Corporate social responsibility

Corporate social responsibility (CSR, also called corporate conscience, corporate

citizenship or sustainable responsible business/ Responsible Business)[1] is a form
ofcorporate self-regulation integrated into a business model. CSR policy functions as a selfregulatory mechanism whereby a business monitors and ensures its active compliance with the
spirit of the law, ethical standards and international norms. With some models, a firm's
implementation of CSR goes beyond compliance and engages in "actions that appear to further
some social good, beyond the interests of the firm and that which is required by law." [2][3] CSR
aims to embrace responsibility for corporate actions and to encourage a positive impact on the
environment and stakeholders including consumers, employees, investors, communities, and
others.
The term "corporate social responsibility" became popular in the 1960s and has remained a term
used indiscriminately by many to cover legal and moral responsibility more narrowly construed. [4]
Proponents argue that corporations increase long term profits by operating with a CSR
perspective, while critics argue that CSR distracts from business' economic role. A 2000 study
compared existing econometric studies of the relationship between social and financial
performance, concluding that the contradictory results of previous studies reporting positive,
negative, and neutral financial impact, were due to flawed empirical analysis and claimed when
the study is properly specified, CSR has a neutral impact on financial outcomes. [5]
Critics[6][7] questioned the "lofty" and sometimes "unrealistic expectations" in CSR. [8] or that CSR is
merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations.
Political sociologists became interested in CSR in the context of theories
of globalization, neoliberalism and late capitalism. Some sociologists viewed CSR as a form of
capitalist legitimacy and in particular point out that what began as a social movement against
uninhibited corporate power was transformed by corporations into a 'business model' and a 'risk
management' device, often with questionable results.[9]
CSR is titled to aid an organization's mission as well as a guide to what the company stands for
to its consumers. Business ethics is the part of applied ethics that examines ethical principles
and moral or ethical problems that can arise in a business environment. ISO 26000 is the
recognized international standard for CSR. Public sector organizations (the United Nations for
example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar
principles, but with no formal act of legislation.
The notion is now extended beyond purely commercial corporations, e.g. to universities. [10]

Definition
Business dictionary defines CSR as "A companys sense of responsibility towards the community
and environment (both ecological and social) in which it operates. Companies express this
citizenship (1) through their waste and pollution reduction processes, (2) by contributing
educational and social programs and (3) by earning adequate returns on the employed
resources."[11]
A broader definition expands from a focus on stakeholders to
include philanthropy and volunteering.[12]

Consumer perspectives

Most consumers agree that while achieving business targets, companies should do CSR at the
same time.[13] Most consumers believe companies doing charity will receive a positive response.
[14]

Somerville also found that consumers are loyal and willing to spend more on retailers that

support charity. Consumers also believe that retailers selling local products will gain loyalty.
[15]

Smith (2013)[16] shares the belief that marketing local products will gain consumer trust.

However, environmental efforts are receiving negative views given the belief that this would
affect customer service.[15] Oppewal et al. (2006) found that not all CSR activities are attractive to
consumers.[17] They recommended that retailers focus on one activity.[18] Becker-Olsen (2006)
[19]

found that if the social initiative done by the company is not aligned with other company goals

it will have a negative impact. Mohr et al.(2001)[20] and Groza et al. (2011) [21] also emphasise the
importance of reaching the consumer.

Approaches

CSR Approaches

Some commentators have identified a difference between the Canadian (Montreal school of
CSR), theContinental European and the Anglo-Saxon approaches to CSR.[22] It is said that for
Chinese consumers, a socially responsible company makes safe, high-quality products; for
Germans it provides secure employment; in South Africa it makes a positive contribution to social
needs such as health care and education.[23] And even within Europe the discussion about CSR is
very heterogeneous.[24]
A more common approach to CSR is corporate philanthropy. This includes monetary donations
and aid given to nonprofit organizations and communities. Donations are made in areas such as
the arts, education, housing, health, social welfare and the environment, among others, but
excluding political contributions and commercial event sponsorship.[25]
Another approach to CSR is to incorporate the CSR strategy directly into operations. For
instance, procurement of Fair Trade tea and coffee.
Creating Shared Value, or CSV is based on the idea that corporate success and social welfare
are interdependent. A business needs a healthy, educated workforce, sustainable resources and
adept government to compete effectively. For society to thrive, profitable and competitive
businesses must be developed and supported to create income, wealth, tax revenues and
philanthropy. The Harvard Business Review article Strategy & Society: The Link between
Competitive Advantage and Corporate Social Responsibility provided examples of companies
that have developed deep linkages between their business strategies and CSR. [26] CSV
acknowledges trade-offs between short-term profitability and social or environmental goals, but
emphasizes the opportunities for competitive advantage from building a social value proposition

into corporate strategy. CSV gives the impression that only two stakeholders are important shareholders and consumers.
Many companies employ benchmarking to assess their CSR policy, implementation and
effectiveness. Benchmarking involves reviewing competitor initiatives, as well as measuring and
evaluating the impact that those policies have on society and the environment, and how others
perceive competitor CSR strategy.[27]

