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ORGLectureWeek2.pptxFrom Corporate Social Responsibility to Corporate Citizenship week 2
Last Week
Introduced the changing Business/Society Relationship
Business boundaries shifting beyond the organisation itself and the desire for profit
Increased consideration of sustainability and the triple-bottom line.
Discussed the role and importance of stakeholders
This week
Introduce Corporate Citizenship (CC) and
Corporate Social Responsibility (CSR)
Explore development in business ethics and the culture of sustainability
Corporate Citizenship (CC) or Corporate Social Responsibility(CSR)
Business responsibility or concern for the macro-environment in which it operates in increasingly under scrutiny.
Carroll and Bucholtz suggest community expects increased concern or responsibility from business to include customers, global poverty, social order, the rights of minorities and the ethics associated with intergenerational equity concerning climate change.
Corporate Citizenship (CC) or Corporate Social Responsibility(CSR)
The issues around increasing Corporate Social Responsibility of business have been prevalent for decades.
More recently the term “corporate citizenship” has extended debates around the roles and responsibilities of business in society to include and integrate Corporate Social Responsibility, Corporate Social Responsiveness and Corporate Social Performance.
These terms are often used interchangeably, but understanding the evolution of practice sheds light on why society sees their importance.
From Corporate Social Responsibility (CSR) to Corporate Citizenship
Over the last 50 years increasing interest in CSR
In the US the notion of CSR aligned strongly with Adam Smith’s traditional or classical economic thinking that the market is the best means of determining society’s wants and needs
“ …the invisible hand transforms self –interest into societal interest”.
As society became more complex a legal model emerged, followed by a social model and ultimately a stakeholder model
Important to understand the nature of modification of the CSR model
Early engagement of business people with CSR involved: Philanthropy and voluntary community obligations or contributions (e.g. contribute to roads, railways, schools)
From the late 19th century onwards business also embraced community well-being through what Carroll and Buchholtz call paternalism.
What does this imply?
Johnson suggests by late 19th century political resentment growing against the huge fortunes being amassed by Carnegie and Rockefeller type corporations in the US.
Building up community criticism of business and business practices.
Therefore business was looking for a philosophy and a set of practices to demonstrate businesses were a source for social good e.g. Carnegie’s program of library building in the US. (2,500 libraries, mostly in the United States)
Other forces were gradually changing attitudes to business ethics and responsibilities in increasingly complex business environments including the role of government
The increasing role of government
By the 1930s there was a shift from laissez-faire to a more mixed economy
World depression
Mass unemployment
Community demands for government to intervene to stimulate the economy
Focus on increasing poverty and social impact
Similar situation occurred during the recent Global Financial Crisis (2007-2009)
Governments around the world were forced to act.
Australian government offered $1000 cash handouts to stimulate economy
GFC - the worst financial crisis since the Great Depression of the 1930s
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Broadening of the CSR agenda
From the 1950s shift in thinking from broad awareness of CSR to specific issues relevant to social well-being, seen as an area of responsibility for business.
Carroll suggests issues included corporate governance, product safety, employee well-being and rights, advertising ethics, and global CSR
Challenges of Globalisation:
– in a global environment often very difficult when corporations operate across regions, cultures and have arms in developed and developing nations with different legal and cultural expectations of business
How has this been reflected by ANZ recently in relation to financing sugar cane plantations in Cambodia?
See: Age/SMH Article
Broadening definitions of CSR: Carroll and Buchholtz
CSR is seriously considering the impact of the company’s actions on society
Social responsibility is the obligation of decision makers to take actions which protect and improve the welfare of society as a whole along with its own interests
The idea of social responsibility supposes that the corporation has not only economic and legal obligations , but also certain responsibilities to society which extend beyond these obligations
Carroll and Buccholtz’s 4 part model of CSR
They suggest a pyramid that includes Economic, Legal, Ethical and Philanthropic Responsibilities.
Do you agree with the pyramid structure as a means of conceptualising corporate social responsibility? Why?
Base level 1 is economic- be profitable: maximise sales: minimise costs; make sound strategic decisions; be attentive to dividend policy
Next level 2 is Legal and regulatory .Obey all laws, adhere to all regulations. Fulfil contract including warranties etc.
Level 3: concerns companies responding above the minimum level. Do what is just, assert ethical leadership
Level 4. Philanthropic. Be a good corporate citizen and give back to society
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So what is CSR? A recap …across ethics, risk and business
University of St Gallen, Centre for Business Ethics summarises What is Corporate Social Responsibility (CSR)?
VIDEO (10 mins)
Key issues raised:
Why is CSR described as a form of risk management?
Why is CSR more than philanthropy?
Is business ethics part of CSR? Explain.
How has the academic and business world responded? The case against CSR
Lydenberg (2005) notes that until the late 1970’s CSR was not taken seriously by the investment and business community, partly because Milton Friedman’s fierce argument (1973) that CSR imposed inappropriate costs on shareholders:
AND THAT SHAREHOLDERS WERE THE PRIMARY STAKEHOLDERS IN A BUSINESS
The case against CSR
Carroll and Buchholtz note that the case against CSR suggests managers should not be concerned with CSR because
Management is not equipped to understand social benefits of business. They should focus on their areas of expertise …on finance and operations
Concerns that CSR will dilute the business purpose
Business already has enough power
Asking business to assume social responsibility for their operations and the costs they previously passed on to society could affect their profitability
Are these arguments valid?
