Corporate Responsibility

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Corporate Responsibility? Meaning.

Corporate Social Responsibility ("CSR") is a form of corporate (self-) regulation integrated into a business model.

A CSR policies function as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with these policies, in addition to upholding the (spirit of) the law, ethical standards, and international norms.

Purpose of Corporate Responsibility

The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality.

CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a Triple Bottom Line: people, planet, profit.

Origin of Corporate Social Responsibility. History

A survey on the history of CSR reveals evidence of CSR as early as the 1800s, mainly in the form of donations by companies (Sethi, 1977), although Barnard. C., (1938) ‘The Functions of the Executive’, Clark. J., (1939) ‘Social Control of Business’, and Kreps. T., (1940) ‘Measurement of the Social Performance of Business’, specifically addressed the subject of CSR, which are quite commonly used foundations for CSR theories

In-depth notion of the CSR concept is found in 1953, where the economist Bowen addressed the topic in his book ‘Social Responsibilities of the Business Men’. Bowen argues that “entrepreneurs have the responsibility to orientate on expectations, aims and values of a society”, creating the bridge to expansion of the corporate purpose beyond economic growth.

Walton, C. (1967) addressed a more detailed CSR concept in which companies needed to voluntarily acknowledge and accept that their responsibilities exceeded the corporate barriers and that cost are involved. These theories find correlation with the Committee for Economic Development (CED) presented ‘code of conduct’ (1971) that outlined a three-leveled model for CSR. This model demonstrates the interdependency of corporations and their community in relation to profit creation.
 

The term "corporate social responsibility" came in to common use in the early 1970s. During this period many multinational corporations (MNC’s) acknowledged the term stakeholders, (signifying those affected by an organization's activities), to describe corporate beneficiaries beyond shareholders. This was partly driven by the influential book by R. Edward Freeman, Strategic Management: a Stakeholder Approach (1984).

Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses.

Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

The latter is imaginable when economies permits companies to have revenues eclipsing various midsize countries GDP’s, leading to assumptions that great forms of (corporate) wealth should shoulder similar responsibilities, hence solving issues not necessarily inherent to these company’s activities.

Often, under-developed or emerging countries, with less influence on large organization, are faced with dilemma’s to enforce social behavior on corporations, as Newell (2000, p. 121) signified that, “… frequently the presence of large transnational corporations appear to wield powers without responsibility, [and that] they are often as powerful as states and yet unaccountable”.

Because of fear to loose these companies, governments become reluctant to irresponsible corporate behavior, “partly due to their fear that such regulations will discourage domestic investment and make their economies less competitive” (Lipschutz, 2005). Hertz, (2002) and Monbiot, (2001) brand these phenomenon’s as ”… the silent take-over of government by corporations, [resulting in the] excessive dependency of governments upon big business”.

Occasionally in such situations, public’s demands, frequently voiced by various groups e.g. NGO’s, stakeholders, governments, etc. are capable to sink a companies reputation, its products, and if not addressed in time, its liveability!
Companies are required to stay within the rules and guidelines opposed upon them through legislation and (self) regulations, nevertheless, society may still prosecute them when they exercise these rules to their own advantage and benefit substantially.

Companies initially did not embraced CSR voluntarily, many did not even realize various public issues as there responsibility, i.e. “Pharmaceutical companies discovered that they were expected to respond to the AIDS pandemic in Africa, even though it was distant from their primary product lines and markets” (Porter & Kramer, 2006).

The first company that published a social report was Ben and Jerry’s (1989) followed by Shell as the first major company in 1998 (corporate watch, 2006). Shell followed mainly because of the 1995 ‘Brent Spar’ debacle. The mentioning of Shell marks a remarkable moment, because Shell recognized its mistake in the management of its Corporate Responsibility and incorporated these lessons by CSR throughout its organization and started reporting these. This action helped “institutionalize” (Zadek, 2004, p.12) legislation and self-regulation in its industry.

Today there are various rating agencies which track and report corporations’ social behavior, e.g.; The Dow Jones Sustainability Index, FTSE4Good Index, etc. The rating criteria’s vary widely and have become meaningless since there is no standard. Although, the ‘Global Reporting Initiative’, have a high likeability to become the global standard soon.
 

ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). 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 UN has developed the Principles for Responsible Investment as guidelines for investing entities.
 

Advantages of Corporate Social Responsibility. Benefits

• Discourages government regulation
• Stimulates long-term orientation and profits for business
• Balances corporate power with responsibility
• Improves relationships with stakeholders
• Improves corporate reputation

Disadvantages of Corporate Social Responsibility. Drawbacks

• Decreases economic efficiency and financial returns
• Interferes with equal competition between firms
• Imposes hidden costs and passes them on to (financial) stakeholders
• Places responsibility on businesses rather than on individuals
• Results in non-core activities by firms (better left to others)

Two main visions underlying Corporate Social Responsibility

Supporters of a Regulation-based Approach argue that:

• Corporations care little for the welfare of workers, and given the opportunity will move production to sweatshops in less well regulated countries.

• Unchecked, companies will squander scarce resources.

• Companies do not pay the full costs of their impact. For example the costs of cleaning pollution often fall on society in general. As a result, profits of corporations are enhanced at the expense of social or ecological welfare. Note that recent environmental legislation increases the range of risks and responsibilities for companies. To protect themselves against losses from environmental hazards, companies can consider Environmental Insurance.

• Regulation is the best way to ensure that companies remain socially responsible.

Supporters of a more Market-based Approach argue that:

• Free markets and capitalism have been at the centre of economic and social development over the past two hundred years and that improvements in health, longevity or infant mortality (for example) have only been possible because economies (driven by free enterprise) have progressed.

• In order to attract quality workers, it is necessary for companies to offer better pay and conditions which leads to an overall rise in standards and to wealth creation.

• Investment in less developed countries contributes to the welfare of those societies, notwithstanding that these countries have fewer protections in place for workers.

• Failure to invest in these countries decreases the opportunity to increase social welfare.

• Free markets contribute to the effective management of scarce resources. The prices of many commodities have fallen in recent years. This contradicts the notion of scarcity, and may be attributed to improvements in technology leading to the more efficient use of resources.

• There may indeed be occasions when externalities, such as the costs of pollution are not built into normal market prices in a free market. In these circumstances, regulatory intervention is possible to redress the balance, to ensure that costs and benefits are correctly aligned.

• Whilst regulation is necessary in certain circumstances, over regulation creates barriers to entry into a market. These barriers increase the opportunities for excess profits, to the delight of the market participants, but do little to serve the interests of society as a whole.

On balance, the concept is strongly related to other concepts such as Corporate Sustainability, Corporate Transparency, Corporate Accountability, and Corporate Governance.

Also called (Corporate) Social Responsibility, corporate conscience, corporate citizenship, corporate social performance, and sustainable responsible business.

Forum Forum about Corporate Responsibility. Below you can ask a question about this topic, share your experiences, report a new development, or explain something. Start a new topic about Corporate Responsibility Share your knowledge here (or ask a question)   Align CSR with Corporate Purpose and Values As argued by Rangan et al. (2015), CSR should not be designed to deliver business results. In contrast, companies should align their social and environmental activities with their business purpose and... 24   11 comments Unethical Behavior and Child Labor in Supply Chains: Willful Ignorance Even though many organizations claim to comply to strict policies with regard to human rights such as child labor, a report by Amnesty International has revealed that still a lot of technology compani... 23   20 comments Tips for Starting an Ethical Business or Social Enterprise A big advantage of starting an ethical business is that people tend to be positive about what you do. After all, you are by definition commercializing strategies to improve human and environmental wel... 11   3 comments Is Acting Selflessly Required for Social Responsibility? Does a company have to act selflessly to be considered socially responsible?... 11   4 comments Moving CSR from a Business Case to a Development Tool NORTHERN AND SOUTHERN APPROACHES TO CSR CSR practices and their effectiveness vary across regions and localities. The mainstream CSR agenda still seems to neglect these differences and can be cri... 9   2 comments Pyramid of Corporate Social Responsibility (Caroll) An early and widely applied CSR framework that distinguishes "CSR layers" is the Pyramid of Corporate Social Responsibility by Caroll (1991). The 4 layers of Responsibilities are, from bottom to top:<... 8   2 comments Examples of Truly Putting CSR Into Practice A well-known quote used by among others Hillary Clinton, Reagan and Eisenhower is: 'We are great because we are good'. It means that a country's performance in this global world is derived and judged ... 8   Potential Corporate Social Responsibility Focus Areas Government, Corporations and People need to work together. Responsibility to who? Our neighbors, community, city, province/state, country, WORLD! Here are some CSR focus areas to consider: ... 7   1 comments Reasons for Corporate Responsibility It's really important one understands the reasons for CSR. What really matters are the stakeholders and customer perceptions about these underlying reason(s) for CSR. If the CSR activities of a c... 6   2 comments How to Measure the Impact of Corporate Social Responsibility (CSR)? If we keep in mind the Four Stages of CSR-implementation by Martinuzzi and Krumay (With a CSR-scope moving from Project ⇒ Quality ⇒ Strategic ⇒ Transformational), that makes me wonde... 6   15 comments Legal and Tax Strategies to Support Corporate Social Responsibility Initiatives CSR is also about dynamic innovation... One such aspect I was wondering is - could there be any innovation on the finance side - in general at least in emerging economies. The funding for the social s... 5   1 comments Company Social-Economic Responsibility (CSER) The raison d´etre of an Organization is to CREATE VALUE: - MVA (Market Value Added, - EVA (Economical Value added) and - HVA (Human Value added) To comply with all the stakeholders... 4   5 comments

