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Year on year companies are spending more money on Corporate Social Responsibility (CSR) initiatives. Yet this type of activity is often regarded by some as nothing more than expensive PR and that it adds no real value to society or return on investment for shareholders. How far do you agree with this statement? Giving examples to support your arguments, explain the reasons why companies engage in CSR activity and what the future holds for those who choose not to do it at all.
CSR is a multidimensional issue. It has many aspects. It has got a wide range of definitions and theories suggesting that CSR means different things to different people. The focus of all the definitions and theories is to accept the reality that companies will have to shoulder the responsibility for public good and welfare. The research on this topic will prove that CSR is a driving force for many businesses. It is contributing to the society and different stakeholders. The role of CSR and its impact will be discussed in the developed as well as the developing world
Different organizations focus on different aspects of CSR, such as environmental management, human and workers' rights, transparency and compliance, and stakeholder management (Garriga & Melé 2004; Blowfield & Murray 2008). Whether a company's social responsibility should be voluntary, self-regulatory or legally binding is a matter of considerable debate (Fox, 2004; Utting, 2005; Prieto-Carrón et al. 2007; Blowfield & Murray, 2008). According to Blowfield and Murray (2008), CSR is an 'umbrella term' capturing the different ways in which business relates to society; it involves values that guide a company's interactions with other society members, it addresses business' role in wider society and the different types of business-society interaction, and it looks at the categories in which business is expected to take action. So CSR means many things and covers a wide range of areas, though some may be considered subsets of another, like:
Charity and philanthropy
Supporting local businesses
So CSR is about companies acting beyond their legal obligations to their customers, suppliers, employees and society at large. However the adoption of CSR activities differs in terms of depth and breath. Depth covers its vision, mission and strategic objectives while breadth includes suppliers, customers, employers, shareholders and society (Joseph and Perkin 2002). (Edwards and Rees, page; 264)
HISTORY OF CSR AND SUSTAINABILITY
The social and environmental issues history is as ancient and old as business and trade itself. The Dean of Harvard Business School, Wallace M. Donham expressed his views in this fashion while addressing at North Western university.
'Business started long centuries before the dawn of history, but business as we
now know it is new - new in its broadening scope, new in its social
significance. Business has not learned how to handle these changes, nor does
it recognise the magnitude of its responsibilities for the future of civilisation.'
About more than eighty years later, these words seem just real. Although the concerns we are facing are new and of somewhat different in nature about the role of business in society, from internet spam to genetically modified foods. Most of these issues which are being discussed today are not so much different from the issues being raised in 1920 and onwards
Source: ( http://www.brass.cf.ac.uk/uploads/History_L3.pdf)
REASONS FOR GROWTH IN CSR
Businesses have been under immense ethical pressure to behave responsibly for centuries. The specific issues have shifted, but issues around the protection of workers, environmentalism and consumer protection are long standing. The main impetus in the modern times is due to:
-The profound shift towards aggressive capitalism.
-The faltering of traditional social democracy (Sassoon 1996)
-The retreat of the state (Kuttner 1997;Hutton 1995)
-Ascendancy of corporate power. (Korten 1995;Luttwak 1996; Lloyd 2000; Klein 2000;; Monbiot 2000).
Capitalism was both resurgent and triumphant. However this gave birth to several concerns. The particular model of globalization that was being promoted and the greater inequality that arose form it, and the role and lack of accountability of corporate power, including the employment practices of transnationals. The inequalities produced by the prevailing model of globalization have been widely noted. According to the former chief economist of the World Bank, Joseph Stiglitz (2002), the prevailing form of globalization had a devastating effect on the developing countries and poor countries. In Russia the percentage of poverty rose from 2% in 1989 to 23.8% in 1998. In 1996 the UN Development Programme reported that the assets of the worlds 358 billionaires exceeded the combined incomes of 45 percent of the world's population (cited in Faux and Mishel 2000).Michael Eisner, the head of Disney earned $576 million in 1998, or roughly the GDP of the Seychelles (Heertz 2000).40 million of Americans have no health insurance and 20 percent are 'functionally illiterate' (Lloyds 2001a:22). So globalization has had a negative impact on poor countries.
