The idea of Corporate social responsibility (CSR) entails the notion under which business organizations and commercial establishments regard the interests of society by assuming responsibility for the impact of their activities on consumers, suppliers, employees, shareholders, communities and other stakeholders as well as the environment.
This onus or obligation can be construed in terms of extending beyond the legal binding to abide by legislation and ensuring that the business organizations devise further measures by volition to improve the quality of life for employees, their families, the local community and society at large.
A distinctive feature of the recent wave of social responsibility promotion is its internationalized origin. Most of the organizations mentioned above developed a close relationship with Business for Social Responsibility (BSR), a leading organization in the United States founded in 1992 and based in San Francisco. Beginning with a preliminary meeting in Miami in 1997 of a group of individuals in Social Venture Network interested in gauging the state of business social responsibility in Latin America, this relationship strengthened the following year with the participation of Latin American business leaders in BSR’s annual conference. The San Francisco based BSR played an important role in providing models for the Latin American organizations and in advising them in their early stages.
As Joel Makower has aptly observed: “Four hundred years earlier, social responsibility shifted from the church to the state, as government replaced religious institutions as society’s predominant force. At the dawning of the twenty-first century, business appears the next likely candidate to carry this mantle.”1
Global protest activity in the recent past, from the streets of Seattle in 1999 to the fences of Cancun in 2003, was largely impelled by the social, economic, and environmental ‘externalities’ associated with economic globalization (that is, inadequate wages, poor working conditions, deforestation, general environmental degradation). A solution to these externalities being increasingly forwarded by business organizations is private sector self-regulation. Self-regulation – more popularly known as Corporate Social Responsibility (CSR) – is presented as a way to balance the interests of business and society without expanding government intervention in the global market place.
Viewed in broad perspective, Corporate Social Responsibility (CSR) is defined by Business for Social Responsibility, as “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.”2 According to Jeremy Moon, Professor of Corporate Social Responsibility at Nottingham University, “Business social responsibility…refers to the voluntary contribution of finance, goods or services to community or governmental causes. It excludes activities directly related to firms’ production and commerce. It also excludes activity required under legislation or government direction.”
The common thread that weaves through the various definitions of “Corporate Social Responsibility” is the voluntary nature of the good practices referenced. What makes CSR initiatives “socially responsible” is that they are not mandated by governmental or intergovernmental institutions — they are voluntarily pursued.
The most celebrated mechanism in the CSR toolkit is the corporate code of conduct. The Organization for Economic Co-operation and Development (OECD) defines corporate codes as “commitments voluntarily made by companies, associations, or other entities, which put forth standards and principles for the conduct of business activities in the marketplace.”3 However, the question arises as to how effective can voluntary and largely unverified corporate efforts to minimize market externalities be.
More and more studies measuring the (in)effectiveness of voluntary corporate codes are being published every day. The results are mixed. Some find promise whereas others are much more critical. The consensus underlying these divergent findings is that, even if voluntary codes have potential, they are not currently addressing globalization’s externalities in a sustained way. But if voluntary codes have not proven effective, or if there is at least no consensus on their effectiveness, why then are corporations, intergovernmental organizations like the UN, and even civil society so interested in them?
For labour and social activists, corporate codes of conduct, even if voluntary, can strengthen efforts to hold corporations accountable. Simply put, condemning an organization for unethical behaviour is easier when said organization has already and openly agreed that ethical behavior is virtuous. Bama Athreya of the International Labour Rights Fund concretizes this point in relation to her organization’s campaign against Nike: “Let’s face it, hypocrites are far more interesting than mere wrongdoers, and its been much easier to sensitize press and public to Nike’s failure to implement its own code of conduct than to its failure to comply with Indonesian labor laws.”4
These days, the concept of Corporate Social Responsibility (CSR) has emerged as a major buzzword with the members of the business community, academicians, politicians, and the activist groups. The term ‘CSR’ connotes various definitions which lay emphasis on different aspects. However, the definition provided by the World Bank Group’s Corporate Social Responsibility Practice, as a department of Foreign Investment Advisory Service (FIAS) is regarded as most contemporary and most applicable to the majority cases. According to this definition, “Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.”
After working with stakeholders around the world, the World Business Council for Sustainable Development (WBCSD) has defined Corporate Social Responsibility (CSR) as .the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.
Viewed in a broad perspective, the CSR is a fundamental concept like liberty and equality. The CSR is not a static but a dynamic concept which is always redefined in consonance with the changing needs and times. The social responsibilities of a food company are different than those of a transport company. With the passage of time as societal expectations change, so changes the perception of a company’s social responsibilities.
The practice of CSR is subject to much debate and criticism. It is argued by the protagonists of the CSR that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. On the other hand, the critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations (MNCs).
