Corporate Social

Responsibility

Barry Emery

Sobia Shazeen

C07394604
What is Corporate Social Responsibility?

According to Vogel (2006)

“the subject of corporate social responsibility is something which is

often troubled by ambiguity, caught being good for business and
doing good for others, it has been unable to shake off its tainted
image”

Firstly we have to define what is corporate social responsibility?

Business will all define corporate social responsibility in different
ways that their business has adopted to it.

“The broad concept that businesses are more than just profit
seeking entities and therefore have an obligation to benefit society”

All business want to do the best that they can for the growth of their
company but this does not necessary mean that it is good for the
community.

Corporate social responsibility symbolizes the challenge to define

the future of our society. There are many things that could be done
from social to ecological factors that affect the business as a whole
as well as keeping in mind the environmental factors as well.

CSR is crucial for all business that wants to be successful in today’s

society. There are many organisations that operate with the social
value in today’s business industry, they also include a section in
their annual reports and on their websites about what they are
doing for society and how their business will benefit society at large.

In a broader context CSR covers the ‘responsibilities corporations’,

that society has, which they are based and operated within. CSR in
particular involves a business identifying its stake holders and
incorporating their values and needs within a daily decision making
process.
The need for business to act more responsibly has grown due to the
fact that people do not trust businesses anymore and that more
often negative images of companies are common in the media. It is
important for all businesses to think about corporate social
responsibility because of increased public awareness this is due to
the fact of a desire to actually change things in practice (Campbell
et al, 2005).

According to Vogel he sees corporate social responsibility as

something that is sandwiched between what the business wants and
what society wants. He is very optimistic about CSR and he
considers that business should solitarily practice it if it fits their
business model. Vogel believes that the best way a business can
succeed is if it only focuses on one part either be socially
responsible or make profit, as it is impossible for business to make
decisions that will make them the largest amount of profit but still
considering being socially responsible. It can be evidently seen that
Vogel is against the concept of CSR.

I will be referring to what Vogel says through out the assignment,

and comparing it with what others say and if they agree with Vogel
and if not why?

Defining CSR

There is no set definition as what CSR is, business adapt to what

they think is socially responsible and form their own definition of
CSR. When defining what CSR is business take into account the
sustainability development as well as taking into account the
economical, social and environmental development that challenges
today’s society.

To start off with, The World Business Council For Sustainable

Development (WBCSD) defines CSR as;
 “the continuing commitment by business to behave ethically
and contribute to economic development while improving the
quality of life of the workforce and their families as well as the
local community and society at large”

(cited in Castka et al.,

2004).

Most CSR definitions are based on the WBCSD’s (Castka et al, 2004).
WBCSD have visibly set CSR as sustainable on the subject of
economic development. This therefore is evident that all aspects of
the business including the workplace environment, the market
sector and the community around, all play a vital part in behaving in
a socially responsible manner. This definition of CSR is very similar
to the definition that the world bank gives.

The World Bank, uses the following definition for defining CSR:

“CSR is the commitment of business to contribute to

sustainable economic development, working with employees,
their families, the local community and society at large to
improve the quality of life in ways that are both good for
business and good for development”
(Fox, 2004).

Kotler and Lee (2005) in their book ‘Business for social

responsibility’ defines CSR as

“Operating a business in a manner that meets or exceeds the

ethical, legal, commercial and public expectations that society
has of business”
What Kotler and Lee are trying to say is that for a company to be
socially responsible it has to exceed the norms that the rest of the
companies are. They have to consider what society wants, and how
it will benefit society along with providing the service for them. This
contradicts with what Vogel says about CSR. Vogel as mentioned
before believes that a business can either do well for itself(making
more profit) or be socially responsible, it is hard to do both in
today’s society.

According to löhman and steinholtz 2003

“CSR is not about writing a policy of ethics, formulating and

marketing a social project or donating money to the Red
Cross….being responsible today involves engaging internal
and external stake holders…...”

löhman and steinholtz are putting a point across that a business

may donate to charities and think that they are being socially
responsible. Corporations may have a policy that states what they
do socially but may not always put it into practice. Also its not only
the managers and employees of an organisation that has to be
socially responsible, you have to involve everyone including share
holders and stake holders.

In today’s society companies are expected to exercise social

responsibility that they have to account for social welfare and social
Impact and welfare of their activities, locally and globally. They are
expected to take actions that benefit the wider society, this is due
to the increasing importance of immaterial values, resulting in
companies that no longer compete with the best products, but also
competing with values and responsibilities.
As mentioned before by the views of Vogel, there is more to CSR
then the generalised view of ‘doing good’. This can be summarised
in to anything, a definition that is very open ended.

However most companies interpret ‘doing good’ as complying above

the legal requirements and serve with a public interest (Hilton and
Gibbons 2002).