As governments withdraw from key economy activities or via public private partnerships, businesses have been asked to fill the gaps, playing a substantially greater role in providing products and services that were once the domain of the state. This has elevated the role of MNCs ahead of governments. Industries such as the banana trade are controlled by a small number of MNCs. While coffee trade is controlled by four MNCs that account for 40% of worldwide retail sales (Fair trade Foundation 2002). Through private finance initiatives and public -private partnerships, private firms have a growing international role in providing public services such as prisons, health and education (Sachdev 2001). The patenting of seeds, drugs and genes has been a major source of anxiety (Klein 2002).These are essential for food and health, which are not owned by governments but by for profit companies.
(Edwards and Rees 2006:268,268)
CURRENT STATE IN CSR
CSR has risen up the hierarchy of issues in no time that businesses seek to address. In 2001 the UK stock exchange launched the ethical index FTSE4Goodafter following the example of Dow Jones Sustainability Index in 1999. Similar indices are already there in JPAN, France, Italy and Belgium. It is estimated that £13.4 billion is spent annually in the UK on investments, goods and services governed by ethical decisions (Droane 2001). French law now requires companies to take into account in the annual reports, the socials and environmental consequences of their activity. Belgium now has a national kite marking scheme so that consumers can identify companies that follow CSR principles. The Netherland, Denmark and Norway have long standing environmental disclosure requirements. The Fair trade brand is now an annual £315 million global niche market and has encouraged public authorities to pursue ethical procurement policies (Vidal 2003). One dollar in every eight dollars invested in USA in ethical funds.(Heertz 2001).In 2004 the UN issued the draft UN Norms' that brings together a range of international human rights instruments in a single code and envisages ways of enforcing them(Maitland 2004).
CSR AND CONTROVERSY
CSR is controversial. Supporters of CSR argue that it has many benefits for employers. Some advocates emphasize the defensive aspects of CSR in protecting reputation, profits and share price. Others adopt a more ambitious, proactive stance, seeing a CSR role in redefining the corporate mission, protecting reputation, offering a distinctive position, building credibility and trust with employees and customers, assisting recruitment and retention and fostering dialogue with interest groups(CIPD 2002:8) Some commentators see it as a corporate fig leaf to enhance reputations(Klein 2000; Christian Aid 2004), others as a wasteful distraction from the proper activities of firms(Henderson 2001;Wolf 2002);as Milton Friedman(1973) famously stated, ' there is one and only social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game(According to Friedman(1973) those who advocated the social responsibilities of business were preaching pure and unadulterated socialism).Most businesses see CSR as a niche issue, but in some cases for example the coexisting product lines rather than niche alternatives(Buckley 2002). Some businesses appear to be hostile to the concept altogether; the chairman and chief executive of EXXonMobil, Lee Raymond, declared that 'we do not invest to make social statements at the expense of shareholder return' (cited in McNulty 2003).
HRM and CSR:
HRM and CSR have always been together in an organization. HRM is mainly concerned with the following labour issues consistent with CSR:
Heath and Safety
Pay and remuneration
Child and forced labour
Freedom of association and collective bargaining.