According to David Cavett-Goodwin, companies should first determine what they really stand for, their vision and values, their .corporate magnetic north. Then they should integrate corporate social concerns into the business strategy. In order to make corporate sector more responsive towards CSR, he makes following suggestions:
- focus on individuals, since CSR reaches out to all stakeholders, but will be judged by its implications for individual employees, managers, and citizens;
- determine a corporate legacy by instilling an ethic of education and learning, and by instituting processes to foster this ethic;
- put employees first as business, best assets and ambassadors, and also know their neighbours, both their communities and cultures;
- establish a system for keeping CSR debates and dialogues transparent and continuous;
- form smart partnerships, not for publicity or cover, but to realize CSR goals;
- measure and account for what they do;
- report externally; but report in ways that reach all stakeholders, not just those on their mailing list or on the Internet.
However, David Cavett-Goodwin laments that despite adhering to such measures, there still remain many questions that must be answered by ongoing debate among all sectors. These inter alia include:
Ø What are the respective roles of government and the private sector in providing social, educational and health services?
Ø How far along the supply chain does a company’s responsibility extend?
Ø How should it adapt to local cultures?
Ø How far into the future should a company plan?
Ø What is the distinctive corporate contribution to private/sustainable livelihood problem?
There can be differences of opinion with regard to modus operandi in implementing or measuring the CSR goals but no one can deny the urgency and need for the CSR in the corporate sector. Undoubtedly, a coherent, well-concerted CSR strategy, based on integrity, sound values, and a long-term approach, is bound to unfold clear business benefits to the corporate sector and a positive contribution to the well-being of the society as well.
At this juncture, it seems pertinent to draw attention to the recently concluded global survey by the IBM with a view to gauge just how deeply the CSR issue has penetrated the core of the corporation – its strategies and operations. Having surveyed more than 250 executives worldwide, the IBM study has come out with three dynamics that companies should understand and act upon in dealing with CSR, and these are: (a) Impact for business – from cost to growth; (b) information – from visibility to transparency; and (c) Relationships – from containment to engagement.
I strongly feel that there is a need for the role of civil society in addressing the complex issue of CSR auditing with a scientific approach using Grounded Theory. CSR seems to be perceived by many as the social strand of sustainable development as defined by Brundtland. However, there is far less agreement regarding its measurement. Undoubtedly, developing an applied CSR auditing procedure is a challenging task. This is due in no small measure to the lack of formal study of the topic, despite the widespread debates it provokes. Moreover, it is a complex subject that currently lacks even a single broadly accepted definition.
Viewed in a broad spectrum, the following items seem as crucial points to be considered in developing a CSR auditing system:
Ø The inclusion of all significant stakeholder groups in the auditing process;
Ø Diversity in individual perceptions of CSR;
Ø The problem of negative screening;
Ø The shortcomings of the ‘tick-box’ approach to auditing CSR;
Ø The requirement that the measurement of CSR should be both quantitative and qualitative in nature;
Ø The six key elements to the achievement of successful CSR are perceived as:
- Good stakeholder management;
- Good corporate leadership;
- Greater priority for CSR at board level;
- Integration of CSR into corporate policy;
- Regulation at the national and international level;
- Active involvement of, and good coordination between, government business, NGOs and civil society
Although creating a new CSR audit protocol is a challenging task, it is nonetheless possible. The fact remains that it would be technically demanding to conduct a CSR audit even with the prospective audit protocol because of the complexity of the subject, and in real terms this may require that specific training be given to auditors.
In particular, the assessment of some indices would be dependent on auditors’ own judgment and experience because of the nature of the subject. Moreover, the draft audit protocol needs the refinement that only comes with testing. Therefore, further improvement and trials by auditors in a pilot study will be required before the system can be fully implemented. Auditors should be interviewed after the pilot study to determine whether the audit protocol is practical in use, both in terms of the application of each index and its associated evidence, and the degree to which it is manageable as a process that must be completed in a limited time. The generality of application of each index to any type of organization should also be determined.
Notes
- Joel Makower and Business for Social Responsibility, Beyond the Bottom Line: Putting Social Responsibility to Work for Your Business and the World, New York: Simon & Schuster, 1994, p. 33.
- Business for Social Responsibility, “Overview of Corporate Social Responsibility”, 17 March 2003, available at http://www.bsr.org/BSRResources/IssueBriefDetail.cfm?DocumentID=48809.
- OECD, Working Party of the Trade Committee, “Codes of Corporate Conduct: An Inventory”, available at http://www.olis.oecd.org/olis/1998doc.nsf/LinkTo/td-tc-wp(98)74-final.
- Quoted in Naomi Klein, No Logo: Taking Aim at the Brand Bullies, Toronto: Vintage, 2000, p. 432.
By Dr. Arvind Kumar
