CORPORATE

SOCIAL
RESPONSIBILIT Y
C O R P O R AT E C I T I Z E N S H I P - T O D E S C R I B E H O W
A N O R G A N I S AT I O N ' S V A L U E S A R E S H A P E D A N D
T H E I M PAC T
C O N C E P T S O F R E S P O N S I B I L I T Y H AV E O N
BUSINESS DECISION-MAKING
CORPORATE SOCIAL RESPONSIBILITY

• Four levels of corporate social responsibility:

1. Economic To shareholders wanting dividends/capital gains, to employees wanting fair
employment, to customers wanting good quality products
2. Legal Obeying the law is a requirement in all societies, though legal compliance imposes
greater burdens in some societies rather than others
3. Ethical Acting in a fair and just way
4. Philanthropic Voluntary contributions to society
• In recent years corporations have recognised more and more the importance of CSR and have
developed strategies to demonstrate its implementation
CSR
1. Environmental - A focus on sustainability, for example by using renewable energy sources,
recycling, using green technology, minimising waste and pollution
2. Social - Engagement with local communities, for example by supporting local charities and
social events, employing local people, investing in the local economy
3. Ethical - Adopting ethical business practices, for example by paying living wages, avoiding
the exploitation of child labour, respecting health and safety, eliminating fraud and corruption
• Some commentators have criticised the CSR approach, claiming that large corporations engage
in this exercise for cynical or insincere motives; in other words, they are employing 'strategic
CSR' in order to enhance their image and their brand value. Indeed some business activities
are considered beyond the reach of CSR altogether, for example arms manufacturers and
tobacco firms.
• Others,, argue that corporations have no responsibility to society, only to their shareholders,
and that their sole purpose is to make profits on behalf of those shareholders.
CORPORATE CITIZENSHIP

• Three core principles define the essence of corporate citizenship, and every company should
apply them in a manner appropriate to its distinct needs:
1. minimizing harm,
2. maximizing benefit, and
3. being accountable and responsive to stakeholders.
THE GENERAL CONCEPTS OF RIGHTS AND
RESPONSIBILITIES ARE FUNDAMENTAL TO
THE DEBATE ON CITIZENSHIP.
• Rights:
•  The rights that a corporate citizen has include being able to take actions that are
lawful and to enjoy the protection of the law. The rights of a company include the right
to exist as a separate legal entity and carry on a lawful business. Society will grant it
protection under the law and will also permit it to develop and expand.

• Responsibilities:
•  Responsibilities are the duties owed to society by the citizen as a consequence of the
citizen belonging to the society and enjoying rights within it. In order to enjoy the protection,
the individual or organisation has to comply with the laws that affect it and act in
accordance with society's behavioural norms.
PERSPECTIVES ON CORPORATE
CITIZENSHIP
1. Limited view - The business's philanthropy consists of limited projects undertaken in the
business's self-interest. The main stakeholder groups that the corporation engages with are
local communities and employees.
2. Equivalent view - This is based on a wider concept of corporate social responsibility
based on stakeholder theory. The corporation responds to the demands of society and
focuses on balancing the interests of different stakeholders. Acting according to the
business's self-interest is not the most important priority
3. Extended view - This view is based round a partly voluntary, partly imposed view of active
social and political citizenship. Corporations must promote citizens' rights, particularly as
governments have failed to provide some of the safeguards necessary for their society's
citizens and corporations are the most powerful institutions in society.
3. EXTENDED VIEW

• Under the extended view, organisations will promote:

• Social rights of citizens by provision of, for example, decent working conditions