The aforementioned are prominent debates around CSR. Therefore, Shell's report (2001) pays considerable attention to employee rights, health and safety, diversity, working hours and wages. The international Labour Organization is quite clear in these debates and international trade union confederations are active within them(Elliot and Freeman 2003).HRM departments are often heavily involved or have lead responsibility in CSR issues; one survey found the \hr department was second only to the legal department in devising a company code of ethics(cited in CIPD 2002).The Gap employs more than 80 people around the world whose sole responsibility is to ensure that factories comply with ethical sourcing criteria and \Nike has quadrupled the number of employees dealing with labour practices( Murray 2002). More over, the employment practices of some leading transnational's, such as Nike (McCawley 2000;Klein 2000;Skapinker 2002) and Mc Donald's (Vidal 1997;Royle 2000;Schlosser 2001; Maitland 2002) have come under close scrutiny. Some commentators have focused on the ethical dimension of HR issues such as recruitment (Spence 2000), flexible working hours (Stanworth 2000) and human resource development (Woodall and Douglas 2000). While other studies have included redeployment and redundancy strategies as CSR issues (Segal et al.2003).
Some companies use their appraisal and pay systems to encourage responsible behaviour by their staff. Thus for the Chief executive of stateoil, Norwegian largest oil company, bonus payments are partly dependent on the outcome of indicators on health and safety, the environment and employee satisfaction (Maitland 2003). The HR department of Adidas has made performance in human rights a factor I calculating annual bonuses for country managers (Crwford2000). HR has a focus on codes as well, like labour regulations in international trade are also important. It is certainly claimed that the good reputation of firms attracts top class graduates, improves retention rates and morale and increases productivity. The best example is PricewaterhouseCoopers in Save the Children 2000:34.It has also been argued that if employees don not see the point of CSR initiatives, or understand the message, initiatives are unlikely to be effective.(CIPD 2002:7) Moreover the CIPD sees CSR as being intrinsic to being ' good' employer, the skills of HR being key to communicating and engaging employees for an effective implementation of a broader CSR strategy (Edwards and Rees 2006:265,266)
CSR AND THE DEVELOPING WORLD
A large number of scholars are of the view that CSR can be put in to practice to fulfil the needs of the poor (Utting 2005;Jenkins2005;Blowfield 2007 ). The business role in developing world is debatable. As it is based on this fact that to what extent one can meet social and environmental challenges through the market based solutions and the private sector is better at optimizing resources than the public sector (Blowfield and Murray2008) Most of the businessmen and critics think that CSR is a misleading concept. It is in fact a competition of interest between short-term and long-term horizons; between shareholders and stakeholders; between outputs and outcomes when defining CSR's actual impact; and between sharing and withholding social learning.
The opponents of CSR argue that business has nothing to do with social development. Milton Friedman (1970) argues that companies have 'no business' getting involved in the public as they already contribute to the society through jobs. A study conducted jointly by Unilever and Oxfam in 2004-05 found that Unilever in Indonesia supported the equivalent of 300,000 full-time jobs and contributed $130m a year in taxes to the Indonesian government leading the Economist to conclude that this was a lesson for firms not to be 'too defensive about their contribution to society' (Economist 17 January 2008; see also Clay 2005).
Christian Aid (2004), also attacks and argues that CSR is only a public relations tool used to mask the sometimes devastating impact large corporations can have on vulnerable people and the environments in which they live, pointing to the continuing negative effects on Nigerian communities because of Shell's oil extractions; the health issues of workers on the plantations under British American Tobacco contract; and Coca Cola depriving local communities in southern India of clean water. In fact they these big MNCs want to make profit in the developing world. They have nothing to do with the welfare of the people of the area or their employees working over there with them.Secondly, the competing logics of development imperatives and business realities are not easily reconciled (McFalls 2007). Long-term extensive effort is needed to accomplish social change, but most businesses look for short-term maximum returns; company shareholders' interests tend to dominate over the interests of other stakeholders. When a cross-cutting exercise went through HP, the Mogalakwena HP i-Community project was one of the first to be discontinued and its project team and local staff members' employment terminated (McFalls 2007). This questions the sustainability of CSR itself as a company's programmes 'may disappear with the next downturn' (Economist 17 January 2008). Information on measuring impact is limited and what CSR seeks to measure is significantly different from what international development is concerned with; focus is often on the economic impact of CSR on the company not on changes in people's lives (Blowfield (2007 ). There is a strong academic call to research the developmental impact of CSR (Jenkins 2005; Prieto-Carrón et al. 2007; Newell & Frynas 2007) but whether this is in the interest of the most influential groups that are engaged in CSR, predominantly business itself, is doubtful (Hamann 2007; Blowfield 2007; Blowfield & Murray 2008).