Best Practices The best, top-rated topics about Corporate Responsibility. Here you will find the most valuable ideas and practical suggestions. NEW Corporate Responsibility: Different for Large and Small Firms? There is an ongoing debate: "Should small companies be equally held responsible as conglomerates, in terms of corporate social responsibility (CSR). Why or why not?" ⇒ What would be yo... 19   14 comments Stages of Corporate Social Responsibility According to Kreitner (2009), there are FOUR STRATEGIES for responding to social responsibility that companies can utilize (p.124). Beginning with the least responsibility and moving toward the greate... 13   30 comments Taxation and Corporate Social Responsibility TAX AVOIDANCE BY LARGE COMPANIES The Panama Papers showed that tax avoidance takes place on a large scale. Taxation strategies of some large MNE’s involve aggressive tax planning, including trans... 12   9 comments CSR Communication Should Be More Impactful CURRENT CSR COMMUNICATION STATUS: SUPERFICIAL While the notion of CSR has become mainstream and its benefits have been demonstrated to win over employees and shareholders, the communication of th... 12   14 comments Corporate Responsibility versus Porter's Shared Value Crane et al. (2014) recently argue that ‘Created Shared Value’ (CSV)' is a subject (part) of the Corporate Responsibility (CSR) concept. This is opposed to Porter and Kramer’s (1999; 2002; 2006; ... 9   20 comments Marketing of Corporate Responsibility Efforts CSR has become both a strategic approach through which competitive advantages can be created as well as overall social benefits. Due to the increased awareness among conscious consumers of social and ... 9   4 comments The Role of Corporate Social Responsibility in Employee Engagement Hi I am currently doing my dissertation for my MBA. The topic of my dissertation is the role of Corporate Social Responsibility (CSR) on employee's engagement. The research on Malaysian employee'... 7   4 comments The Meaning of Sustainability as Perceived by Consumers A pending study reveals that the meaning of the word "Sustainability" is perceived differently by mainstream consumers compared to experts and practitioners. As argued by Fitzgerald (2014), "… th... 6   2 comments

