Running Head: Corporate Social Responsibility

Terryann Bodden-Bravo

Environment of Business

International College of the Cayman Islands

Professor Lancelot Barnes

June 20th 2017

 Corporate Social Responsibility 2

Abstract

Corporate social responsibility has continued to evolve throughout the years due to

increased expectations of key stakeholders in the society. The concept has also taken on various

meanings. Corporate social responsibility is a key concept as business has various

responsibilities including economic, legal, and ethical, and philanthropic parts. As such, the

importance of corporate social responsibility and related concepts will be discussed throughout

this research paper. Some common business examples of companies that have shown corporate

social responsibility are Microsoft and Google. Corporate social responsibility, corporate social

responsiveness, social performance is all intertwined into corporate citizenship. The stages of

corporate citizenship will be included and highlighted as well as the relevance of the triple

bottom line. Additionally, socially responsible investing practices are becoming more prominent

due to corporate social responsibility. In todays environment investors are seeking companies

who can demonstrate that they are socially responsible. These factors will expound on the basis

as to why corporate social responsibility should be incorporated into the core strategies of a

business.
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Introduction The evolution of the "Corporate Social Responsibility" concept

To understand the dynamics of corporate social responsibility (CSR), it is necessary to

look back into the history of this concept. According to Buchholtz & Carroll (2012), since the

industrial revolution in the 1800s, the idea of business responsibility was formed as a result of

the classical economical model (Buchholtz & Carroll, 2012). This model stems from Adam

Smiths theory of the invisible hand (Buchholtz & Carroll, 2012). The classical economic model

is formed on the basis that society has the ability establish its wants and needs through the

marketplace (Buchholtz & Carroll, 2012). If businesses are compensated for the ability to

properly react to the needs of the market, the quest for that reward will meet societys needs and

maximize profits (Buchholtz & Carroll, 2012). Consequently, the invisible hand theory converts

the marketplace from the self-interest of business to societal interest (Buchholtz & Carroll,

2012).

According to Buchholtz & Carroll (2012), when large corporations emerged in the latter

part of 1800s this had a major impact on hastening the movement away from the classical

economic view (Buchholtz & Carroll, 2012). There were questions that were raised regarding

the responsibility of a business to the society as the society blossomed from the economic

structure of minute, powerless firms operated mainly by the marketplace to large corporations

that had more centralized power (Buchholtz & Carroll, 2012).

The concept of corporate social responsibility came about in the United States in the late

1900s (Farcane & Bureana, 2015). Managers had a more positive perspective of their role in the

1920s, despite the fact that CSR had not completely developed (Buchholtz & Carroll, 2012).

Buchholtz & Carroll (2012) mentioned that during this time, community service was at the

center of the landscape (Buchholtz & Carroll, 2012). A prime example of this was the
 Corporate Social Responsibility 4

Community Chest Movement which was largest and first attempt in which businesses became

involved with other nongovernmental community groups to give time and money to certain

community projects (Buchholtz & Carroll, 2012). It was around this time that the concept of

business social responsibility received a more prominent meaning (Buchholtz & Carroll, 2012).

The 1930s exemplified an even greater shift from the laissez-faire economy to a mixed

economy where businesses were regulated by a more activist government (Buchholtz & Carroll,

2012). It was from this time and moving into the 1950s that the social responsibility of

businesses increased to include employee welfare, safety, medical care and retirement programs

(Buchholtz & Carroll, 2012). According to Buchholtz & Carroll (2012), governmental

compulsion and the amplified idea of business social responsibility caused these new

developments (Buchholtz & Carroll, 2012).

As a result of two world wars corporate social responsibility was not shown a lot of

interest by society until 1950-1960. The concept flourished after World War II, and particularly

in the last 50 years. Even though the concept of corporate social responsibility was not defined

and understood in many parts of the world, there was a modern understanding during the 1950s

in the United States (Farcane & Bureana, 2015). The business environment, politics or court

power were crucial in the understanding, enforcement and respect of corporate social

responsibility (Farcane & Bureana, 2015). However, the expectations society had of business

changed from being mainly economic to other areas that were under the umbrella of business

(Buchholtz & Carroll, 2012).