The focus on the business case of CSR avoids addressing key issues of power and participation that are key in poverty reduction debates. Because power relations shape the issues that are raised, the alliances that are formed and the successes that are identified (Dolan and O'Pondo 2005 in Prieto-Carrón et al. 2007) they tend to reproduce poverty as those who do not normally have a voice in society. Like small-scale farmers, children, workers, and women - are often excluded (Garvey & Newell 2005; Prieto-Carrón et al. 2007; McFalls 2007; Blowfield & Murray 2008).
Finally, a number of companies that have initiated or are otherwise involved in CSR are the same companies that continue to ignore or fail to address the human rights abuses, poor labour standards, and environmentally harmful activities that occur within their core operations (Prieto-Carrón et al. 2007; Oxfam 2008). Codes of conduct are a key CSR tool, but can become a 'tick-box technique' relieving corporations from any wider social responsibility (Jenkins 2005; Prieto-Carrón et al. 2007). For example, even though British Petroleum had complied with the codes of conduct laid down in the Extractive Industries Transparency Initiative, in relation to the construction of the Baku-Tbilisi-Ceyhan pipeline, it did not address the human rights abuses and the destruction of livelihoods of the local communities as a result (Documentary 'Source' 2005). The above arguments form different critcs shows that CSR role in the developing world is minimum and businesses are more focused on their profit rather than the public welfare of the stakeholders.
THE PROBLEMS OF CSR
There has been widespread criticism of the actual practice of CSR as undertaken by some businesses. There is a real danger that socially responsible policies could be a greenwashing or corporate gloss. Where hiding behind a superficially screen, corporations can abuse their power. According to Hutton ' nearly every company pays lip service to this new cultural business exigency, but very few take it seriously, instead believing it can be discharged through better public relations or tokenistic nods towards what most directors see as little more than politically correct behaviour with little value'(2000:1)
Some tentative, emerging empirical evidence seems to confirm Hutton's analysis. The contribution of the leading 400 UK companies of pre-tax profits to the UK community especially remained the same between 1990-2001- at a modest 0.42 % ( Benjamin2002). Recent research (cited in Doane 2002) found that while 78 of the FTSE100published some social information on their website, only 16 companies used any qualitative performance data to support their policy assertions. The lack of hard data is prevalent even where it should be relatively easy to obtain. Thus ' only ten of the FTSE100 report data on the ethnic diversity of their workforce and none provide qualitative data in child labour in their supply chain or on workdays lost through stress'(Joseph2002). Few reports -the accountants KPMG (in 1999) estimated that one in six were checked by third parties for accuracy and 'where they are it tends to be the data collection processes rather than the end results that are audited' (Joseph2002). According to Doane (2002) 'while some companies utilise the accounting sector to provide a statement of verification for the contents of a report, these loose statements do little to provide a statement of verification statement to ignore what has not been included in a report.' Moreover a survey by PricewaterhouseCoopers found that nearly 30 % of chief executives trend to agree that CSR is mainly a public relations issue (cited in CIPD 2002).
There are also some striking examples of the lack of sufficient attentions to CSR principles. Enron notoriously promoted its CSR credentials while internally betraying them. The DIY chain B&Q was accused of spending more on advertising a charity initiative than on the project itself (Pickard2002).