Also according to Vogel CSR ‘is unable to shake off its tainted
image’, due to the fact that societies expectations of CSR are on the
rise, therefore resulting in the media having a large impact on the
way society perceives CSR.

Lunheim (2003) argues that CSR has often been referred to as

“ethical business” or “triple bottom line” (TBL). Ethical business is
defined as an ability to satisfy three bottom lines: economic,
environmental
and social aspects (Castka et al., 2004).

Purpose of CSR

What is the purpose of CSR? Why is it so important?

According to Kotler and Lee CSR can be perceived as health care.

For example majority of health care professional assure the public
that if we appoint ‘regular physical activity’ (sports), we’ll not only
look better and feel better but we’ll also do better and live longer.
Kotler and Lee (2005) say that CSR results in just that. A business
who complies CSR looks better to customers, investors, in the
business reports, board members and even in the news (Kotler and
Lee 2005).

It has also been reported that CSR ‘feels’ good to the business
employees and stake holders (Kotler and Lee 2005).
It can be evidently seen that CSR does good for the brand name as
if society is pleased with the brand it would lead to higher brand
recognition.

Theory

Evidence of CSR can be traced back as far as the seventeenth

century, there have been many rules and regulations that ensure
that the publics interest is always considered. The term CSR first
came into practice in the 1970’s just before multinational
corporations had formed, here they had o include the stake holders
and the shareholders as part of being socially responsible.

Over the years more and more companies are following CSR in their
business daily life, many organisations have even dedicated a
section in their annual stating how socially responsible they are and
what actions they are taking towards their goal. More recently the
FTSE4Good have launched a group that lists all the socially
responsible companies, they also evaluate the performances of
these companies.

There are a few models that have helped business in behaving

socially responsible by giving them a guideline of what they would
have to do to become socially responsible. Models that have helped
companies like the body shop, Ben and jerry’s, star bucks, nestles
etc, are the triple bottom line and Carrols pyramid.
Carroll’s pyramid was formed to help managers of firms to see the
different types of obligations that they have to constantly use to
become a socially responsible firm.

Carroll’s pyramid (1991) defines four stages that a corporation

needs to engage in to become more socially responsible. The first
level is economic responsibilities, which is the foundation for all the
levels to rest on , the second level of being socially responsible is
Legal requirements, the third level is Ethical responsibilities and the
top level of being socially responsible is by being Philanthropic
responsibilities.

More recently Carroll has incorporated stake holders in his pyramid.

He has defined the role of the stake holders in each of his four
stages. In economic responsibilities he has incorporated stake
holders as what is required by ‘Global capitalism’, Legal
requirements hold the value of what is required to be done by the
global stakeholders. Ethical responsibility is defined by Carroll as
what is ‘Expected’ by the global stake holders, and the philanthropic
responsibilities is incorporated by the stake holders as what is
‘desired’ by them. (Carroll 2004)

A further theory that is more commonly used to help with social

responsibility is the triple bottom line (TBL). TBL means the
expansion of the traditional framework, to account for the
ecological, financial and social performances.

The triple bottom line was first defined by the Brundtland report
(1987). It was later expanded by John Elkington (1994) as a form of
sustainability.

The Brundtland report was produced to make everyone aware of the

progression that should be made towards being more socially
responsible, the development implemented should not harm the
environments natural resources. It defines the TBL as

“the development that meets the needs of the present

without compromising the ability of future generations to
meet its own needs”

(Brundtland report 1987)

The main principle of the triple bottom line is the dependability of

the company having stakeholders rather than shareholders. By
stake holders it is meant anyone that is influenced by the
companies actions and decisions made. This is due to the theory of
the stakeholders that lay out the fact that a company should co-
ordinate the stakeholder’s interest rather that maximising the
shareholders wealth.

The triple bottom line shows the emphasis that holds importance to
a company and the impact that it leaves on society as being
environmentally and socially responsible (Bridges and Wilhelm
2008)
The triple bottom line which is also known as the three E’s of
corporate sustainability, which are Environmental, Economic and
Equity and the three P’s of corporate sustainability as Planet, People
and Profit.

Corporate sustainability for any company is a very powerful tool,

that defines the corporate sustainability as ‘one that creates a profit
for its shareholders while protecting the environment and improving
the lives of those with whom it interacts. (Weber 2006)

Weber also defines a sustainable business as having an excellence

possibility of creating a successful future, not just for months or
years to come, but decades and generations to follow. (Weber 2006)

The three P’s Planet, People and Profit all contribute to the
development of Profitability, sustainability, social responsibility and
environmental accountability, which all will allow the company to
practice CSR. A Company will loose the impact of these
developments if any one of these are not carried out properly or
carried out at all. This obviously highlights the impact that they
have on a business to carry out CSR.
Companies that are in line with the triple bottom line have become
successful in bringing their firm in behaving in a more socially
responsible way. An example of a company that is sustainable is
Nokia. Nokia is a leading phone brand in today’s market. The
contribution that they make to the ‘Global community’ is by
conducting their business in a responsible way. They have a
commitment in ‘creating ethically sound policies and principles that
guide us in our work on a daily basis’.

