Business ethics

LECTURE 10;
and social responsibility

.
PhD Krzysztof R. Nowakowski
 Lecture objectives;

A meaning of CSR
CSR and company strategies & policies
The evolution of CSR
The European political debate over CSR.
 INTRODUCTION; a meaning of CSR

 CSR means the ability to effectively manage the increasingly

pressing requests from workers, consumers, local communities,
suppliers and so on, has become crucial for economic sustainability,
in that an unsatisfied stakeholder can interfere with the survival of
firms in the long run.
 As a result, CSR can be defined as the voluntary integration of
economic, social and environmental objectives in the relationship
with company stakeholder networks.
 Researchers and practitioners prefer corporate sustainability to CSR,
in that sustainability refers directly to the triple-bottom-line
approach;
➢the integration of social, environmental and economic dimensions
into management practices, taking for granted the stakeholder
orientation.
 MOVIE; BUSS4 Section B:
Corporate Social Responsibility
(CSR);
https://youtu.be/nkteAJBtM9A
Source; http://craneandmatten.blogspot.com/2010/08/what-is-csr-
free-download-of.html
 Characteristics of CSR

 Voluntary adoption of social and environmental standards beyond

legal prescriptions, opening companies to stakeholder dialogue
and cooperation, addressing operations toward sustainable
development, together gain consensus, trust and legitimacy for
firms in the globalization era.
 In other words, adopting a responsible approach means laying the
foundation of a long-lasting development in the history of
business and economics.
 This responsibility affects employees and more generally all
stakeholders (amongst others shareholders, customers, suppliers,
banks and insurance companies, retailers, competitors, state and
local authorities, civil society at large and media), and this in turn
can influence corporate success.
 CSR involves strategies and company policies

• In such a dynamic context, CSR is defined as a new managerial

model centred on the voluntary integration of economic,
social and environmental responsibilities into the entire value
chain and all company functions, and on the relationships with
the stakeholder network.
• CSR is a discipline through which the progressive alignment of
shareholder and stakeholder interests is satisfied, along with a
shift from short- to long-term objectives.
Movie; What is Corporate Social Responsibility (CSR)?
https://youtu.be/E0NkGtNU_9w
 CSR and corporate management;

• CSR refers to a new governance model based on stakeholder

satisfaction beyond not only legal prescription but also individual
ethical orientation.
• CSR involves strategies and company policies, as a consequence
interacting with all the areas of corporate management;
➢production processes: the reduction of environmental damage,
health and safety of workers, quality and safety of products and
services exemplify ways in which CSR can be integrated concretely into
company production processes;
➢marketing policies: efforts toward customer satisfaction or
transparency in promotional policies;
➢internal organization: support, provided by CSR policies, of career
management, training policies and employee turnover;
➢financial and economic performance: capability of CSR practices to
positively influence company efficiency and reduce the risk profile.
 CSR and corporate
management;
 In this sense, CSR becomes an integrative approach to firms'
management, like investments that, minimizing risks, represent an
innovative source of competitive advantage and do not increase costs.
 This new management model is characterized by the centrality of
stakeholders, by a tendency towards constant improvement and by
continuous innovation.
 The more integrated the economic, social and environmental
dimensions are into company strategies, the more processes will be
oriented towards the long run, the better the relationship with
stakeholders will be, fostering company legitimacy and the related
accumulation of intangibles based on trust and knowledge.
 As a result, the likelihood of surviving in the long run will increase.
The pyramid of CSR and business ethics.
 Developing Corporate Social Responsibility

 CSR can be promoted through legislation.