Over the years, corporate social responsibility has evolved and encompasses economic,

legal, ethical and philanthropic components. Business has economic responsibilities to society.
 Corporate Social Responsibility 5

Free enterprise social systems require businesses to be economic institutions (Buchholtz &

Carroll, 2012). Businesses produce goods and services that society wants and sells them at fair

prices. These prices signify the value of goods and services as perceived by society (Buchholtz

& Carroll, 2012). Additionally, these prices provide business with ample profits to continue to

survive as well as provide growth aspects for investors. Society also has legal expectations from

business. Legal responsibilities speak to businesss responsibility to society to comply with all

relevant laws and legislations. The legal framework acts as the ground rules that businesses are

expected to operate under (Buchholtz & Carroll, 2012).

The idea of social responsibility assumes that businesses have not only economic and

legal obligations but also responsibilities towards society, which go above these obligations

(Farcane & Bureana, 2015). While laws are a requirement in order for business to operate, they

are not enough on their own. Being ethically responsible is part of a societys expectations of

business. Ethical responsibilities compliment legal requirements, standards and operations that

are expected or forbidden by society (Buchholtz & Carroll, 2012). These responsibilities

encompass all of societal norms, standards, values and expectations. Ethical responsibilities call

for respect and protection of stakeholders moral rights (Buchholtz & Carroll, 2012).

The last component of corporate social responsibility is a business philanthropic

responsibilities. These activities are not mandatory but are still part of what a society expects of

a business. Philanthropic activities are left to a businesss discretion and are primarily driven by

the organizations willingness to engage in social activities which are not mandatory by law or

necessary from an ethical standpoint (Buchholtz & Carroll, 2012). Society has the perception

that businesses need to give back and do good deeds for the community. As such this is part of
 Corporate Social Responsibility 6

the social contract that has been forged between business and society (Buchholtz & Carroll,

2012).

Examples of corporate social responsibility and corporate citizenship

Two companies that have done well in the area of corporate social responsibility are

Disney and Microsoft. Disney has been in existence for a very long time and has a good

reputation. The company focuses on few socially responsible initiatives which include the

community, the environment, and volunteering (Espenson, 2014). Disney has contributed after

natural disasters, such as the earthquake in Haiti in 2010 (Espenson, 2014). Additionally, the

company is also interested in protecting the environment as they pass on funds raised from

nature documentaries to plant trees and to help protect the coral reef (Espenson, 2014).

According to Espenson (2014), Microsoft also gives back to the community. The Reputation

Institute also named the company the best at corporate social responsibility (Espenson, 2014).

Mircosoft has an annual Employee Giving Campaign and employees are given an opportunity to

attend fundraising activities for non-profit organizations (Espenson, 2014). The company has

hosted this event since 1983 and has managed to raise more than $1 billion which has been given

to 31,000 organizations (Espenson, 2014).

When it comes to corporate citizenship, two companies that stand out are Google and

Target. As described by Moreno (2015), Google has made tremendous efforts in the area of

good citizenship. One initiative that the company has is called Google Green and it seeks to use

recourses efficiently and take advantage of renewable power. The company is supportive of

recycling and turning off lights. As a result of targeted initiatives, Google has witnessed a

general decrease of about 50 percent in power needed for their data centers. The reduction in

utility costs allows Google to use funds in other areas of the business or pass them on to
 Corporate Social Responsibility 7

investors (Moreno, 2015). Target is not just a place where people can go to purchase milk or

tires. This company is a more than just a place to buy tires and milk. They are a prime example

of corporate social responsibility. Since 1946, Target has shown remarkable effort and resources

in the communities in which they operate (Moreno, 2015). These initiatives have been in the

form of local and environmental support (Moreno, 2015). The last few years Targets efforts

ranged from educational grants to sustainable practices (Moreno, 2015). As a result of all of the

companys efforts, five percent of its total profits have gone toward helping local communities,

which equates to $4 million per week (Moreno, 2015). Target has given more than $875 million

to education alone (Moreno, 2015).