Olli-Pekka Kallasvuo the president and CEO of Nokia corporations

says the following about how his corporation is socially responsible,

“The nokia code of conduct sets out approach to ethical

business practice, it outlines the commitment to respect and
promote human rights and fair work place practices, equal
opportunities, environmentally sustainable business, and our
zero-tolerance policy on bribery and corruption.”

The Nokia Code of conduct was first revealed in 1997. Their

corporate responsibility is structured around their business values
and carried out in all aspects of their business.

CSR will always be the main objective of a organisation, as they’d

have to put it into practice to be more socially viable. As well as
being socially responsible CSR also helps the organisation in
building a reputation that benefits them making the public more
aware of their brands (brand recognition).

According to Kotler and Lee (2005) CSR is not only about benefiting
the society but also helping to engage businesses it self.

Kotler and Lee 2005 stated that

“CSR will be advantageous to companies for increasing profit,

enhanced brand image and reputation, increased sales and
customer loyalty, increased productivity and quality and
increased appeal to investors and financial analysts”
One of the first companies to promote corporate social responsibility
was The Body Shop, which was set up by Anita Roddick. The aim
was to provide a service of goods to the public in a fair and natural
way. They were one of the first to succeed their social,
environmental and economic goals before the requirement of being
socially responsible hit the media.

The Body shop was one of the pioneers for leading CSR for society
and their stake holders, in which they felt was the best way to tackle
the challenges that they faced in today’s society, but also taking
into account the impact that it would have on society.

The way that the Body shop engaged with CSR was by sourcing all
their ingredients naturally and effectively without damaging the
environment, saying no to animal testing, by reducing their carbon
footprint and using all sources that can be recycled. Also improving
working conditions, a stop for child labour, developing community
trade, campaigning for human rights and the protection of the
planet in general. This all led to the company having a very high and
loyal base of customers.

As Quoted on their website The Body Shop say

“We’re committed to using responsibly sourced ingredients

wherever possible, and working with the communities and
people who supply us”.

They done this by working in line with the society around them buy
making sure that al their suppliers agreed to sign their code of
conduct of ‘ethical trade programme’. The Body shop was perceived
around the world as a ‘value led’ business, however this has been
criticised recently as a bid from L’Oreal has taken over the
company.

This take over led to a lot of critics from companies, customers and
society questioning Anita Roddick as to why the takeover was
carried out to a company that she had allegedly criticized in the
past for the behaviour of ‘animal testing, exploiting the sexuality of
women, and making women insecure as a result of their products.

However the body shop defended them selves by quoting the

following:

“the take over by L’Oreal would not compromise Body Shops

ethics, the merger would in fact give Body shop the chance to
spread its values to L’Oreal”.

This caused a frenzy in society of Body shop being Guilty of

‘Greenwashing’. Also a lot of criticisms arouse of whether Body shop
had enough power to influence their values to L’Oreal. On the other
hand some said that it was a deal that would improve L’Oreal’s
image through buying CSR rather then the takeover.

Another organisation that follows the triple bottom line in producing

service for the public is IKEA. They are one of many that interact
with their stake holders in compiling with the CSR regulations. The
main strategy that ikea has been rewarded for is working with the
green peace campaign against using woods from ancient forests.
They adopted the approach of ‘stakeholders monitoring and
consultations’.

IKEA are not just improving their large aspects of business but also
improving the little things that they say make the best change. They
participate with a numerous number of projects for the development
of ‘responsible forestry practices and policies’. To name a few of
these projects are the WWF co-operations, sow a seed projects, rain
forest alliance and many more.

A business cannot be expected to do everything, but they certainly

need to fulfil their stake holder’s needs.

Bill gates owner of Microsoft said the following:

 “If a companies stakeholders are content, then the company
is much more likely to be successful over the long term”.

(Werther and chandler, 2006)

This is a consistent CSR strategy as Bill gates made a donation of

$70million to the university of Washington, although it was a
personal donation made, it still benefitted Microsoft as a key
constituent.

A further example of a company complying with the triple bottom

line is Ben and Jerry’s. Their values were very similar to the body
shop and their example is similar to.

Unlike the Body shop Ben and Jerry’s did not start off as a socially
responsible business, but over the years they have grasped the
concept of being socially responsible and taking full advantage of it.
They started off as a business that was solely existed to make a
profit. Once they starting to focus on CSR they automatically
expanded at a large rate.

