Corporate Social Responsibility
Corporate social responsibility is concerned with the relationship between the corporate sector and society, and focuses particularly good corporate citizenship. The World Business Council for Sustainable Development defines it like this:
"Corporate Social Responsibility is 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."
Some models of corporate social responsibility accentuate the primacy of a corporation’s economic responsibility to survive by making a profit. These models suggest other responsibilities came after: to abide by societal expectations and ethical principles, to meet legal standards and to indulge in discretionary charitable actions (Carroll, 1979). Others argue the emphasis should be placed first and foremost on the responsibility of business to support individual managers to make socially responsible decisions, followed by the imperatives of conforming to ethical behaviours and obeying the law, and lastly, making a profit. As Wood (1994) says, "It is of no importance at all whether a particular business remains competitive or not. Businesses that cannot remain competitive while fulfilling legal, ethical, and discretionary social responsibilities should not be in business at all."
As governments around the world withdraw from operating business enterprises, private sector corporations are increasingly under pressure to take a more active role in society, to be good 'corporate citizens'. Despite the currently high profile of the call for corporate citizenship, this is not a new phenomenon. At the end of the 1960s, similar pressure was mounting. In the United States, the Committee for Economic Development went so far as to assert that ‘business has an obligation to help alleviate social problems and meet social needs’. But not everyone agrees with this sentiment. Many would avow that solving social problems is the role of government, not the private sector, and that the responsibility of corporations is bounded by the business mission.
Social standards change and society expresses these changing standards in new laws and regulations. In the 1970s, the desire to end discrimination against women and minorities led to various anti-discrimination, equal opportunity and affirmative action laws; the desire to curb pollution and environmental damage led to environmental laws and the establishment of environment protection agencies. So far there has been no similar move to introduce new laws to institutionalise society’s contemporary concern with responsible corporate behaviour. But a number of government reviews are underway. The UK Department of Trade and Industry, for example, is undertaking a wide ranging review of company law that, amongst other things, is looking at the concept of stakeholders and corporate governance.
Corporate Social Responsibility and Management Practice
There is a range of strategies to turn a commitment to corporate social responsibility into practical action. These include:
- Articulating a relevant organisational philosophy and incorporating it into an existing mission, vision and values statements.
- Designing an organisational structure with relevant roles to assure the necessary work gets done. The responsibility to keep employees from harm, for example, can be facilitated by occupational health and safety managers; the responsibility to prevent harm to the environment can be facilitated by environmental managers.
- Developing and implementing appropriate organisational systems to assure socially responsible outcomes. The responsibility to assure public safety or minimise environmental pollution and waste, for example, can be supported through using a life-cycle product design system; the responsibility to assure ethical behaviour can be supported through implementation of relevant audit systems.
- Constantly communicating with various public groups to ensure up-to-date knowledge of key social issues. This should include engaging with key stakeholder groups; reporting on social and environmental aims, programs and outcomes as well as financial results; discussing uncertainties as well as stating facts.
- Partnering with community sector organisations to further socially desirable goals. For example, the Earthwatch Institute partners with corporations to give managers personal experience of ecosystems operating in field conditions. This experience not only increases understanding of the imperative of good environmental practices but is an excellent example of best practice in management development.
The table below provides a useful model of the why, the how and the what
of corporate social responsibility:
Principles of corporate social responsibility |
Processes of corporate social responsiveness |
Outcomes of corporate behaviour |
|---|---|---|
Principle of institutional legitimacy
|
Environmental assessment:
|
Social impacts:
|
Principle of public responsibility:
|
Stakeholder management:
|
Social programs:
|
Principle of managerial discretion:
|
Issues management:
|
Social policies:
|
Source: D. Wood, Business and Society, Harper Collins, New York, 1994
Measuring Corporate Social Responsibility
Some years ago, economists started to question the usefulness of national indicators like the Gross Domestic Product (GDP). In an influential article in a 1995 edition of the Atlantic Monthly, Daly and Cobb asked "If the GDP is up, why is America down?" In it, they argued that indicators measuring financial transactions alone, such as the GDP, fail to account for ‘felt quality of life’. The economy might be booming, but social indicators like suicide rates, drug use, and marriage breakdown, show the quality of life is deteriorating. To remedy this conundrum, they proposed an alternative indicator dubbed the ‘Genuine Progress Indicator (GPI)’. Calculating the GPI takes into account the fact that some transactions, despite contributing positively to GDP, in reality detract from the quality of people’s lives. Car accidents, for example, contribute to the GDP because they lead to car repairs and sometimes to treatment of personal injuries that involve financial exchange – but car accidents are clearly not desirable.
Similar rethinking of performance indicators has been happening in corporations. Academics and management consultants have started to challenge the traditional focus on the business bottom line – ie, the financial bottom line. John Elkington, Chair of the UK consultancy SustainAbility, suggests corporations should drive for progress on not just one but three bottom lines: the economic, the environmental and the social. In the US, accountant-turned-social-advocate Ralph Estes has developed a new set of accounts for corporations known as the Sunshine Standards, so called because of the power of sunlight to reveal dark corners and heal sickness.
The power of triple bottom line thinking has even touched traditional market analysts. Late in 1999, the global market analyst firm Dow Jones introduced its new Sustainability Index, which tracks the share market performance of the world’s top 200 sustainability-driven companies. These companies are chosen by assessing their performance on the triple bottom line of economic viability, environmental quality and social equity.
While measures of sustainability are still evolving, the model gaining most adherents is the Global Reporting Index. This joint effort, involving groups ranging from the United Nations to Greenpeace to Amnesty International, has developed a set of measures corporations can use to test their own performance and standards.
A valuable website launched in February 2002, Corporate Impact Reporting, is a new online research tool for those interested in how businesses impact the communities in which they operate.
References
Carroll, A. 1979, Managing Corporate Responsibility, Little, Brown, Boston.
Wood, D. 1994, Business and Society, Harper Collins, New
York.