_responsibility.html Accessed on 27/11/2010.

EDF, 2010. http://www.edf.org/page.cfm?tagID=1448 Accessed: November 18, 2010.

Green McDonalds, 2010. "On the right trucks with green trucks." http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=1HYPERLINK "http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=1&cs=2"&HYPERLINK "http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=1&cs=2"cs=2 Accessed 27/11/2010.

McDonalds History website http://www.mcdonalds.ca/en/aboutus/faq.aspx, Accessed: 27/11/2010.

McDonalds Corporation, CSR Press Release, 2010. http://www.csrwire.com/press_releases/31099-McDonald-s-and-Environmental-Defense-Fund-Mark-20-Years-of-Partnerships-for-Sustainability Accessed 27/11/2010.

McDonalds and WWF, 2010. 'Packing contains environmental thought.' http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=5HYPERLINK "http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=5&cs=1"&HYPERLINK "http://www.bestofgreenmcdonaldseurope.com/casestudies_detail.php?cat=5&cs=1"cs=1 Accessed 27/11/2010.

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