Cost-benefit analysis[edit]
In competitive markets cost-benefit analysis of CSR initiatives, can be examined using
a resource-based view (RBV). According to Barney (1990) "formulation of the RBV, sustainable
competitive advantage requires that resources be valuable (V), rare (R), inimitable (I) and nonsubstitutable (S)."[28][29] A firm introducing a CSR-based strategy might only sustain high returns on
their investment if their CSR-based strategy could not be copied (I). However, should competitors
imitate such a strategy, that might increase overall social benefits. Firms that choose CSR for
strategic financial gain are also acting responsibly.[3]
RBV presumes that firms are bundles of heterogeneous resources and capabilities that are
imperfectly mobile across firms. This imperfect mobility can produce competitive advantages for
firms that acquire immobile resources. McWilliams and Siegel (2001) examined CSR activities
and attributes as a differentiation strategy. They concluded that managers can determine the
appropriate level of investment in CSR by conducting cost benefit analysis in the same way that
they analyze other investments.
Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only sustain an
abnormal return if it could prevent competitors from imitating its strategy.[30]

Scope
Initially, CSR emphasized the official behavior of individual firms. Later, it expanded to include
supplier behavior and the uses to which products were put and how they were disposed of after
they lost value.

Supply chain[edit]
Incidents like the 2013 Savar building collapse pushed companies to consider how the behavior
of their suppliers impacted their overall impact on society. Irresponsible behavior reflected on
both the misbehaving firm, but also on its corporate customers. Supply chain
management expanded to consider the CSR context. Wieland and Handfield (2013) suggested

that companies need to include social responsibility in their reviews of component quality. They
highlighted the use of technology in improving visibility across the supply chain.[31]

Implementation
CSR may be based within the human resources, business development or public
relations departments of an organisation,[12] or may be a separate unit reporting to the CEO or
theboard of directors. Some companies approach CSR without a clearly defined team or
programme.

Engagement plan[edit]
An engagement plan can assist in reaching a desired audience. A corporate social responsibility
individual or team plans the goals and objectives of the organization. As with any corporate
activity, a defined budget demonstrates commitment and scales the program's relative
importance.

Accounting, auditing and reporting[edit]

Main article: Social accounting
Social accounting is the communication of social and environmental effects of a company's
economic actions to particular interest groups within society and to society at large. [32]
Social accounting emphasizes the notion of corporate accountability. Crowther defines social
accounting as "an approach to reporting a firms activities which stresses the need for the
identification of socially relevant behavior, the determination of those to whom the company is
accountable for its social performance and the development of appropriate measures and
reporting techniques."[33] Reporting guidelines and standards serve as frameworks for social
accounting, auditing and reporting:

AccountAbility's AA1000 standard, based on John Elkington's triple bottom line (3BL)
reporting

The Prince's Accounting for Sustainability Project's Connected Reporting Framework [34]

The Fair Labor Association conducts audits based on its Workplace Code of Conduct and
posts audit results on the FLA website.

The Fair Wear Foundation verifies labour conditions in companies' supply chains, using
interdisciplinary auditing teams.

Global Reporting Initiative's Sustainability Reporting Guidelines

Economy for the Common Good's Common Good Balance Sheet[35]

GoodCorporation's standard[36] developed in association with the Institute of Business

Ethics

Synergy Codethic 26000[37] Social Responsibility and Sustainability Commitment

Management System (SRSCMS) Requirements Ethical Business Best Practices of
Organizations - the necessary management system elements to obtain a certifiable ethical
commitment management system. The standard scheme has been build around ISO 26000
and UNCTAD Guidance on Good Practices in Corporate Governance.The standard is
applicable by any type of organization.;

Earthcheck Certification / Standard

Social Accountability International's SA8000 standard

Standard Ethics Aei guidelines

The ISO 14000 environmental management standard

The United Nations Global Compact requires companies to communicate on their

progress[38] (or to produce a Communication on Progress, COP), and to describe the
company's implementation of the Compact's ten universal principles. [39]

The United Nations Intergovernmental Working Group of Experts on International

Standards of Accounting and Reporting (ISAR) provides voluntary technical guidance on
eco-efficiency indicators,[40] corporate responsibility reporting,[41] and corporate governance
disclosure.[42]

The FTSE Group publishes the FTSE4Good Index, an evaluation of CSR performance of
companies.