Ben and Jerry’s mission statement is:

“Our aim is to make the best possible ice cream, in the nicest
possible way….. its not only mixing in the best ingredients
that’s important to us, our suppliers are too…”

They believe that not only is sourcing their ingredients naturally

important but also the affects that society will have on these
changes.

They also believed that they had an obligation to the community in

which they had started off, they assumed the fact that they should
be owned by the people who they were first established by.

This resulted in the gain of respect that they received from the
stakeholders and the community around them.
Due to the large amount of competition CSR brings with it, socially
responsible companies are being taken over by multinational
corporations. Similarly to the body shop, Ben and jerry’s were taken
over by unilever, their approach of behaving in a socially
responsible manner had gone down the drain. It has been evidently
seen that the take over by multinational companies have destroyed
the reputations of socially responsible companies.

These examples are proving to be right according to what Friedman

(1972) had said. Friedman was against CSR and had said:

“The social responsibility of an organisation is to increase its

profits”.

By this he meant that business may appear to be socially

responsible but the fact is that they are more concerned with the
financial side of the business (making a profit) rather then being
socially viable. Friedman was not wrong in explaining CSR in this
manner as fro every business their main objective is to make a
profit.

Example of The body Shop and Ben and Jerry’s reflects what
Friedman (1972) had said.

There are many companies that had been criticised as to how they
were conducting their business, but they improved and came out as
being socially viable. Examples of companies like this are
McDonalds. They were producing their food by animals that were
mistreated (animal cruelty) and unethical behaviour towards their
workers in developing countries. But now McDonalds have improved
the way that the do business, they resource all their ingredients
naturally from farms in the UK.

Nike had also been criticised for not behaving in a socially

responsible manner. They started off as being socially responsible
but later were found of treating workers unethically in developing
countries.

It reinforces the fact that it is much harder to restore a reputation

than to loose it (Werther and chandler 2006).

There have been many debates on how useful CSR is and how it
benefits the business by conducting CSR. Morally CSR satisfies the
stake holders need in different ways, it encourages employees to
work for a company that is socially responsible.

As argued by Friedman (1972) that company’s main priority is

maximising its profits, Werther (2006) has argued that when the
need of the stakeholders are satisfied it then leads the company to
financial benefits. (Werther and Chandler 2006)

Werther (2006) to some extent agrees with Friedman’s quote but he

does say that just because a company’s main priority is to maximise
its wealth does not mean that a company is not behaving socially
responsible. As CSR defines socially responsible as fulfilling the
needs of the stake holders and the needs of the stake holders are to
maximise profit.

If companies engage in sustainable activities then they can avoid

consumer boycotts and law suits that originate from environmental
violations (Jackson in Brown 2005).

Ignoring the issues of CSR a company can loose it societal image by

not acknowledging its responsibilities, which affects the operational
and financial performances (Werther and chandler 2006).

The purpose of a business is not only to make a profit, but to make

a profit so that the business can do better.

There are many benefits that CSR brings to a company. According to

Kotler and Lee (2005) the strategic directions is compiled by the
sustainable experience in the CSR area and therefore provide a
good base when studying the benefits sought by the companies
engaged in CSR.

The main advantages of CSR are the following

• Enhanced reputation
• Employee loyalty and satisfaction
• Enhanced product life cycle
• Innovation improvements
• Improved risk management
• Higher investment attractions
• Supports marketing objectives
• Contribute to general business goals
• Reduces operating costs
• Reduces regulatory oversight
• Builds strong community relationships and many more

All these advantages are the needs of stakeholders, therefore if a

business does not carry out CSR then they would not be fulfilling the
needs of the stakeholders which will result in the company not doing
well.

Conclusion

In today’ society CSR is not only about looking good for society but a
obligation that has to be fulfilled. It has become an obligation from
an option due to the increased issues surrounding global warming,
sustainability, ethical behaviour and benefiting society in general.
CSR has become a must for those companies that strive for success.
Although some companies do not start off to be socially responsible
but as time goes on they form to be socially responsible like Ben
and Jerry’s.
It is strongly suggested that all aspects of CSR is vital for a company
in today’s global market.
Going back to what Vogel had said about CSR’s ‘tainted image’, has
raised many questions as to whether or not businesses are actually
caught between doing good for business and doing good for society.

As it was thought that business can do both, but after the recent
takeover, can the companies still maintain their high image in
society or has everything that they have worked for fallen down the
drain?

However the market affects business that are socially responsible,

as the recent recession has evidently shown that business get
caught up with their values and principles and often thrive for a
solution. But would this be the turning point as most companies
have come out to be stronger and more socially responsible then
they were before, only time will tell.
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