The practice of exhibiting proactive social responsibility has become a trend among leading firms operating in the global arena. Corporate social responsibility (CSR) represents a set of actions taken by an organization in order to improve the overall social good beyond the direct interests of the company. Such actions have become a pervasive phenomenon in both European and North American political and financial landscape.
When exploring CSR in the context of globalization, it is essential to note that the latter has seized to be a new phenomenon and had become an evolving characteristic of world economic activity. Nor is globalization a singular condition or a process aimed in one direction that could lead to the final point of change in the socio-economic landscape. Instead, it is a complicated framework of different but interrelated developments and transformations within economic, cultural, technological, and social systems.
Due to the complexity of globalization and the range of processes embedded into it, the impact of CSR for multinational organizations is unlikely to be positive across the board. Organizations usually depend on societies in which they operate, with the vast majority of transnational corporations being subjected to reputational losses. The ongoing challenges presented by globalization, which may range from war to the degradation of resources, make it difficult for organizations to attain benefit from CSR efforts.
Thus, despite the fact that CSR offers a positive perspective on improving the reputation of society, it is unlikely that it would provide equal benefits to all corporations. Furthermore, recent studies that focused on the exploration of CSR showed that the efforts that organizations may take are not enough to address social concerns.
The purpose of the paper is to explore the challenges of CSR as related to globalization by drawing examples from transnational organizations. Due to the limited benefits of CSR for preserving a positive brand image, it is also important to assess possible progress associated with the best social responsibility practices that could be beneficial for organizations.
Positive Analysis
While it was expected that globalization would be beneficial for international economic integration, current research suggests that it is a driver of uneven regional development. According to Martin, Tyler, Storper, Evenhuis, and Glasmeier (2018), as trade is opened up between nations throughout the world, at least one production factor could gain an advantage while at least one factor would lose. For example, the element of production that would lose is the one that is being the most regularly and heavily used for manufacturing goods used for increasing imports. In advanced economies, the increased intensity of production will be done at the expense of low-skilled labor (Martin et al., 2018).
Furthermore, while developed Western economies have managed to increase their per-capita income as a result of leading innovations and the power of intellectual property. This advantage comes at a price, such as the increasing income inequality (Sklair & Miller, 2010). Thus, globalization, as a process of production redistribution across different nations around the globe, is associated with the emergence of geographically uneven patterns of overall intensiveness in output and incomes “as well as changing income distributions within various territories around the world” (Milanovic, 2016, p. 48). Since the influence of trade is felt unevenly within nations due to globalization, the same CSR efforts that companies operating worldwide would implement would have different effects on populations.
The influence of global trade that is facilitated by globalization is felt unevenly in different countries. If to take the United States, for example, the trade predominantly benefits larger cities that have strong financial, technological, and entertainment sectors (Martin et al., 2018). However, it would have an adverse impact on those regions that depend on manufacturing. Globalization of trade and monetary flows between worldwide organizations, therefore, drives irregular development between regions.
Globalization has shown to bring new concerns regarding the dimensions of responsibility. As companies found themselves connected to different other parties and locations in rather complex ways, and the effects were indirectly concerned with remote parties that are not usually taken into account in stakeholder analysis, the responsibility of organizations is considered necessary to be reflected in the process of creating value (Jensen & Sandström, 2011).
Therefore, CSR represents a controversial issue within the context of the organizational world. While it is expected to add substance through showing that the products offered by companies are ‘ethical’ and can do no harm to the broader population, the real state of affairs may often reflect the opposite.
An example of how CSR failed in a global organization pertains to Volkswagen’s reputational scandal. The case was associated with the company pushing to sell vehicles with diesel engines that exceeded the allowed levels of carbon dioxide emissions (Birch et al., 2016).