Expert Tips Advanced insights about Corporate Responsibility. Here you will find professional advices by experts. Ways to Set Up a Powerful CSR Program Setting up a Corporate Social Responsibility Program In an article, Lain Hensley (2014) described five approaches to successfully create authentic, powerful CSR programs: ... Corporate Responsibility Areas Checklist Corporate Responsibility Check According to Mark Daniel, if your company's approach to corporate responsibility is not the right one, you will not insp... Functional and Corporate Types of Corporate Responsibility Initiatives CSR Types, CSR Mechanisms Corporate Responsibility (CR) Initiatives are related to what an organization wants to achieve with their CR activities.... Corporate Foundations versus Normal Foundations Corporate Responsibility, Corporate Foundations Due to increased awareness of the social and environmental effects of economic and other activities (among other reasons... Consumer Skepticism About CSR Motives of Companies CSR Skepticism, Consumer View towards CSR Businesses nowadays monitor and measure risks to which they are exposed to. One of these risks relate to organizational ... Where Corporate Responsibility Begins and Ends Boundaries of Corporate Responsibility Where should your efforts to be or be perceived as a responsible corporation start, and where should they stop? In other... The Role of CSR in the Public Function of Commercial Banks CSR at Banks, Public Function of Banks, Stakeholder Management at Banks A widely shared point of view is that banks should create long term shareholder value and also have a public function. T... 4 Levers to Pursue a Dual Corporate Purpose CSR, Impact on Society, Balancing Financial and Social Goals, Dual Purpose These is a slow but steadily increasing trend for corporations to diminish their single-minded pursuit of shareholder va... Corporate Social Responsibility Reporting Standards Businesses, auditors, stakeholders and other institutions favor different reporting standards, and whereas financial rep... Two Imperatives on Corporate Social Responsibility Understanding the Foundations of CSR, Trainings and Workshops In the past decades there has been increased pressure on companies to incorporate CSR in their businesses. In fact, the... How to Develop a Coherent and Coordinated CSR Program CSR Alignment, CSR Strategy, CSR Coordination, CSR Theaters Although many organizations nowadays at least have some form of CSR to contribute to the well-being of society and/or th... CSR and Ethical Business Practices Corporate Responsibility, Corporate Social Responsibility, Business Ethics, Ethical Business Practices Mason and Simmons (2013) argue that one should differentiate between the external drivers of CSR and the organizational ... Corporate Responsibility Committee Corporate Responsibility, Corporate Sustainability, Strategic Innovation, Corporate Governance Even if the interest for and significance of Corporate (Social) Responsibility (CSR) and Corporate Sustainability (CS) h... Moral Intensity: When Will a Decision Be Seen as Unethical? Risk Management, Business Ethics, Ethical Decision-making, Crisis Management, Corporate Responsibility The financial crisis of 2008 has been partly the result of managers and executives taking excessive risks. That's why Fe... Reasons Why People are Doing Voluntary Work Expectancy Theory, Corporate Social Responsibility, Stakeholder Perspective, Volunteers Voluntary work has long been seen as an activity performed mainly by unemployed individuals –mostly women, both in their... How to Design a Large CSR Program that Works CSR, Shared Value, Public-Private Partnerships, Poverty Reduction, Combating Global Inequality A study by Kaplan, Serafeim & Tugendhat (2018) finds that most corporate social responsibility (CSR) programs they analy... How to Inject Corporate Purpose Into Corporate Governance Enacting Purpose, Organizational Purpose Implementation, Corporate Sustainability, ESG, SCORE Framework Many models and frameworks have been created wrt Corporate Responsibility and ESG. But how can you actually make it happ... Strategies for Strategic Philanthropy (Norton) Strategic Philanthropy, Corporate Philanthropy, Corporate Social Responsibility, Customer Loyalty A lot of companies are trying to use philanthropic activities to improve factors as customer loyalty and brand awareness... Three Dimensions in How Global Brands are Evaluated by Consumers Global Branding, Corporate Reputation, CSR, Globalization Holt et al. (2004) researched how people evaluate and value global brands. They found out that 3 main characteristics ar... Putting Purpose at the Core of Strategy Works Strategy, CSR, Stakeholder Management IMD Professor Malnight A. O. Presented results of 8 years of study on high growth in companies, initially considering 3 ...

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Voluntary Activities of Employees | Employee Volunteerism Employee Motivation, Employee Volunteerism, Employee Commitment, Shared Value, CSR, Corporate Reputation Presentation about employee volunteerism, including the following sections: 1. What is employee volunteerism 2. Employ... Introduction Into Welfarenomics Welfarenomics This presentation elaborates on the concept of welfarenomics. The presentation includes the following sections; 1. Cont... Creating Inclusive Business Models Business Models, Corporate Sustainability, International Development, Investing in Africa Presentation that provides an introduction into inclusive business models, especially focusing on (agri) businesses in ... CSR in the Public Sector CSR, Public Sector CSR for Central Public Enterprises Presentation about CSR in Central Public Enterprises, including the following sectio... 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