In nations such as France, legal requirements for social accounting, auditing and reporting exist,
though international or national agreement on meaningful measurements of social and
environmental performance has not been achieved. Many companies produce externally audited
annual reports that cover Sustainable Development and CSR issues ("Triple Bottom Line
Reports"), but the reports vary widely in format, style, and evaluation methodology (even within
the same industry). Critics dismiss these reports as lip service, citing examples such as Enron's
yearly "Corporate Responsibility Annual Report" and tobacco companies' social reports.

In South Africa, as of June 2010, all companies listed on the Johannesburg Stock
Exchange (JSE) were required to produce an integrated report in place of an annual financial
report and sustainability report.[43] An integrated report reviews environmental, social and
economic performance alongside financial performance. This requirement was implemented in
the absence of formal or legal standards. An Integrated Reporting Committee (IRC) was
established to issue guidelines for good practice.

Ethics training[edit]

The rise of ethics training inside corporations , some of it required by government regulation, has helped CSR
increased employee loyalty and pride in the organization.[46]

Common actions[edit]
Common CSR actions include:[47]

Environmental sustainability: recycling, waste management, water management,

renewable energy, reusable materials, 'greener' supply chains, reducing paper use and
adopting Leadership in Energy and Environmental Design (LEED) buildind standards.[48][49][50]

Community involvement: This can include raising money for local charities, providing
volunteers, sponsoring local events, employing local workers, supporting local economic
growth, engaging in fair trade practices, etc.[51][52]

Ethical marketing: Companies that ethically market to consumers are placing a higher
value on their customers and respecting them as people who are ends in themselves. They
do not try to manipulate or falsely advertise to potential consumers. This is important for
companies that want to be viewed as ethical.

Social license[edit]
Social license refers to a local communitys acceptance or approval of a company. Social
license exists outside formal regulatory processes. Social license can nevertheless be acquired
through timely and effective communication, meaningful dialogue and ethical and responsible
behavior.
Displaying commitment to CSR is one way to achieve social license, by enhancing a companys
reputation.[53]

Potential business benefits

A large body of literature exhorts business to adopt measures non-financial measures of success
(e.g., Deming's Fourteen Points, balanced scorecards). While CSR benefits are hard to quantify,
Orlitzky, Schmidt and Rynes[54] found a correlation between social/environmental performance
and financial performance.
The business case for CSR[55] within a company employs one or more of these arguments:

Triple bottom line[edit]

"People, planet and profit", also known as the triple bottom line form one way to evaluate CSR.
"People" refers to fair labour practices, the community and region where the business operates.
"Planet" refers to sustainable environmental practices. Profit is the economic value created by
the organization after deducting the cost of all inputs, including the cost of the capital (unlike
accounting definitions of profit).[56][57]
This measure was claimed to help some companies be more conscious of their social and moral
responsibilities.[58] However, critics claim that it is selective and substitutes a company's
perspective for that of the community. Another criticism is about the absence of a standard
auditing procedure.[59]

Human resources[edit]
A CSR program can be an aid to recruitment and retention,[60][61] particularly within the
competitive graduate student market. Potential recruits often consider a firm's CSR policy. CSR
can also help improve the perception of a company among its staff, particularly when staff can
become involved through payroll giving, fundraising activities or community volunteering. CSR
has been credited with encouraging customer orientation among customer-facing employees. [62]

Risk management[edit]
Managing risk is an important executive responsibility. Reputations that take decades to build up
can be ruined in hours through corruption scandals or environmental accidents. [63]These draw
unwanted attention from regulators, courts, governments and media. CSR can limit these risks. [64]

Brand differentiation[edit]
CSR can help build customer loyalty based on distinctive ethical values. [65] Some companies use
their commitment to CSR as their primary positioning tool, e.g., The Co-operative Group, The
Body Shop and American Apparel[66]

Some companies use CSR methodologies as a strategic tactic to gain public support for their
presence in global markets, helping them sustain a competitive advantage by using their social
contributions as another form of advertising.[67]

Reduced scrutiny[edit]
Corporations are keen to avoid interference in their business through taxation and/or regulations.
A CSR program can persuade governments and the public that a company takeshealth and
safety, diversity and the environment seriously, reducing the likelihood that company practices
will be closely monitored.