• Civil rights, by intervening to promote citizens' individual rights themselves or to

pressurize governments to promote citizens' rights

• Political rights by allowing individuals to promote their causes by using corporate power
ORGANISATIONS' ETHICAL AND SOCIAL
RESPONSIBILITY
STANCES
• The ethical stance  An organisation's ethical stance the extent to which it will exceed its
minimum obligation to stakeholders.
• the range of possible ethical stances for organisations and individuals:
1. Short-term shareholder interest
2. Long-term shareholder interest
3. Multiple stakeholder obligations
4. Shaper of society
SHORT-TERM SHAREHOLDER
INTEREST
• An organisation or individual might limit its ethical stance to taking responsibility for short-
term shareholder interest on the grounds that it is for government alone to impose
wider constraints on corporate governance.
• This approach may not look much beyond the current financial year.
• This minimalist approach would accept a duty of obedience to the demands of the law, but
would not undertake to comply with any less substantial rules of conduct.
• This stance can be justified on the grounds that going beyond it can challenge government
authority.
• This is an important consideration for organisations operating in developing countries.
LONG-TERM SHAREHOLDER INTEREST

• The longer view will look years rather than months ahead and consider the legitimacy of a
claim in terms of its effect on long-term shareholder value.
• There are two reasons for taking a wider view of ethical responsibilities when considering the
longer-term interest of shareholders.
1. Corporate image may be enhanced by an assumption of wider responsibilities. The cost of
undertaking such responsibilities may be justified as essentially promotional expenditure.
2. The responsible exercise of corporate power may prevent a build-up of social and political
pressure for legal regulation. Freedom of action may be preserved and the burden of
regulation lightened by acceptance of ethical responsibilities
MULTIPLE STAKEHOLDER
OBLIGATIONS
• An organisation or individual might accept the legitimacy of the expectations and/or claims
of stakeholders other than shareholders and build those expectations into its stated purposes.
• This would be because, without appropriate relationships with groups such as suppliers, employers
and customers, the organisation would not be able to function.
• The legal rights of stakeholders other than shareholders have to be respected.
• These are extensive, including wide-ranging employment law and consumer protection law, as
well as the more basic legislation relating to such matters as contract and property.
• Where moral entitlements are concerned, organisations need to be practical.
• They should take care to establish just what expectations they are prepared to treat as
obligations, bearing in mind their general ethical stance and degree of concern about bad publicity
• Acceptance of obligations to stakeholders implies that measurement of the performance must
give due weight to these extra imperatives.
SOCIAL AND ENVIRONMENTAL
EFFECTS OF ECONOMIC ACTIVITY
• Significance of environmental effects - Is there a problem and how serious is it?
• Impact on environment of economic activities  business's activities have on the environment
including its resource consumption and pollution emissions. It concerns the environmental
consequences of a business's inputs and outputs.
IMPACT ON ENVIRONMENT OF
ECONOMIC ACTIVITIES
• At an individual firm or business level, environmental impact can be measured in terms of
environmental costs in various areas.
• A 1998 IFAC report identified several examples of impacts on the environment.
• Depletion of natural resources
• Noise and aesthetic impacts
• Residual air and water emissions
• Long-term waste disposal (exacerbated by excessive product packaging)
• Uncompensated health effects
• Change in the local quality of life (through for example the impact of tourism)
ENVIRONMENTAL
• a business may be contributing negatively to the environment but positively in other ways.
• An increase in tourism will provide jobs and other economic benefits to the community, but
could lead to adverse effects on the environment as the roads become more crowded or
because of infrastructure improvements.
• Ways of assessing the impact of inputs include the measurement of key environmental
resources used, such as energy, water, inventories and land.
• Measurement of the impact of outputs includes the proportion of product recyclability,
tonnes of carbon or other gases produced by company activities, waste or
pollution.
• A business may also be concerned with the efficiency of its processes, maybe carrying out a
mass balance or yield calculation.
DIRECT AND INDIRECT IMPACTS

• Measures of impact can apply directly and narrowly to the organisation, or they can be applied
more broadly to the indirect, associated impacts that it has.
• For a manufacturer, indirect measures could report on the forward and backward supply chains
which it uses from sourcing its raw materials to bringing its products to market.
• A bank could include the environmental consequences of the activities it finances through its
business loans.
• However, reporting of indirect measures is rare, as the other parties are primarily responsible
for reporting the direct impacts that they have.
• Clearly also it would be particularly difficult for a bank to track the impacts of all its business
borrowers.
IMPACT ON ORGANISATION OF
ENVIRONMENTAL COSTS - THE IFAC REPORT
LISTED A LARGE NUMBER OF COSTS THAT THE BUSINESS MIGHT
SUFFER INTERNALLY.
• Direct or indirect environmental costs