The fault in manufacturing could affect approximately 800,000 cars in Europe, with the estimated cost of the scandal exceeding $8 billion (Birch et al., 2016). The critical problem pertained to the fact that Volkswagen knew about the potential faults of its vehicles but made a decision not to pull the cars. While the company’s CSR statement was associated with ensuring the safety of communities, the case undermined the public trust in the business as well as increased the cynicism of consumers about greenwashing. The latter is concerned with companies conveying false impressions or providing misleading information about the environmental sustainability of products offered by companies.
Therefore, companies may perceive CSR to be a practice of risk management that may not always paint the picture for inclusive development and justice. Combined with the pressure from the financial sector as well as significant legal issues, the pressure on organizations to exhibit CSR is on the rise (Frederiksen, 2018). However, due to their inability to ensure that all processes align with the standards of ethics and sustainability, companies may resort to untruthful actions. The absence or the limited availability of accountabilities for organizations allows some companies to cover up their unethical actions behind the façade of ethical actions. To summarize, the commonly-accepted approaches to CSR may not be sufficient for addressing the challenges pertaining to both environmental and social challenges.
The interplay between globalization and corporate social responsibility shows that there is a significant degree of inequality in the way transnational businesses would affect the global market. Globalization has shown to contribute to rising inequalities in income, with less developed regions that rely on manufacturing suffering at the hands of larger corporations. Metaphorically, globalization can facilitate new opportunities for power, with non-traditional stakeholders having a significant impact on the integrated world.
The emergence of new relations of power, such as sub-political movements and new bureaucratic forms, coupled with new dimensions of social responsibility, call for the reconsideration of the way in which CSR and globalization interact. While less developed regions that rely heavily on manufacturing should not suffer from income inequalities, CSR should be implemented in such a way that it would increase the prosperity of communities rather than the attractiveness of large organizations.
Critical Analysis
The expectations regarding CSR that would work on a worldwide scale have not been supported by evidence explored in the positive analysis section of the paper. National-level CSR is based on the idea that responsible firms would operate within a more or less appropriately working political frameworks and regulations, which have been defined by governmental authorities (Ruggie, 2017). However, such a condition does not work on a global scale.
At this time, there is no primary regulator that would guide the appropriate CSR efforts of organizations that work on a worldwide level. The measures of CSR are currently voluntary for organizations, and may often represent inadequate regulatory responses to adverse social and environmental externalities. The analysis points to the direction that CSR represents a set of greenwashing opportunities for companies (Ruggie, 2017). Therefore, CSR in the context of globalization is a tactical move that helps organizations avoid the prospects of extensive public regulations by subverting the general purpose overall. Such an approach to CSR poses a threat to the prosperity of societies in both developed and developing countries.
The challenges of CSR in the context of globalization become more complicated when it comes to considering multinational businesses, which continuously generate new ecosystems and impact the regions in which they operate. These ecosystems include production networks, global value chains, and supply chains. For example, Starbucks is a perfect illustration of how a multinational company affects multiple ecosystems and should adjust the existing CSR efforts to different contexts.
The company employs directly 150,000 workers, sources coffee from thousands of traders around the globe, predominantly from developing countries (Ruggie, 2017). Moreover, Starbucks manufactures coffee in more than 30 countries, and usually close to final markets. It is inevitable that the company would have an impact on communities in low-income economies. The CSR efforts, therefore, should be targeted on adding value and ensuring that the operations of the company do not have an adverse influence.
The implications of the interplay between CSR and globalization are concerning for the worldwide community. Due to the national and international regulatory pressures, CSR may often be implemented on a short-term basis, as in the example of Korea (Kim, Amaeshi, Harris, & Suh, 2011). The domestic government of the country has shown to exert coercive pressure on companies, which leads to companies using CSR as a method of quasi-tax or a governmental job creation mechanism, which may not have any beneficial impact on the development of actually effective measures of corporate social responsibility. In such a context, the activities of non-governmental and civil organizations are not free to do what they deem necessary.