Supplier relations[edit]
Appropriate CSR programs can increase the attractiveness of supplier firms to potential
customer corporations. E.g., a fashion merchandiser may find value in an overseas manufacturer
that uses CSR to establish a positive imageand to reduce the risks of bad publicity from
uncovered misbehavior.

Criticisms and concerns

CSR concerns include its relationship to the purpose of business and the motives for engaging in
it.

Nature of business[edit]
Milton Friedman and others argued that a corporation's purpose is to maximize returns to its
shareholders and that obeying the laws of the jurisdictions within which it operates constitutes
socially responsible behavior.[68]
While some CSR supporters claim that companies practicing CSR, especially in developing
countries, are less likely to exploit workers and communities, critics claim that CSR itself imposes
outside values on local communities with unpredictable outcomes.[69]
Better governmental regulation and enforcement, rather than voluntary measures, are an
alternative to CSR that moves decision-making and resource allocation from public to private
bodies.[70] However, critics claim that effective CSR must be voluntary as mandatory social
responsibility programs regulated by the government interferes with peoples own plans and
preferences, distorts the allocation of resources, and increases the likelihood of irresponsible
decisions.[71]

Motives[edit]

A story of CSR promoted by Azim Premji Foundation in India[72]

Some critics believe that CSR programs are undertaken by companies to distract the public from
ethical questions posed by their core operations. They argue that the reputational benefits that
CSR companies receive (cited above as a benefit to the corporation) demonstrate the hypocrisy
of the approach.[73]

Misdirection[edit]
Another concern is that sometimes companies use CSR to direct public attention away from
other, harmful business practices. For example,McDonald's Corporation positioned its
association with Ronald McDonald House as CSR[74] while its meals have been accused of
promoting poor eating habits.[75]

Controversial industries[edit]
Industries such as tobacco, alcohol or munitions firms make products that damage their
consumers and/or the environment. Such firms may engage in the same philanthropic activities
as those in other industries. This duality complicates assessments of such firms with respect to
CSR.[76]

Negative impact of corporate psychopathy

Main article: Psychopathy in the workplace
As corporate psychopaths have little or no conscience or care or empathy, it follows logically that
they are not driven by any notion of social responsibility or commitment to employees or to the
wider public.[77]

Stakeholder influence
One motivation for corporations to adopt CSR is to satisfy stakeholders.

Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the set of views of
corporate responsibility held by all groups or constituents with a relationship to the firm. [78] In their
normative model the company accepts these views as long as they do not hinder the
organization. The stakeholder perspective fails to acknowledge the complexity of network
interactions that can occur in cross-sector partnerships. It relegates communication to a
maintenance function, similar to the exchange perspective. [79]

Ethical consumerism[edit]
The rise in popularity of ethical consumerism over the last two decades can be linked to the rise
of CSR.[80] Consumers are becoming more aware of the environmental and social implications of
their day-to-day consumption decisions and in some cases make purchasing decisions related to
their environmental and ethical concerns.[81]

Socially responsible investing[edit]

Main article: Socially responsible investing
Shareholders and investors, through socially responsible investing are using their capital to
encourage behavior they consider responsible. However, definitions of what constitutes ethical
behavior vary. For example, some religious investors in the US have withdrawn investment from
companies that violate their religious views, while secular investors divest from companies that
they see as imposing religious views on workers or customers.[82]

Creating shared value[edit]

Non-governmental organizations are also taking an increasing role, leveraging the media and the
Internet to increase the visibility of corporate behavior. Through education and dialogue, the
development of community awareness in pushing businesses to change their behavior is
growing.[83]
Creating Shared Value (CSV) claims to be more community aware than CSR. Several
companies are refining their collaboration with stakeholders accordingly.

Public policies[edit]
Some national governments promote socially and environmentally responsible corporate
practices. The heightened role of government in CSR has facilitated the development of
numerous CSR programs and policies.[84] Various European governments have pushed
companies to develop sustainable corporate practices.[85] CSR critics such as Robert
Reichargued that governments should set the agenda for social responsibility with laws and
regulation that describe how to conduct business responsibly.

