Introduction
In the contemporary business environment, businesses do not exist in isolation. Nor do they just pursue the objective of making money. All the stakeholders, including the employees, customers, suppliers and the local community, are affected by the activities of the business in one way or another. The products of the company and the way they are made also have a great impact on the environment. The concept of corporate social responsibility came about as a result of need to understand these effects of business activities on the wider world and how they can be used in a positive way.
All the stakeholders demand the organizations to manage environmental consequences of their actions beyond their legal and regulatory framework that they operate in. According to Leonard, “Across the globe, business leaders are struggling to balance conflicting demands from communities, government, advocacy groups, and others about the role they play in economic advancement, environmental improvement, and social development.” (1).
It is no longer acceptable for companies to just make good products to meet the needs of their customers. The companies are expected to consider the wider and environmental effects of their activities. The activities carried by the firm in order to meet these expectations are collectively referred to as corporate social responsibility. This paper is a literature review of the concept and definition of corporate responsibility and the drivers behind the development of CSR (globally).
Definition of corporate social responsibility
There was scanty literature on the definition of Corporate Social Responsibility. However, the decade of 1960s had a significant growth in the attempts to define what CSR means. Keith Davis is one of those prominent writers who significantly contributed to build a constructive definition of CSR. Davis later wrote extensively about the topic. In his early literature, Davis (70) defines corporate social responsibility as business men’s decisions and actions for purposes that are beyond the normal activities of the business. He tries to view CSR in a managerial context. Davis contribution to the development of the definition became very popular and was considered to be the runner-up Bowen, a father of CSR designation. Drawing on this definition of CSR, more writers have come up and built upon this definition. Most of these definitions are described in the paragraphs below.
Kotler and Lee (3) define corporate social responsibility as a commitment by an organization to improve community well-being through discretionary business practices and contributions of corporate resources. It is basically a voluntary commitment a business makes in choosing and implementing these practices and making these contributions. Such commitments should be demonstrated in order for a company to be described as socially responsible and will be fulfilled through the adoption of new business practices and/or contributions, either monetary or non-monetary. The other element in the definition is the term community well-being. This includes human conditions as well as environmental issues.
Corporate social responsibility could also be defined as business commitment to contribute to sustainable economic development, working with employees, their families, the local community, and society at large to improve their quality of life. It is also described as operating a business in a manner that that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business. This definition encompasses the decision making of the company relating to ethical values, legal requirements, as well as respect for people, communities, and the environment.
According to Boeger (92), the European parliament recently in the adoption of its resolution of CSR expressly stated recognition that a debate remains open among different stakeholder groups on an appropriate definition of CSR. This means that there is no universally acceptable definition of CSR but every business may define it based on the activities they carry out as part of their CSR. Boeger (92), however, defines CSR as a voluntary integration of environmental and social considerations into business operations, over and above legal requirements and contractual obligations.
Drawing from different definitions, CSR is basically about companies operating in a manner that at least meets legal requirements and that respects social and economic interests so that economic progress is sustainable rather than doing it for a short term period. The definition shows that CSR lies within the “Tripple-bottom line” (TBL), a framework that assesses and reports corporate performance against economic, social and environmental parameters used.
This framework reflects that the process of production and the distribution of goods and services by the firm are as paramount as the products being produced and distributed. The firm owes substantive obligations to all affected societal stakeholders throughout the supply chain, from customers, workers and their families, to suppliers, the community at large, investors, shareholders and even the government. This means that, despite following the letter and the spirit of the law, the CSR calls the firms to address those issues not addressed in the law.
Every CSR activity is guided by such principles as transparency, accountability, public disclosure, meaningful stakeholder involvement and reporting. There should also be an integrated, coherent, consistent and comprehensive approach that is employed in the process. CSR could then be interpreted as an ambitious approach to ensuring the company has good corporate behavior. Since CSR is an approach that is concerned with the behavior that goes beyond the legal requirements, it is very vital in improving a company’s relationship with its workers, its consumers, the environment and the community.
Hopkins (19), in his attempt to define Corporate Social Responsibility, explains that companies that embrace CSR are supposed to embrace corporate citizenship and adopt as their goal, “sustainable development”. They must work for sustainable development in conjunction with an array of different stakeholders. They should buy into multi-stakeholder engagement. Corporate social responsibility advocates for working to meet the Triple Bottom Line, that is, financial, environmental and social.
According to International Organization of Employers (IOE) (1), CSR is a set of initiatives by companies voluntarily integrating social and environmental concerns in their business operations and their interaction with their stakeholders. It further explains that that CSR is a core aspect of business activities throughout a company and also recognizes it as a means of engagement with stakeholders in the various markets in which a company operates.
Concurring to the above definitions of CSR, Barthel, the Head of Environment, Sustainability, and CSR of the British Standard Institution, defines CSR in the following words: “it is a simple notion that sets a framework for business managers to protect their company’s long-term profitability, but it is more about how profits are made than how much profit there is, or how much is given away” (2). He further explains that understanding CSR would mean clear understanding of how companies have to relate to the wider world, and the impact that their activities have on society and the environment. Barthel also agree that there is much confusion about the definition of the Corporate Social Responsibility.
Analyzing these definitions of CSR, Mullerat (14) explains that although there are many attempts to define CSR, we must keep in mind the lack of a single and generally accepted definition of CSR and the need to work towards developing one. There are very many definitions of CSR ranging from very comprehensive ones to very stringent ones, although there is a considerable common ground among them. Therefore, CSR could be basically described as a company’s obligation to manage its activities to protect the interests f all the stakeholders that it has.