Businesses have to consider the pressures and act in accordance with what the government expects them to do. For instance, with the political regimes in the country changing, business management has been challenged to accommodate to the new governmental priorities. Because of this, Korean businesses have been facing a consistent issue of being unable to deal with the problems of sustainability, such as corporate governance or the transparency of managerial operations. A more sustainable approach toward CSR is needed for companies operating in the international market in order to comply with the worldwide regulations and standards, such as the UN Global Compact or the Global Reporting Initiative (Kim et al., 2011).
Although, only a few Korean firms, as shown in the example provided by Kim et al. (2011), have proved to be mindful of the new tools pertaining to CSR assessment, which calls for raising the overall awareness of global companies. Governments, therefore, should not establish separate requirements for CSR to impact local businesses. Rather, there should be a universal understanding by all governments around the globe of how the CSR practice can be enriched.
The pressure on organizations from the government, as shown in the example pertaining to South Korean businesses, undermines democratic politics in the context of globalization. As suggested by Martin et al. (2018), when the “borderless world” came to exist, it was expected that the national borders would become irrelevant, and both governments and businesses across the globe would establish beneficial connections based on democratic politics (p. 11).
However, analysis has shown that globalization contributes to both divergence and convergence between national economies as well as inequalities among them. Significant changes in democratic politics have also occurred because of the rising the disparities in social and spatial areas, in which income and financial prosperity have become concentrated in the hands of minorities.
It becomes complex for multinational organizations to implement CSR to the degree expected by society because modern democracies rely on a worldview of meritocracy, which implies the belief that inequality in society is based rather on merit and effort. Such a view can play an essential role in modern society for a specific reason. In a society guided by democracy, “the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions” (Martin et al., 2018, p. 12). While CSR is expected to address such inequalities and add value to communities around the globe, the lack of equality presents as useful to businesses, and giving wealth to less developed regions at the expense of companies is not the goal that many would pursue.
Overall, CSR efforts in the context of globalization represent significant challenges for businesses. The present level of global imbalance in trade is contributing to severe tensions in the way in which the global economy can function. Existing imbalances in the economy lead to the emergence of capital flows that have not been successfully managed in a way that could sustain economic growth/ Therefore, globalization has not created favorable conditions for organizations to exhibit effective CSR. Whatever are the views about the future of CSR, there are substantial grounds for suggesting that the worldwide political economy has found itself in the disruptive and turbulent times.
Dealing with the current state of affairs is a challenge for global organizations. Therefore, meaningful policy solutions are necessary to overcome such a challenge. The political state of affairs should serve in the interest of communities that are influenced by the impact of large companies, which points to the need to develop practical solutions to overcome the challenges of CSR in the context of globalization.
Strategic Analysis
Globalization has shown to play an essential role in facilitating the progress of the CSR practice and discourse within both developing and developed countries. The development of efforts aimed at improving CSR efforts across multiple attempts relates to the impact of internationalization, modernization, and globalization processes. Despite the challenges, global corporations are expected to communicate their contributions to CSR for gaining legitimacy, an improved brand image, and the achievement of higher monetary performance overall.
The conceptual understanding of CSR should include a framework for social responsibility that would guarantee the interplay of patterns regarding the economic, legal, ethical, and philanthropic affairs. Businesses would use corporate social responsibility for not only saving their brand image and avoid legal issues from both governments and communities affected by the operations of global organizations.
An example of a positive CSR strategy that shows a change for the better is the GCC framework. With the help of the Arab Forum for Environment and Development, it was possible for the region to transition sustainable social and environmental practices as a way to secure the road toward a sustainable future. Within the framework, the governments of each GCC country have shown to play integral roles in facilitating CSR implementation logics set by the Arab Forum (Jamali & Safadi, 2019). The practice of the countries represents an example for both highly developed nations and emerging economies.
For instance, the government of the UAE has been playing an important role in encouraging businesses “to be involved in social responsibility and consumer awareness through various programs, such as the activities for sustainable management” (Jamali & Safadi, 2019, p. ). Businesses have been focusing on the importance of responsibility initiatives that would facilitate the sustainable development of communities. Dubai has been in the lead of emerging sustainability projects that benefit locals, specifically in the areas of energy conservation and construction.