• Waste management • Environmentally related maintenance

• Remediation costs or expenses • Legal costs and fines
• Compliance costs • Environmental assurance bonds
• Permit fees • Environmental certification and labelling
• Environmental training • Natural resource inputs
• Environmentally driven research and • Recordkeeping and reporting
development
IMPACT ON ORGANISATION OF
ENVIRONMENTAL COSTS - THE IFAC REPORT LISTED A
L ARGE NUMBER OF COSTS THAT THE BUSINESS MIGHT SUFFER
INTERNALLY.
• Contingent or intangible environmental costs

Uncertain future remediation or

Environmental knowledge assets
compensation costs
Sustainability of raw material inputs
Risk posed by future regulatory changes
Risk of impaired assets
Product quality
Public/customer perception
Employee health and safety
SOCIAL IMPACTS OF ACTIVITIES

• is the impact of an organisation on human, social and constructed capitals (Anthro capitals).
• The definition of social footprint formulated by the Center for Sustainable Organizations is
measured in terms of impacts that arise from organisational activities.
• 'Sustainability entails the maintenance and/or production of vital capitals as required to
ensure human (and non-human) well-being.‘
• The definition concentrates on anthro capital which is created by people and can be produced
at will – more can always be created. It is thus different from natural capital which humanity
cannot reproduce. The focus is on providing enough resources to maintain levels of social
capital.
THE DIFFERENT TYPES OF CAPITAL ARE
ALL USED TO TAKE EFFECTIVE ACTION
AND ENSURE THEIR OWN WELLBEING.
• Capitals :
1. Human  Personal health, knowledge, skills, experience, human rights, ethical entitlements.
Relied on by individuals

2. Social  Social networks and mutually held knowledge. Relied on by collectives

3. Constructed  Material things such as tools, technologies, roads, utilities and

infrastructures
STAKEHOLDER EXPECTATIONS

• Pressure on organisations to widen the scope of their corporate public accountability comes
from increasing expectations of stakeholders and knowledge about the consequences
of ignoring such pressures.

• Stakeholders in this respect include communities (particularly where operations are based),
customers (product safety issues), suppliers and supply chain participants and competitors.
Issues such as plant closures, pollution, job creation, sourcing, etc can have powerful social
effects for good or ill on these stakeholders.
REPUTATION RISK

• loss of corporate reputation.

• A business must have the reputation of being a responsible business that enhances long-
term shareholder value by addressing the needs of its stakeholders – employees, customers,
suppliers, the community and the environment
CORPORATE SOCIAL RESPONSIBILITY
• The primary purpose of a business organisation is to make profits, thereby increasing the
wealth of its owners, the shareholders.
• Businesses do not, however, exist in splendid isolation; they are dependent on the society in
which they operate, and they should therefore contribute to that society.
• Businesses make use at least in part of the infrastructure of the country or countries in which
they operate, for example roads, utilities and other social goods paid for through taxation.
• For this reason it can be seen as only fair that businesses are aware of their social
responsibility, and their ethical reputation can depend on the extent to which they take this
responsibility seriously.
CSR STRATEGY

• Examples of CSR activities might include:

• Making donations to charity
• Contributing to the activities on non-governmental organisations (NGOs)
• Supporting local good causes
• Including stakeholders in key decisions
• Managing the social and environmental impacts of the business
• Having a strategy means making choices, providing funding for the CSR initiatives chosen, and
monitoring the outcomes.
STRATEGIC CSR

• Examples of strategic CSR initiatives might include:

• A pharmaceutical company funding the training of medical staff, in the hope that when
qualified they will source drugs from that company.
• A bank providing free internet training for senior customers, who might then be disposed
to buying financial products.
• Encouraging employees to nominate and get involved in good causes, in order to develop
loyalty to the company.