The case for CSR
Vogel (2005) and Lee(2008) suggest that this thinking was changing by the 1990s, because it was becoming apparent that there was evidence of very good business advantage and outcomes from adopting CSR.
Porter and Kramer (2011) were very influential in identifying that new opportunities for business, stating in the Harvard Business Review that the majority of business will require taking account of the social needs and impacts of its operations besides its economic and environmental impact.
Continued on next slide..
The case for CSR (Carroll and Buchholtz 2015)
CSR is synonymous with sustainability : businesses need to think ahead about what this means to the public (particularly consumers of their goods and services)
If business does not respond to society’s concerns about its impact on the broader society, action will be taken through consumer spending, and through the ballot box.
Business has significant resources including its management of talent to solve general societal problems - many of these broad social issues arise in the workplace
Proactivity is required to engage with others to find solutions. This is part of the business role and its engagement with stakeholders. New skills needed for managers?
Significant shifts in public opinion about businesses not only focussing on their profits for shareholders, but also their responsibilities for the well-being of their workers and their communities
Identifies the shift for business from a passive form of responsibility to more active responsiveness
Focus on motivation…active willingness to take responsibility and contribute to society rather than just respond when society raises issues of concern.
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Think about BP oil spill as a form of response and compare to TOM’s approach to CSR, or Marks and Spencer introducing their Plan A
Plan A is a strategic response, amongst other things, to support their customers become sustainable consumers, their research suggesting their customers are increasingly concerned with this
Much more dynamic and active approach…working very well for many organisations in terms of business growth and profitability
The notion of Corporate Social Responsiveness identifies the need for business pro-activity
Corporate Social Performance (CSP)
Many debates as to how we might envisage or measure corporate social performance
Carroll’s CSP model suggests that this might be achieved through bringing together an understanding of
how we align the different types of economic legal, ethical and discretionary (philanthropic approaches)
Understanding of different stakeholder interests and priorities
the level at which we undertake these actions (pro-active to re-active)
All these are useful dimensions to consider when we look at specific business and managerial approaches to the business-society interface
Very useful for considering your assignment tasks. Look at Westpac example in tutorials.
Social Performance Evaluation and Measurement
Benn and Bolton (2011) suggest that evaluating and measuring CSR can be thought of as “assessing how the firm’s impacts on its stakeholders lead to value creation or destruction” p. 139
Weber 2008) that potential positive outcomes of CSR that can be measured by the organisation are:
monetary brand value
customer attraction and retention
reputation
employer attractiveness
employee motivation and retention.
Do you agree? (To be discussed in tutorial)
Corporate Citizenry: Embraces CSR, CR and CSP
Matten and Crane (2005) suggest that the term Corporate Citizenry was introduced by business players because it takes the notion of pro-active social involvement by business to a dimension in which they can better understand the advantages to business
Again the notion of “stakeholder responsiveness” is used as a critical indicator of good or otherwise corporate citizenry (nationally and globally).
Goddard (2005) suggests that businesses are now having such an impact on communities that soon their profile as a corporate citizen will be very important to their “licence to operate”.
How might this work?
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Corporate citizenry (CC) also being seen in terms of corporate accountability
In the 1990s the term “triple bottom line helped popularise an understanding of the need for business to account to a constituency broader than shareholders
Basic understanding that business should consider economic, social and environmental capitals.
the framework improved clarity around the interface between business and society
Captures the whole set of values that a company should address to minimise harm and create value across all these sectors to create long term shareholder value.
Consider recent and more sophisticated developments around corporate accountability building on the TBL that you looked at last week with the Integrated Reporting initiative.
Dunphy, Griffiths and Benn (2007) provide a different perspective on sustainability cultures
They provide a similar approach to Carroll and Buchholtz’s stages of corporate citizenship, but build embellish triple bottom line thinking by suggesting that the way an organisation takes responsibility for its employees and the environment is closely aligned
Their research suggests there are 5 stages that are reflected in an organisation’s strategic approach to sustainability culture:
Rejection…example?
Non-responsiveness…example?
Compliance…example?
Efficiency…example?
Strategic pro-activity?
The sustaining organisation
See diagram on next slide…
Development stage alignment: Human and Ecological Sustainability (adapted from Benn et al 2006)
Summary
We have considered:
Definitions of CSR , CC, Corporate social responsiveness and corporate social performance
Historical development of business attitudes towards social responsibility
The case for and against CSR
Approaches to evaluating corporate social performance
Sustainability cultures
Tutorial
What skills do this broader understanding of CSR require from a manager?
Social capital building?
Choose initial groups of three/four for Group Assignment.
Develop a shared understanding of the case for or against CSR in your group.
Read Westpac Sustainability Strategy document
Discuss where you would place Westpac in relation to the table on slide 21?