The example of CSR efforts carried out United Arab Emirates businesses can serve as a model for other countries because it shows how companies can work together with the government. The Sheikh Zayed Housing Program and the Mohammad Rashid Housing Establishment are programs that encourage the contribution of local businesses to communities in need (Jamali & Safadi, 2019). The government also contributes to such programs, which points to the high degree of transparency associated with CSR efforts (Jamali & Safadi, 2019).
Moreover, the Center for Responsible Businesses in Dubai offers comprehensive support in the implementation of corporate responsibility efforts and conducts regular audits to recognize responsible business behaviors and reward organizations that exhibit them. Similarly, the projects funded by the UAE government, such as the Arabia CSR Network, implement assessments for determining the best practices of social responsibility in the country. The mentioned programs have brought tangible results, such as the increasing awareness of consumers about the need to pursue sustainable efforts that would preserve not only environmental but also social prosperity of communities. In the Emirates of Dubai and Abu Dhabi, where the sustainable business programs have been predominantly concentrated, the social awareness of companies increased, which is the result of the collaboration between the government and organizations.
The peculiar national context in which GCC firms operate encourages the support for CSR as there are regulations that support collaboration between stakeholders to facilitate positive efforts in reaching the desired degree of social support for communities. Such an approach is recommended to implement in other regions where companies have been using CSR as a somewhat temporary solution to satisfy the pressure from governments. Governments, in turn, should also initiate and fund a variety of community outreach projects and promote audit CSR practices. Instead of imposing strict frameworks that have made CSR efforts among organizations ineffective, governments should increase social awareness overall.
In order for CSR to address the inequality challenges brought by globalization, there also could be a mandated annual philanthropy tax that businesses would have to pay. As the current market dynamics contribute to negative externalities for the environment and society, the mandatory fee that large corporations, including monopolies, will have to pay would increase the overall social benefit and ensure that there is a mitigating factor that allows companies to do business.
Low accountability and responsibility standards are currently the main issues causing organizations to exhibit unethical practices and adversely influencing both societies and the environment. There should be a market-oriented CSR approach that would also have political rationale set in place to ensure that companies exhibit positive and valuable practices for social improvement.
Beyond collaborating with governments on effective CSR measures in the current context, businesses should also establish clear metrics that would prove the value of their corporate social responsibility efforts. Such metrics are necessary because they can be adjusted to the contexts in which businesses operate and encourage self-assessment and accountability. The government may integrate the standard for CSR metrics in order to establish transparency when it comes to the reporting of corporate social responsibility efforts. The way in which organizations disclose their efforts associated with CSR programs may impact the brand image and profit levels, which points to the need to elevate the challenges of lacking transparency in reporting.
Overall, to overcome the challenges of CSR in the context of globalization, the perspectives on the issue should be reconfigured to trace the limitations in the policies and practices of a multinational corporation. As mentioned by Rafi Khan, Westwood, and Boje (2010), the majority of current interventions are based on universalistic, paternalistic, and de-contextualizing assumptions that bring predominantly negative consequences to society. To accomplish the reconfiguration, it is imperative to recognize the complexities of CSR in the context of globalization, which has led to the marginalization of communities that do not have the economic or social capacity for establishing prosperity.
Conclusion
The analysis revealed that globalization has created more boundaries between countries and contributed to the rise of inequality, even though the initial intentions were the opposite. At this time, globalization at a critical conjuncture, with the wealth of the global community being concentrated in the hands of minorities. In such a context, corporate social responsibility efforts do not meet the required standards of quality despite the fact that the operations of international organizations adversely affect both environments and societies. There should be decisive efforts aimed at ensuring that governments collaborate with multinational companies when implementing CSR.
Specific control measures are necessary for ensuring the accountability of firms in the context of globalization. Reforms, such as the integration of a mandatory philanthropy tax, could be useful for creating equal opportunities among organizations that hold significant power in the global market. The implications for future research are vast as CSR remains to be an issue in the context of globalization.
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