Differentiation between and among concepts

It is useful to differentiate between and among corporate citizenship, social

responsibility, social responsiveness, social performance, and sustainability. Corporate

citizenship, social responsibility, social responsiveness, social performance, and sustainability

are crucial concepts that are all interrelated. It is necessary to break down each component

which will allow a better understanding. There have been various meanings attached to the

concept of corporate social responsibility (CSR) over the years (Buchholtz & Carroll, 2012). An

early definition of corporate social responsibility was a company critically contemplating the

impact of its actions on society. From an individual standpoint, corporate social responsibility

calls for a person to stop to think about his or her actions as they pertain to the entire social

network (Buchholtz & Carroll, 2012). It holds a person accountable for their actions where ever

he or she falls in the system (Buchholtz & Carroll, 2012).

 Corporate Social Responsibility 8

As time progressed, the meaning of corporate social responsibility has evolved to say,

decision makers are compelled to take precautions that will be in the best interest of its society

and to ensure it (society) is protected as well as taking their own interest into consideration

(Buchholtz & Carroll, 2012). Corporate social responsibility examines the economic and legal

obligations that go beyond anything explicitly stated (Buchholtz & Carroll, 2012). In todays

environment, the social responsibility of business encompasses the economic, legal, ethical, and

discretionary (philanthropic) expectations that society has of organizations at a given point in

time.

Corporate social responsibility is also found to be connected with sustainability as the

promotion of corporate social responsibility could lead to the realization of sustainable economic

growth (Sharma & Khanna, 2014). Leaders in the industry, as well as academics, acknowledge

that sustainability is important to the long-term success of a business and the community in

which it operates (Galpin, Whitttington, & Bell, 2015). Sustainability decreases a businesss

impact on the natural environment. Furthermore, it can also greatly affect the longevity and

success of the business (Galpin, Whitttington, & Bell, 2015). Businesses enhancing their long-

term economic, social and environmental performance can be derived in part from corporate

social responsibility, corporate social performance, sustainability, going green and the triple

bottom line (Galpin, Whitttington, & Bell, 2015).

As stated by Buchholtz & Carroll (2012), corporate social responsiveness is known as the

action that is brought about by corporate social responsibility (Buchholtz & Carroll, 2012).It

appears that the term responsibility is points too much towards accountability and what needs

to be done. Due to this, responsibility is not broad enough to describe a business efforts to

societys social needs (Buchholtz & Carroll, 2012). As a result of corporate social
 Corporate Social Responsibility 9

responsiveness stemmed the idea of corporate social performance. According to Buchholtz &

Carroll (2012), throughout the years there has been a push to try to make issues such as the

environment, social and ethical more measurable regarding a companys performance. Corporate

social performance is what companies can accomplish. It is the outcome of social responsibility

and the on-boarding of the viewpoint of responsiveness (Buchholtz & Carroll, 2012).

As mentioned by Farcane & Bureana (2015), corporations should be concerned with

politics, the welfare community, education and happiness of their employees. In so doing

businesses will act as honest citizens. As a result of these factors, the concept aroused of what

later became known as corporate citizenship (Farcane & Bureana, 2015). Corporate citizenship

is the notion that companies are tasked with a certain amount of responsibility that must be

carried out if they are to be viewed as good corporate citizens. According to Buchholtz &

Carroll (2012), corporate citizenship is linked to all components of corporate social

responsibility, responsiveness, and performance. The corporate citizenship concept is not a new

concept. Corporate citizenship serves a variety of stakeholders. The broad view of corporate

citizenship looks at a combination of moral and ethical principles. It is a way to get people

incorporated into the communities that they work in (Buchholtz & Carroll, 2012). In essence,

corporate citizenship is a type of self-interest that harmonizes stakeholders demands and

increases the value a company can derive in the long-run. A narrower view of corporate

citizenship is the relationship a company has with members of the community (Buchholtz &

Carroll, 2012).

