CSR

There are hundreds of definitions of corporate social responsibility, or CSR. The one we think says it the best comes from the International Organization for Standardization’s  Guidance Standard on Social Responsibility, ISO 26000, published in 2010. It says:

“Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:

·       Contributes to sustainable development, including the health and the welfare of society

·       Takes into account the expectations of stakeholders

·       Is in compliance with applicable law and consistent with international norms of behaviour, and

·       Is integrated throughout the organization and practised in its relationships.”

Corporate Social Responsibility or CSR has been debated since the early twentieth century, but there has been little agreement over its definition due to:

·       Differences in national and cultural approaches to business

·       Differences in motivation for CSR – doing it because it is morally correct or doing it because it makes good business sense

·       Differences in disciplinary backgrounds, perspectives and methods of scholars engaged with CSR

Governance View of CSR

CSR can also be viewed as a global governance mechanism. Understanding CSR from this perspective is useful for realising why civil society and government are interested in CSR. The view of CSR as a global governance mechanism emerges from the global trans-national institutions that developed in the twentieth century, such as the United Nations, the International Labour Organisation, The World Bank and the Organisation for Economic Cooperation and Development (OECD), together with international treaties and agreements negotiated by governments and non-government organisations. These institutions and arrangements are designed to create international order around the pillars of democracy, respect for human rights, and economic development.

In particular, the world’s failures to redress poverty and abuses of human rights and the need to assure equitable benefits from trade liberalisation have driven the rise of the CSR concept among these organisations. This explains the plethora of initiatives at this level such as the UN’s Bruntdland Commission which popularised the notion of sustainable development and the proliferation of over 300 different codes and guidelines related to corporate social responsibility.

The Sustainable Development Goals released by the United Nations in September 2015 are the latest international framework to address CSR issues.

To whom is the corporation responsible? 

The rise of the stakeholder concept has been attributed to the management scholar Edward Freeman (1984). Although Freeman did not coin the term, “stakeholder”, he was the first to show how the stakeholder concept could be applied to the strategic management of business. The term stakeholder arises from the concept of ownership. Stakeholders of an organisation have ownership claims which may be material (financial or non-financial), informational, political, or affiliative. Material stakes can include financial stakes such as stock dividends, or salary and benefits as well as non-financial stakes such as access to clean air and water. Fear of loss often drives material stakeholders into action. Each of these types of stakes can be held by different stakeholders and each type of stake and stakeholder can potentially be a source of social risk for a firm. For example, employees may have material stakes as well as informational and affiliative stakes (the need to feel a sense of belonging).

More recently, scholars have argued by reference to the experience of well-known companies such as Shell and Motorola, that the corporation be understood as an entity with the purpose of creating wealth in all forms for its stakeholders (Post, Preston, & Sachs, 2002). “Wealth” is broadly defined as “the cumulative result of corporate performance over time, including all of the assets, competencies and revenue-generating capacities developed by the firm” (p. 36). By attending to the interests and issues of a wider set of stakeholders, corporations can maximise their intangible assets such as relationships, goodwill, reputation, trust and opportunities for innovation.

Building on a stakeholder view of the firm, management gurus Michael Porter and Mark Kramer introduced the concept of “shared value” in Harvard Business Review in 2011. It has become one of the most influential and widely read articles related to the field of CSR. Its most prominent contribution to thinking on CSR is to emphasise the need to bring scale and innovation to address social problems. In this respect it echoes ‘bottom of the pyramid ideas first described by  C. K. Prahalad and Stuart L. Hart

The key stakeholders for corporations are generally considered to be shareholders, employees, local communities (often represented by civil society organisations), customers and suppliers. Other stakeholders such government, regulatory authorities and media are usually included in stakeholder management strategies pursued by corporations.

A key task for management is then, to identify these stakeholders and understand their salience for the strategic future of the business. A common way of prioritising stakeholders is by their power, urgency and legitimacy. Other approaches look at their likelihood to act in the face of perceived or actual constraints or examining the simultaneous influence of stakeholders within a network of corporate and stakeholder relationships. A stakeholder view therefore leads to the perspective that the ability of corporations to manage stakeholder relationships and the social issues that attend these relationships is fundamental to the success of their CSR approach.

SIRIKWA YASINTA THADEY