 A number of initiatives are associated with this approach.
 In general they refer to a system of incentives and punishments that
subject companies to external verification by law.
 But if we accept the assumption that CSR plays a strategic role as
the source of competitive advantage for committed firms, it cannot
be imposed by law.
 CSR is an instrument for better management of social and
environmental risks, a tool for total quality management.
 It gives enterprises a clear picture of their social and environmental
impacts, helping them to manage them well, and a new and wider
approach to corporate governance involving more issues and more
stakeholders.
 Developing Corporate Social Responsibility

 CSR can exist based on the complementary social mechanisms able

to trigger virtuous cycles and provide market benefits.
 Relevant examples refer to the gain in productivity brought about by
an improved corporate climate, to the preference of customers for
CSR-based products and services, to the mushrooming of socially
responsible investing and the related possibility for firms to access
new sources of financing, and so on.
 CSR can derive from the integration of social and
environmental objectives into the corporate identity through a
shift in the fundamental principles at the core of corporate
actions.
 In other words, the Corporation's final objective must reorient
away from a shareholder-value approach to the centrality of
stakeholders.
 Movie; The social responsibility of business | Alex Edmans |
TEDxLondonBusinessSchool; https://youtu.be/Z5KZhm19EO0
 CSR appears to have become increasingly integrated into corporate
strategies.

• Strategy is what links a company with its market (economic, financial

and technological) and non-market (social, political and cultural)
environment; and a company is inextricably linked by a dynamic
process of interaction with a diverse set of stakeholders in this
environment, where the boundaries between market and non-market
become increasingly blurred.
• Therefore, CSR represents the main driver of corporate sustainability,
that is, the capability of the firm to generate long-term value through
mutually beneficial relationships with its entire network of
stakeholders, 'business stakeholders' and 'sociopolitical stakeholders'.
CSR appears to have become increasingly integrated into corporate
strategies.

• Accelerating economic liberalization without effective global

governance and defective corporate governance practices among
some major companies have focused public attention on corporate
integrity and attitudes not only toward their shareholders, but also
toward society as a whole.
• Today, as business is expected to be accountable for its impact on
society, CSR is increasingly debated in Europe.
Evolution of CSR
 Evolution of CSR

 Through the 1980s, CSR was disproportionately if not almost

exclusively an American phenomenon.
 It was primarily associated with the pressures on American-based firms
by investors, consumers and activists.
 And it was American-based firms that pioneered many of CSR's
principles and practices, such as corporate philanthropy, social audits,
corporate codes of conduct and so on.
 This is no longer the case. The United Kingdom is now the country in
which CSR is most evident, but it is not alone.
 More and more European governments are including CSR in their
strategie priorities, defining specific objectives and ad hoc
organizational structures.
 European countries, institutions and European companies are
actively contributing to the global debate on CSR, promoting
initiatives and formal definitions, proposing approaches and
management tools and supporting rules of conduct and
promotional campaigns.
 CSR & EU
 At a more institutional level, the European Union (EU)
has been actively dealing with these issues since 2001,
when it presented the Green Paper 'Promoting a
European framework for CSR'.
 This paper was the EU's response to the strategic goal
adopted in March 2000 during the European Council in
Lisbon: 'to become the most competitive and dynamie
knowledge-based economy in the world, capable of
sustainable economic growth with more and better jobs
and greater social cohesion‘.
MOVIE; Re-thinking corporate
social responsibility: Andy Le
Seelluer at TEDxStHelier;
https://youtu.be/jga4s0Ei7Zs
Source; www.csreurope.org
 CSR & public policy

The next area is the search for coherence of CSR public

policies.
To ensure that CSR both on the marketplace and in public
policies contributes to sustainable development, it is
essential to use benchmarks which properly reflect its
components; that is, competitiveness, social cohesion and
environmental protection.
 European definition of CSR

• The Commission defines CSR as 'a business contribution to

sustainable development, that is, a management approach
enhancing competitiveness, social cohesion and evironmental
protection.‘
• More broadly, CSR is an instrument that can contribute to the
objectives of EU policies, as well as to development and better
global governance, by supplementing existing policy tools such
as legislation and social dialogue.
 Public policy and CSR
• In political terms, CSR appeared on the European political
map during the 1990s.
• The EU official commitment to CSR came out of the Lisbon
Summit in March 2000, which set a new strategie goal for the
Union, which was becoming the most inclusive and
competitive society in the world.
• In Lisbon, EU leaders made a specific appeal to companies'
sense of CSR.
• CSR is expected to contribute to the wider process of
modernizing and strengthening the European economic and
social model.
 Public policy and CSR

