4-6 pages double-spaced Business Ethic Paper!!!
Maoxiaoying
jenkins.pptxBusiness Ethics
CSR and poverty
Background
CSR arises out of efforts by corporations to show that they don’t need to be regulated by the government because they can regulate themselves through self-imposed codes of conduct.
The recent popularity of CSR developed as a way to counter the bad publicity many transnational corporations (TNCs) received for abusing workers and the environment in developing countries in the 1990s.
This abuse was encouraged by TNCs relocating to countries with laxer labor and environmental regulations. This incentivized developing countries to provide fewer regulations in order to attract TNCs.
Because the development of CSR has been driven by NGOs, trade unions, environmental groups, consumers and shareholders, it focuses on environmental reforms, working conditions, and human rights.
Jenkins’ Goal
Jenkins aims to question “whether CSR can in fact play the significant role in poverty reduction in developing countries that its proponents claim for it.” (526)
In other words, can CSR move beyond its focus on the environmental sustainability and worker’s rights in order to encourage TNCs to fight poverty?
The problem
Jenkins argues that foreign direct investment (FDI) does not significantly reduce poverty on its own.
The question then becomes whether the adoption of CSR makes it more likely that a transnational corporation (TNC) will reduce poverty in the developing countries that it operates in.
Jenkins’ Claim
Jenkins argues that CSR (the integration of social and environmental concerns into business strategies) will not help in the fight against global poverty. Businesses may contribute to the fight against poverty through charity, but means of integrating these concerns into business strategies will not be effective.
Let’s see why he thinks this.
Ways FDI Could Reduce Poverty
1. The enterprise channel
2. The distribution channel
3. The government revenue channel
1. Enterprise Channel
FDI provides wages for those employed by TNCs and can increase demand for local suppliers.
This doesn’t necessarily reduce poverty because:
1. Enterprise Channel
FDI provides wages for those employed by TNCs and can increase demand for local suppliers.
This doesn’t necessarily reduce poverty because:
It only helps a relatively small number of people and these people are not always poor.
It only helps the poor if operations are located in poorer areas, and there is either a demand for unskilled labor or training is provided.
1. Enterprise Channel
Does CSR help with this problem?
No: CSR focuses on bettering the treatment of workers. It doesn’t do anything to encourage TNCs to hire poor workers.
In fact, requiring better treatment of workers can lead to fewer poor workers being given jobs.
1. Enterprise Channel
Does CSR help with this problem?
No: CSR focuses on bettering the treatment of workers. It doesn’t do anything to encourage TNCs to hire poor workers.
In fact, requiring better treatment of workers can lead to fewer poor workers being given jobs.
It incentivizes moving to more mechanized production methods.
The need to monitor factories can motivate TNCs to rely on a few larger suppliers, rather than many smaller ones, when small ones are more likely to be run by poor citizens or be located in poorer areas.
2. Distribution Channel
FDI can target the poor as consumers in order to take advantage of this untapped market (the bottom of the pyramid).
This doesn’t necessarily reduce poverty because:
2. Distribution Channel
FDI can target the poor as consumers in order to take advantage of this untapped market (the bottom of the pyramid).
This doesn’t necessarily reduce poverty because:
Non-profits generally target the poor, not TNCs.
The buying power of the poor is often estimated, making it a risky venture.
The products themselves don’t always help the poor because of a bad product or because of pushing out local makers of the product.
One company can’t make the bottom of the pyramid into a market alone.
This strategy generally only works when selling fast-moving goods like food and soap, and when these goods are made affordable or credit is offered.
2. Distribution Channel
Does CSR help with this problem?
No: TNCs are generally not producing goods that are sold to the poor, but goods to be exported to developed countries.
CSR could help if it deliberately incorporated the goal of making the company’s goods available and affordable to the poor, but most CSR is currently focused on environmental issues and workers’ rights.
3. Government Revenue Channel
FDI could help by generating revenue for the governments of developing countries
This doesn’t necessarily reduce poverty because:
3. Government Revenue Channel
FDI could help by generating revenue for the governments of developing countries
This doesn’t necessarily reduce poverty because:
TNCs are often offered tax breaks by governments in order to attract them to the country, or avoid paying taxes in other ways.
Generating revenue for the government only helps the poor if the government uses it to help the poor.
3. Government Revenue Channel
Does CSR help with this problem?
No: CSR currently doesn’t focus on paying taxes
CSR could change to emphasize transparency and disclosure of the relationship the TNC has with the government, discourage bribery, and pay more taxes.
However, many ways of avoiding taxes are seen as standard and legitimate.
Also, the government may still not spend the money on helping the poor.
General reasons CSR won’t help
Jenkins thinks that no matter what changes are made to CSR codes of conduct, CSR will ultimately not help fight poverty for three reasons:
General reasons CSR won’t help
Jenkins thinks that no matter what changes are made to CSR codes of conduct, CSR will ultimately not help fight poverty for three reasons:
1. CSR prioritizes the business case
The case has to be made that addressing a particular social issue will be good for the business’ financial bottom line.
Unlike with sustainability and workers’ rights, it is hard to make the case that fighting poverty will increase profits.
Efforts to fight poverty will thus likely remain in the realm of charity for businesses.
General reasons CSR won’t help
Jenkins thinks that no matter what changes are made to CSR codes of conduct, CSR will ultimately not help fight poverty for three reasons:
1. CSR prioritizes the business case
2. CSR is defined largely in negative terms
CSR generally focuses on what a company should not do.
Fighting poverty requires active strategies such as seeking to hire and sell to the poor.
General reasons CSR won’t help
Jenkins thinks that no matter what changes are made to CSR codes of conduct, CSR will ultimately not help fight poverty for three reasons:
1. CSR prioritizes the business case
2. CSR is defined largely in negative terms
3. CSR focuses on stakeholders
The poor don’t have a stake in the business.
They often live in remote regions beyond where the business extends, and do not have enough money to be customers.
General reasons CSR won’t help
Jenkins thinks that no matter what changes are made to CSR codes of conduct, CSR will ultimately not help fight poverty for three reasons:
1. CSR prioritizes the business case
2. CSR is defined largely in negative terms
3. CSR focuses on stakeholders
Discussion question:
Is Jenkins right? And if he is, is this a bad thing? Should TNCs try to fight poverty?