The initial concept is corporate social responsibility and from that forms business need

to respond to the environmental, ethical and social needs of society (Buchholtz & Carroll, 2012).

Corporate social performance is how companies track progress and response efforts to the issues
 Corporate Social Responsibility 10

being presented. Lastly, corporate citizenship is a broader term and encompasses all concepts

previously mentioned (corporate social responsibility, corporate social responsiveness, corporate

social performance). In order to gain a more comprehensive understanding of the subject area it

requires some

Elaboration on the concept of corporate social performance (CSP)

Corporate social performance (CSP) is a manner in which corporate social responsibility

(CSR) is applied and put into practice (Huang, 2010). According to Huang (2010),corporate

social performance can be changed into quantifiable factors (Huang, 2010). In modern day

research, corporate social responsibility examines a companys general viewpoint in regards to a

variety of complex concerns related to corporate social performance (Huang, 2010). Corporate

social responsibility is the base that facilitates the utilization of social power and contribution

that may lead to an increase in corporate social performance (Huang, 2010). Some research has

indicated that companies in this era are mainly increasing the amount of performance from a

short-term profit based objective to a more long-term social, environmental and economic and

valued added focus (Huang, 2010). The size of a business exerts a significant positive effect on

both the probability and degree of the corporate social performance content of innovation.

Geographical diversification has a positive impact on improvements in environmental

performance (Huang, 2010).

The development of corporate citizenship in stages in companies

Corporate citizenship develops in stages in companies. Companies progress and grow in the

manner in which they deal with corporate citizenship issues, much the same way that individuals

develop. Philip Mirvis and Bradley Googins from the Center for Corporate Citizenship have
 Corporate Social Responsibility 11

made a significant contribution to how this growth takes place (Buchholtz & Carroll, 2012). The

core of corporate citizenship is based on the manner in which companies achieve core values in a

manner that reduces harm, maximizes benefits, is answerable to its main stakeholders, and

supports good financial outcomes (Buchholtz & Carroll, 2012). This definition as explained is

very similar to the four-part definition of corporate social responsibility (Buchholtz & Carroll,

2012).

The stages of corporate citizenship include elementary, engaged, innovative, integrated and

transforming (Buchholtz & Carroll, 2012). The corporate citizen model has seven dimensions

which include citizenship concept, strategic intent, leadership, structure, issues management,

stakeholder relationships and transparency (Buchholtz & Carroll, 2012). The dimensions display

a process in which companies develop through the five stages. As companies progress through

the dimensions they adapt a more substantive approach to corporate citizenship (Buchholtz &

Carroll, 2012). Businesses are accepting the standpoint that corporate citizenship activities,

policies, processes, and procedures are important and should be carried out for the benefit of

corporations' reputations and earnings. Additionally, these activities also serve to benefit

employees, customers, various entities, and communities (Carden & Boyd, 2012).

Triple bottom line and its significance to sustainability

The concept of the triple bottom line focuses on the economic performance of a firm (Von

Schnurbein, Seele & Lock, 2016). The Triple Bottom Line gives results of operations in three

inter-related areas which include economic, social, and environmental (Buchholtz & Carroll,

2012). The main idea behind the Triple Bottom Line is the sustainability of the firms

operations, the lives of its stakeholders, and the environment (Buchholtz & Carroll, 2012). This
 Corporate Social Responsibility 12

falls in line with Carroll's bottom of the pyramid. The corporate social responsibility pyramid

distinguishes four levels of responsibility including economic, legal, ethical, and philanthropic

(Buchholtz & Carroll, 2012). According to Buchholtz & Carroll (2012), a business is required to

focus on three aspects of sustainability which include economic, social and environmental

(Buchholtz & Carroll, 2012). As stated, a businesss main objective is to make a profit (Von

Schnurbein, Seele & Lock, 2016). The Triple Bottom Line's social and environmental

components can encompass elements of the legal, ethical, and philanthropic stages of

responsibility in the corporate social responsibility pyramid (Buchholtz & Carroll, 2012).