Regulation[edit]
Fifteen European Union countries actively engaged in CSR regulation and public policy
development.[85] CSR efforts and policies are different among countries, responding to the
complexity and diversity of governmental, corporate and societal roles. Studies claimed that the
role and effectiveness of these actors were case-specific.[84]
The variety among companies complicates regulatory processes. [86] Self-regulation allows each
corporate actor to balance profits and social responsibility without cumbersome governmental
involvement. Studies suggest that mandated CSR distorts the allocation of resources and
increases the likelihood of irresponsible decisions. [87]
Bulkeley cited the Australian government's actions to avoid compliance with the Kyoto Protocol in
1997, over concerns of economic loss and national interest. The Australian government claimed
that the pact would damage Australia more than any other OECD nation.[88] In November 2007,
the new Prime Minister Kevin Rudd ratified the protocol.
Canada adopted CSR in 2007. Prime Minister Harper encouraged Canadian mining companies
to meet Canadas newly developed CSR standards.[89]
Laws[edit]
In the 1800s,the US government could take away a firm's license if it acted irresponsibly.
Corporations were viewed as "creatures of the state" under the law. In 1819, the United States
Supreme Court in Dartmouth College vs. Woodward established a corporation as a legal person
in specific contexts. This ruling allowed corporations to be protected under the Constitution and
prevented states from regulating firms.[90] Recently countries included CSR policies in government
agendas.[85]
On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100
largest Danish companies, investors and state-owned companies to include CSR information in
their financial reports. The reporting requirements became effective on 1 January 2009. [91] The
required information included:

CSR/SRI policies

How such policies are implemented in practice

Results and management expectations

CSR/SRI is voluntary in Denmark, but if a company has no policy on this it must state its
positioning on CSR in financial reports.[92]

In 2014, India became the world's first country to enact a mandatory minimum CSR spending
law. Under Companies Act, 2013, any company having a net worth of 500 crore or more or a
turnover of 1,000 crore or a net profit of 5 crore must spend 2% of their net profits on CSR
activities.[93] The rules came into effect from 1 April 2014.[94]

Crises and their consequences[edit]

Crises have encouraged the adoption of CSR. The CERES principles were adopted following the
1989 Exxon Valdez incident.[45] Other examples include the lead paint used by toy maker Mattel,
which required the recall of millions of toys and caused the company to initiate new risk
management and quality control processes. Magellan Metals was found responsible for lead
contamination killing thousands of birds in Australia. The company ceased business immediately
and had to work with independent regulatory bodies to execute a cleanup. Odwalla experienced
a crisis with sales dropping 90% and its stock price dropping 34% due to cases of E. coli. The
company recalled all apple or carrot juice products and introduced a new process called "flash
pasteurization" as well as maintaining lines of communication constantly open with customers.

Geography
Corporations that employ CSR behaviors do not always behave consistently in all parts of the
world.[95] Conversely, a single behavior may not be considered ethical in all jurisdictions. E.g.,
some jurisdictions forbid women from driving,[96] while others require women to be treated equally
in employment decisions.

UK retail sector[edit]
A 2006 study[97] found that the UK retail sector showed the greatest rate of CSR involvement.
Many of the big retail companies in the UK joined the Ethical Trading Initiative,[98] an association
established to improving working conditions and worker health.
Tesco (2013)[99] reported that their essentials are Trading responsibility, Reducing our Impact
on the Environment, Being a Great Employer and Supporting Local Communities. J
Sainsbury[100] employs the headings Best for food and health, Sourcing with integrity, Respect
for our environment, Making a difference to our community, and A great place to work, etc.
The four main issues to which UK retail these companies committed are environment, social
welfare, ethical trading and becoming an attractive workplace. [101][102]

Top ten UK retail brands in 2013 based on Retail Week reports:[103]

Retailer

Annual Sales bn

Tesco

42.8

Sainsbury's

22.29

Asda

21.66

Morrisons

17.66

Mark and Spencer

8.87

Co-operative Group

8.18

John Lewis Partnership

7.76

Boots

6.71

Home Retail Group

5.49

King Fisher

4.34

Anselmsson and Johansson (2007)[104] assessed three areas of CSR performance: human
responsibility, product responsibility and environmental responsibility. Martinuzzi et al. described
the terms, writing that human responsibility is the company deals with suppliers who adhere to
principles of natural and good breeding and farming of animals, and also maintains fair and
positive working conditions and work-place environments for their own employees. Product
responsibility means that all products come with a full and complete list of content, that country of
origin is stated, that the company will uphold its declarations of intent and assume liability for its
products. Environmental responsibility means that a company is perceived to produce
environmental-friendly, ecological, and non-harmful products.[105] Jones et al. (2005) found that
environmental issues are the most commonly reported CSR programs among top retailers. [106]

DEFINITION OF 'CORPORATE SOCIAL

RESPONSIBILITY'
Corporate initiative to assess and take responsibility for the company's effects
on the environment and impact on social welfare. The term generally applies
to company efforts that go beyond what may be required by regulators or
environmental protection groups.
Corporate social responsibility may also be referred to as "corporate
citizenship" and can involve incurring short-term costs that do not provide an
immediate financial benefit to the company, but instead promote positive social
and environmental change.