PRINCIPLES OF

MANAGEMENT

Corporate Social Responsibility and Business Ethics

CSR: The managerial obligation to take action
that protects and improves both, the welfare of
society as a whole and the interests of the
organization.

 A manager must strive to achieve societal as well as organizational goals.

 DAVIS MODEL OF CSR:

 Prop.1: Social responsibility arises from social power. Businesses have a significant
impact on societal issues such as environmental pollution and minority employment.
Because businesses have this social power, it is important for them to act in socially
responsible ways.

 Prop.2: Business shall operate as a two-way open system, with open receipt of
inputs from society and open disclosure of its operations to the public.

 Prop.3: The social costs and benefits of an activity, product, or service shall be
thoroughly calculated and considered in deciding whether to proceed with it.
Egs of Negative Externalities:
 Air pollution caused by factories
 Climate change due to Gas emissions
 Water Pollution by dumping of toxic waste
 Risk of storing nuclear waste by nuclear plants
 Eg. of Positive Externalities:

 Education gets promoted when companies try to increase

qualifications of their workers
 They may be hiring minorities
 They may be producing products which make the environment
better
 They may be using very clean and safe methods of production
 Spreading the use of new technology
 Prop.4: The social costs related to each activity, product, or service
shall be passed on to the consumer.

 Prop.5: Business Institutions, as citizens, have the responsibility to

become involved in certain social problems that are outside their
normal areas of operation.
 Arguments for CSR:

 Business exerts significant influence, so it has a responsibility to

maintain and improve overall welfare of society.
 Profitability and growth go hand in hand with responsible treatment of
employees, customers, and the community.
 Performing CSR = greater profit
 Companies don't care - they only focus on profit, so CSR is just a PR
smokescreen
Arguments against CSR:
 Milton Friedman – making business managers
responsible for reaching profit objectives, as well
as enhancing society welfare at the same time
leads to a conflict of interest that could
potentially cause the demise of business.
 This demise will certainly occur if business is
continually forced to perform socially responsible
actions that directly conflict with private
organizational objectives.
 May be unethical – spending the company’s money
on society and customers
CONCLUSIONS about CSR:

 Business should perform all legally required

socially responsible activities

 Voluntarily performing Social Responsibility

activities

 Communicating the degree of Social Responsibility

Involvement
 Social Responsiveness

 The degree of effectiveness and efficiency an organization displays in

pursuing its social responsibilities
 Greater efficiency = more socially responsive
 Clearly, business should be responsible towards is stakeholders
 Must determine which social responsibilities to pursue, and how to
pursue them.
 They must decide in order not to waste organizational resources
 Determining If a Social Responsibility (S.R.) Exists-determine
which specific social obligations are implied by their business
situation
 Social Responsiveness and Decision Making-what SR should do
and deciding how to pursue them
 Approaches to Meeting Social Responsibilities
 Socially responsive approach:
1. Incorporate social goals into the annual planning process
2. Seek comparative industry norms for social programs
3. Present reports to org members,BOD,stockholders on SR
progress
4. Experiment with different approaches for measuring SR
progress
5. Attempt to measure the cost of social programs as well as
return on investment
 Planning Socially Responsible Activities:

Environmental Short-Run Management

Long-Run Plans
Forecasts Plans Action

Policy: Management Tool that furnishes broad guidelines for channeling

management thinking in specific directions.

Management should establish policies in the social responsibility areas,

just as they do in all other areas.
Social Responsibility Activities and
Management Functions
 Converting policy into action:

 Phase 1: Recognition by top management that the

organization has social obligation – Formulate and
Communicate Policy

 Phase 2: involve staff as well as management.

 Phase 3: Involve division management

Social Responsibility Activities and
Management Functions
Social Responsibility Activities and
Management Functions
Social Responsibility Activities and
Management Functions
Controlling Social Responsibility
Activities
 Must control, and make modifications if necessary
 Areas of Measurement:
1. The Economic Function Area (eg.producing neeeded goods, paying
fair wages, creating jobs, ensuring safety)
2. Quality of Life Area: improving/degrading general quality of life in
society.
3. Social Investment Area: How much money and resources are invested
to solve social problems
4. Problem-solving area: degree to which the organization deals with
social problems
SOCIAL AUDIT: the process of measuring the
present social responsibility activities of an
organization to assess its progress in this area –
monitoring, measuring and appraising all aspects
of an organization’s social responsibility
performance.
CASE IN POINT: UNILEVER PAKISTAN
 CASE IN POINT: UNILEVER PAKISTAN
 http://www.unilever.pk/sustainability/
 Unilever Sustainable Living Plan (USLP)
 Poverty, malnutrition, climate change and water scarcity: these are some of the big
challenges facing the world and our business today.
 USLP has been created to develop new ways of doing business, which will increase
the social benefits from Unilever’s activities while at the same time reducing our
environmental impacts.
 Our Sustainable Living Plan aims to help everyone enjoy a good quality of life while
respecting the planet.
 Unilever Sustainable Living Plan was created to help achieve three global goals by
2020.
1. Halve the environmental footprint of our products
2. Help more than 1 billion people take action to improve their
health and well-being
3. Source 100% of our agricultural raw materials sustainably
 Unilever Pakistan has also been involved in multiple projects on
the sustainability agenda over the years having created social,
economic and environmental impact in Pakistan.
 Unilever Pakistan has created its own focused USLP goals for the
upcoming years based on the current needs of the country.
1. Reduce the Environmental foot print of our products through
reduction of greenhouse gases, optimisation of water usage and
waste management
2. Enhancing livelihoods by rural programmes and creating
opportunities through enhanced distribution and empowerment
through education
3. Help more than 68 million people take action to improve their
health and well being though our personal care products.
Nutrition enhancement to reduce salt and calories in our food
brands
 Improving education in Pakistan (The Unilever-TCF partnership )
 Pakistan: Blue Band & World Food Programme partnership
 Lifebuoy programmes set out to achieve lasting improvements in health
and hygiene
 Lifebuoy’s newest campaign is a "School of 5" Program which will coach children to
adopt a conscious habit of washing hands with soap
 The drip irrigation project in collaboration with Acumen Fund is aimed at
facilitating the rural communities of Pakistan
 In Bangladesh, a Unilever-sponsored hospital ship is bringing health care to people.
 On 9 December 2004, Unilever signed an agreement with UNICEF to work together
towards making a measurable difference to childhood mortality by 2015
 Pakistan: Sehat First franchise for the rural communities
 Ghana: Unilever Foundation for Education & Development
 Business Ethics
The capacity to reflect on values in the corporate decision-
making process, to determine how these values and
decisions affect various stakeholder groups, and to
establish how managers can use these observations in
day-to-day company management.
 Ackers: A company which is not ethical cannot be
competitive in either national or international markets
 Productivity: Ethical practices towards stakeholders =
happier employees
 Code of Ethics:

A formal statement that acts as a guide for the ethics

of how people within a particular organization should
act and make decisions.
Address issues such as conflict of interest, competitors,
privacy of information, gift giving, forbidding
bribery, etc.
Encourages ethical practices within an organization.