Socially responsible investing movement characteristics

Socially responsible investing refers to ethical and green investing. There is an increase

as it pertains to socially responsible investing in the United States (Latinovic & Obradovic,

2013). Socially responsible investing has come as a consequence of investors' desires, laws, and

innovation in new products and types of investment funds such as focusing on the environmental

issues (Latinovic & Obradovic, 2013). The socially responsible investing movement came into

being in the 1970s (Buchholtz & Carroll, 2012). Since this time, it has progressed and shown

considerable growth. By 2013, socially responsible and sustainable investing (SRI) flourished

into a full based investing framework (Buchholtz & Carroll, 2012). This encompasses social and

environmental examinations, the advocating of shareholders, investment by members of the

community and accounting.

Socially responsible and sustainable investing is broad and covers $3.74 trillion of the

investments in the United States alone (Buchholtz & Carroll, 2012). At this time, it now covers

social screening, shareholder activism, and investment by the community. Businesses integrate
 Corporate Social Responsibility 13

sustainable ideas into their strategies, which can be aligned with sustainability indicators. These

indicators can be an essential ingredient of investment screening (Latinovic & Obradovic, 2013).

According to Buchholtz & Carroll (2012), social screening is the main concept behind socially

responsible and sustainable investing (Buchholtz & Carroll, 2012). Social screening is a

technique used to screen firms for socially-responsible investment purposes (Buchholtz &

Carroll, 2012).

Investors who are looking to invest in companies they perceive as socially responsible

seek to screen out these companies (Buchholtz & Carroll, 2012). As a result, there are negative

social screens and positive ones also. Examples of negative social screens include investors

steering away from investing in tobacco companies, gambling or casino operators, weapons or

arms companies or companies who do business in South Africa (Buchholtz & Carroll, 2012). As

mentioned, socially responsible, sustainable or ethical investing is growing progressively and

studies have indicated that investors need not lose out on financial performance so as to attain

social performance (Buchholtz & Carroll, 2012).

Conclusion

Corporate social responsibility, corporate social responsiveness, corporate social

performance, and corporate citizenship are all related in some form or fashion. The finding in

this paper support corporate social responsibility as being essential to business and society. The

meaning of corporate social may have evolved throughout the years. However, this has served to

push this concept towards the forefront and on the agendas of large corporations to small

businesses alike. Business not only has economic objectives and self-interests for sustainability.

They also have a responsibility to give back to the society in which they operate. As stated
 Corporate Social Responsibility 14

earlier, corporate social responsibility has four components which are economic, legal, ethical

and philanthropic (Buchholtz & Carroll, 2012). The first component concerns the welfare of the

business and its own self-interests to prosper and make money. The others components are

concerned with the well-being of society (Farcan & Bureana, 2015). The main objective of a

business is to make a profit and obtain economic benefits. The selfish motives of business

ultimately lead to fulfilling the needs on social responsibility which come from the community.

Corporate social responsibility has been the driving force behind corporate social

responsiveness and performance. Companies that are socially responsible are driven to respond

to societies needs and strive to act ethically and morally in all respects. The corporate social

performance serves as a measure to track the responsiveness of the company. As stated by

Buchholtz & Carroll (2012), corporate citizenship came into being as a result of all of the

socially conscious actions and participation of business. It appears that corporate social

responsibility has become so important in the business community that it can affect a businesss

future prospects.

Many investors are now interested in sustainable investing and will not invest in a

company that is not perceived a socially responsible. Due to the aforementioned factors, it is

imperative that businesses operating in todays environment take on a socially responsible

perspective. Businesses stand to benefit greatly when they implement these components into

their core strategies and operations. In so doing the business will meet its primary objective of

making profits as well as fulfill societys expectations and maintain good corporate citizenship.

As such the social contract between business and society will continue to be forged.
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