 For these reasons, the Commission is now implementing a CSR

strategy that pursues three priorities: promotion of CSR practices,
credibility of CSR claims and coherence of CSR public policies.
 The first priority aims at promoting the uptake of socially responsible
practices among enterprises.
 CSR is about daily management of social and environmental issues in
every department of a company.
 Enterprises are not expected to adopt CSR practices for
marketing or philanthropic reasons but because CSR makes
sense for their competitiveness.
 It should not be just a public relations exercise, but should lead
companies to reassess and reorganize their core business
activities, and ensure that they manage risk and change in a
socially responsible way.
 Public policy and CSR

 The main European strategic priority deals with the

credibility of responsible practices.
 The European approach to CSR is focused on the strong
belief that CSR is so effective because it is voluntary.
 But to be credible and effective it requires measurement
and assessment.
 CSR performance assessment helps businesses to improve
their practices and behavior as it facilitates an effective and
credible benchmarking of their social and environmental
performance.
 Transparency about CSR performance also enables
stakeholders to measure how businesses meet their
expectations.
 Transparency & CSR

 As transparency has become a key element of the CSR

debate, the number of codes of conduct, reports, labels,
awards, indices and other tools have increased during the
last decade.
 CSR has become a market issue for consumers and
investors.
 Like any information related to the market, CSR claims
must be substantiated.
 When individual consumers or investors are not in a
position to verify the information provided to them, a
level playing field must be established by public
authorities to protect them against unfair practices.
 Promoting a European framework for CSR

 On 18 July 2001, the EU presented the Green Paper: Promoting a

European framework for CSR.
 The document suggests an approach based on strengthening
partnerships among all interested parties (for example, companies,
NGOs, social partners and local authorities).
 After the consultation process on the Green Paper closed on 31
December, 2001, the EU began to work on a new document.
 The new Official Communication, entitled 'CSR: A business
contribution to Sustainable Development', was released on 2 July,
2002.
 These two documents are the final outcomes of a long discussion,
carried on for years in Europe at both the theoretical and
institutional level, about the social implications of business activities
and the social role of companies in supporting community
development at the local and national levels.
 The Green Paper identifies four factors behind the growing success of
the CSR concept:

• the new concerns and expectations of citizens, consumers,

public authorities and investors in the context of globalization
and large-scale industrial change;
• social criteria, which increasingly influence the investment
decisions of individuals and institutions both as consumers
and as investors;
• increased concern about the damage caused by economic
activity to the environment;
• transparency of business activities brought about by media
and modern information and communication technologies.
 The EU also proposes a framework to better understand the different
elements of CSR: according to this approach, CSR has an internal and an
external dimension.

• The internal dimension of CSR encompasses human resources

management; occupational health and safety management;
business restructuring; management of environmental impact and
natural resources.
• The external dimension of CSR, which goes beyond the doors of the
firm and involves many stakeholders, affects local communities;
business partners and suppliers; customers and consumers;
protection of human rights along the whole supply chain; global
environmental concerns.
Movie; World Forum for Ethics in Business;
https://youtu.be/sm6ag9LSOnI
 External sources;

•  Reading for this class;

• John Hancock (edit.), 2005, Investing in Corporate Social
Responsibility. A Guode to Best Practice, Business Planning & the
UK's Leading Companies, Kogan Page Limited, Chapter 1; Corporate
social responsibility - bottom-line issue or public relations exercise ?
• R. J. Ebert, Ricky W. Griffin, 2007, Business Essentials, Pearson
Prentice Hall, Chapter 2: Business ethics and social responsibility.
• R. L. Daft, 1995, Organization Theory and Organization, West
Publishing Company, Chapter 10: Organizational culture and ethical
values.