More recently the CSR debate has been made complicated by concerns that while charitable donations have been increasing, firms are increasingly adept at exploiting loopholes to minimize their tax burden(Teather2004;Cowe2004b).Controversy has also arisen by the decision of major coffee producers, including Kraft Foods, Lavazza and Lyons, to shun the more demanding certification requirements of the world's leading certification body, the Fair-trade Foundation, I favour of the les stringent criteria of the New York based Rainforest Alliance (McAllister 2004).Doane argues 'the market does not provide sufficient incentives for companies to report on their social and environmental impacts on a voluntary basis'(2002) an calls, with others (for example, Henrique 1999; Christian Aid 2004), for a shift to a more mandatory basis to surmount the difficulties currently experienced. There is also, sometimes, an absence of measures that accurately capture performance and that can be applied across organization (ideally across sectors and geographic boundaries) (Joseph 2002). (Edwards and Rees 2006: 277,278)
Nobody can tell exactly about the future. We can set targets and see the result in percentage. There are different views about CSR. Some thinks positively while there are a great number of pessimists as well. The pessimists are of the view that increasing inconsistencies between corporate actions and stated CSR commitments; companies will become astute at shielding their actual performance. They are of the view that substantive issues will not be addressed by CSR. They cannot see any real change in the coming time. Most businesses will hold back waiting for the business case to develop however they may never be satisfied by the evidence of business case and may use this as an excuse for in action. The business case will not be clear enough for companies to take appropriate action at the right time unless it is legislated or there are some incentives. They are of the view that CSR will not be on the public's radar screen and there will not be any clarity around what CSR is and why it is important.
CSR will become too prescriptive and get labelled as needless red tape increasing the cost of business. Companies that once embraced CSR will lose interest and pursue other objectives. Those engaged in CSR shift to minimal CSR activities, never moving beyond baseline CSR.
But there is other side of the picture as well. The CSR optimists believe that many companies will be convinced on this that it is in their strategic interest to follow CSR in their operations. The crisis in the global markets is broadening the discussion of accountability and transparency in the climate where there is no openness to CSR ideas. CSR will be seen as good corporate governance. There will be pressure through competition for better CSR performance. This will have a good effect on the suppliers. The companies will be moving forward smoothly and there will be different models and levels of CSR as a result of steady improvement and quality assurance. Today we see only a few companies committed to CSR but this will increase in the coming times as more and more awareness will come. CSR is like a bond between business and society and this bond will work on the basis of set of norms arrived through experimentation.
Most of the CSR believers are not from the same group. They do not have one or the same theory about the future of CSR as well. There will be different conclusions and views with the passage of time about business and CSR especially based on the businesses in the non-western societies. CSR will definitely play its role but that will be slow over the next ten to twelve years as most of the CSR issues are expected to remain the same.
CSR is an emergent, evolving, disputed but influential concept. Although a definitive definition remains elusive, a common element is an awareness that business operates in a wider community and that its future interests are bound up with that community. It is also a concept that has rapidly acquired a high public profile, partly in the wake of trends such as globalization, greater corporate power (and the issues this raises) and diminishing government intervention. In a wider climate of corporate distrust, CSR is a useful tool in engaging with the concerns of employees, customers and interest groups. This is especially for brands whose reputation can be tarnished by consumer boycotts or NGO campaigns .HRM plays a key role in the issues raised by CSR, as many CSR issues having a strong labour /employment relations aspect. Labour issues are important to most codes of conduct. HRM skills can also be crucial to the implementation of CSR strategies, and thus to wider corporate legitimacy and accountability.
The actual practice of CSR is distinctly uneven. Criticism of 'corporate gloss' or public relations are often very much there. This is because the CSR is still in infancy. Although codes of conduct and other forms of voluntary regulation have proliferated, the limits and weaknesses of such regulation have led in turn to calls for an extension of mandatory regulation. So CSR is there it will go along as the businesses grow. The investment in CSR will bring fruit and those who think that it is only PR, will change their view in the near future. I accept the process is slow and steady. There are many hurdles in the way of CSR especially in the developing world but positive note is that process is on and businesses will grow with CSR with passage of time.
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