Companies voluntarily decide to respect and guard the interest of a broad range of stakeholders while contributing to a cleaner environment and a better society through an active interaction that the company engages in will all these stakeholders. The concept of CSR is conceived differently in different business environment. The most notable difference on the perception of CSR is that of US and the European Union. According to Mullerat (14-15), in the US, CSR is understood better in terms of philanthropic model where companies make profits, unhindered except by fulfilling their duty to settle tax arrears, then they apportion part of their profits to charitable activities. The model of UE focuses more on operating the core business in a responsible way, complemented by investing in communities for business reasons.
The drivers behind the develop of CSR (globally)
According to Carroll (1), the concept of corporate social responsibility has a long history that describes it development. Formal literature about social responsibility came up in the 20th century and mostly in a period of the past 50 years. In this section, I will review the drivers behind the development of CSR focusing on a number of literatures that has been written.
According to Banerjee (5), CSR as a field of study in management probably emerged in the 1950s in the United States. This was basically as a result of business practices that took place in the 1900s and which could be termed as being socially responsible. These practices took different forms such as: philanthropic donations to charity, service to the community, enhancing employee welfare and promoting religious conduct. The early proponents of the CSR are the Chief Executive Officers and business leaders from the big oil and energy companies, telecommunication corporations and automobile manufacturers of 1920s.
According to Wilkinson and Reed (313), the drivers for CSR vary across sectors and between companies. The perception of CSR also differs and that a true indicator of the value that a company has for CSR depends on where the company put this function in its organizational structure. According to Solomon (281), corporate social responsibility is driven by both internal and external drivers. The internal driers include fund managers themselves, clients of the institutional investors, and the actions of trustees.
The external factors on the other hand include lobby groups, governments and political parties competing for powers, society’s interest in corporate social responsibility, and the companies themselves wanting to promote socially responsible investments. Therefore, one of the most important drivers of corporate social responsibility has to be socially responsible investment. The companies cannot take corporate social responsibility seriously unless corporate owners require socially responsible behaviors from companies.
In another view, Parker (434) states that CSR initiatives are important to a global public. He states that a study of 25,000 consumers in 23 nations showed that two-thirds of those surveyed want companies to go beyond fiscal responsibility and take the social roles. The research also showed that the public forms the opinion about a company based in part on the company’s CSR activities.
With this view, it is clear that the public expects the company to give equal attention to society, the environment, and financial performance. Parker further explains that CSR is initiated by the need of the company to retain the people they want in the organization (Preston and Post 12). CSR initiatives help the company to hire and retain the people they want. It helps the company to attract, retain, and motivate the employees. The morale of the employees is higher in organizations that embrace corporate social responsibility.
The need to improve business performance is also a key driver to the development of CSR. Parker (434) argues that firms that pursued a triple bottom line of economic, environmental, and social sustainability perform better than others in the global index.
Conclusion
Companies in the contemporary world have embraced the concept of Corporate Social Responsibility. What different companies regard as their corporate social responsibility activities may differ from one company to another. The definition of CSR also differs from sector to sector. There are many definitions of CSR but all of them have a common ground. Basically, CSR is described as a company’s obligation to manage its activities to protect the interests f all the stakeholders that it has. It is the decision of the company in its discretion to respect and guard the interest of a broad range of stakeholders while contributing to a cleaner environment and a better society through an active interaction that the company engages in will all these stakeholders.
The concept of CSR is conceived differently in different business environment depending on the activities carried out in every kind of business (Swanson 45). The literature revealed that CSR development is driven by such factors as: internal driers which include fund managers themselves, clients of the institutional investors, and the actions of trustees. There are also external drivers which include lobby groups, governments and political parties competing for powers, society’s interest in corporate social responsibility, and the companies themselves wanting to promote socially responsible investments. There is also need to improve performance, the demand by consumers and the need to attract and retain the best employees.
Works Cited
Banerjee, Subhabrata B. Corporate Social Responsibility: The good, the bad and the Ugly. Cheltenham: Edward Elgar publishing limited, 2007. Print.
Barthel, Mona. Standards and assurance in CSR: An emergency landscape. Britain: Environmental Sustainability and CSR of British Standard Institution, n. d. Print.
Boeger, Nina. Perspectives on Corporate Social Responsibility. Cheltenham: Edward Elgar Publishing, 2008. Print.
Carroll, Archie B. Corporate Social Responsibility: Evolution of a Definitional Construct. Vol. 38 No. 3, 1999 268-295.
Davis, Keith. (1960, Spring). Can business afford to ignore social responsibilities? California Management Review, 2, 70-76.
Hopkins, Michael. Corporate social responsibility and international development: Is business the solution? New York: Earthscan, 2007. Print.
International Organization of Employers. Corporate social responsibility. An IOE Approach, Geneva, 2003.
Kotler, Philip, and Lee, Nancy. Corporate social responsibility: Doing the most good for your company and your cause. New York: John Wiley and Sons, 2005. Print.
Leonard, Herman B. Corporate Social Responsibility. Harvard: Harvard Business School &Harvard Kennedy School, 2008. Print.
Mullerat, Ramón. International corporate social responsibility: The role of orporations in The economic order of the 21st century. Rijnland: Kluwer Law International, 2009. Print.
Parker, Barbara. Introduction to globalization and business: relationships and Responsibilities. London: SAGE, 2005. Print.
Preston, Lee, and Post, James. Private management and public policy: The principle of Public responsibility. Englewood Cliffs, NJ: Prentice Hall, 1975. Print.
Solomon, Jill. Corporate governance and accountability. New York: John Wiley and Sons, 2007. Print.
Swanson, David. Addressing a theoretical problem by reorienting the corporate Social performance model. Academy of Management Review, 1995: 20, 43-64.
Wilkinson, Sara, and Reed, Richard. Property Development: 5th Edition. London: Routledge, n. d. Print.