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12. Topic 3.2.3.1 Definition and historical evolution of CSR . ... “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of.
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Circular Economy Innovative Skills in the Textile Sector Intellectual Output 4
The European Commission support for the production of this publication does not constitute an endorsement of the contents which reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein
Corporate responsibility is part of the modern way of doing business, good leadership and risk management and is one of the ways corporations position themselves in society, as it boosts the reputation and image of companies improving the overall standard of living in society.
The Corporate Social Responsibility module is an introductory module for sustainability expert applicants to learn about corporate social responsibility in order to be able to develop, manage and coordinate CSR policies, strategies and tactics.
There is a growing body of data that demonstrates the bottom-line benefits of socially responsible companies in terms of improved financial performance: reduced operating costs, enhanced brand image and reputation, increased sales and customer loyalty, increased productivity and quality, increased ability to attract and retain employees, reduced regulatory oversight and access to capital.
There are several factors that have converged over the last decade to shape the direction of the CSR field, among which, the most notable ones are: increased stakeholder activism, more sophisticated stakeholder engagement, proliferation of codes, standards, indicators and guidelines, accountability throughout the value chain, transparency and reporting, growing government interest and action, growing investor pressure and market-based incentives, advances in information technology pressure to quantify CSR “return on investment”.
Knowledge Skills Competencies At the end of this unit the in-company trainer will:
At the end of this unit the in-company trainer will be able to:
At the end of this unit, the in-company trainer will have acquired the responsibility and autonomy to: Describe the concept of Corporate Responsibility.
Define the scope and complexity of corporate social responsibility (CSR).
Define the concept of stakeholders and their relationship to business
Develop an elementary ability to identify and analyse ethical issues and to solve ethical problems in a business context.
Apply the fundamentals of CSR in the organization. Design an action plan to improve the stakeholder's relationship to business.
and impact on managerial decision-making.
Topic 3.1.3.1 Concept of Corporate Responsibility. Scope and complexity
The CSR concept came into common use in the late 1960s and early 1970s, it encourages organizations to consider the interests of society by taking responsibility for the impact of the organization's activities on consumers, employees, shareholders, communities and the environment in all aspects of its operations. Actually, evidences of businesses seeking to improve society, the community, or particular stakeholder groups may be traced back hundreds of years^1.
According to the 2002 EU Commission Communication concerning the Corporate Social Responsibility: A business contribution to Sustainable Development^2 “... CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”
According to ISO 26000, the aim of corporate social responsibility is to maximize an organization’s contribution to sustainable development.
CSR can also be defined as an aggregate of the voluntary policies and subsequent management processes arising from corporate decisions aimed at achieving actions in the field of economics, environment, social development, and corporate governance^3. Consequently, CSR may be considered as an organizational instrument for implementing the concept of business sustainability (European Commission, 2002).
CSR generally refers to a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals, in addition, to profit maximisation and responsibility among a firm’s stakeholders to hold the firm accountable for its actions.
For CSR to reach its goal it needs to be framed in such a way that the entire range of business responsibilities are embraced. The literature suggested that there are four kinds of social responsibilities constituting total CSR: economic, legal, ethical, and philanthropic and these components can be depicted as a pyramid (Fig. 1)^4.
(^1) Carroll, A. B., Lipartito, K. J., Post, J. E., Werhane, P. H., & Goodpaster, K. E. (Eds.). (2012). Corporate
responsibility: the American Experience. Cambridge: Cambridge University Press. 2
3 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2002:0347:FIN:EN:PDF Muñoz, M. J., Fernández, A., Nieto, L., Rivera, J. M., León, R., & Escrig, E. (2009). SMEs and corporate social responsibility: The perspective from Spanish companies. International Journal of Sustainable Economy, 1(3), 270 – 288. (^4) Carroll, A. B. (1991). “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders.” Business Horizons (July/ August): 39–48.
4. Philanthropic responsibilities include those corporate actions as response to society's expectations – including contributions to education, to the arts, or to the community. Corporate philanthropy includes all forms of business giving.
Based on a two-year study, the World Business Council for Sustainable Development has drawn several conclusions about the benefits of CSR to companies^7 :
Topic 3.1.3.2 Stakeholders
Stakeholders definition
Stakeholder identification and engagement is a key CSR element. ISO 26000 stipulates that “ a [organisation] should determine who has an interest in its decisions and activities so that it can understand its impacts and how to address them.”
Plus, the UN Guiding Principles demand in Principle 18 that companies engage in “…meaningful consultation with potentially affected groups and other relevant stakeholders, as appropriate to the size of the business enterprise and the nature and context of the operation”.
The traditional Stakeholders definition considers that, “a Stakeholder in an organisation is (by definition) any group or individual who can affect or is affected by the achievements of the organisation’s objectives.”^8. The general idea of the Stakeholder concept is a redefinition of the organization^9. In general, the concept is about what the organization should be and how it should be conceptualized. Friedman (2006) states that the organization itself should be thought of as grouping of stakeholders and the purpose of the organization should be to manage their interests, needs and viewpoints.
(^7) https://www.wbcsd.org/ (^8) Freeman, R.E (1984). “Strategic Management: A stakeholder Approach”. Boston, MA: Pitman. (^9) Fontaine, C., Haarman, A., Schmid S., (2006) The Stakeholder Theory, www.diseniosessparrados.goolecode.com
Stakeholders mapping process
The process of stakeholder engagement is as important (and at times, more important) as the outcomes of participation. Stakeholder engagement is an on-going process and should be: predictable, transparent, accessible and appropriate, responsive and documented.
In order to have in place a stakeholder’s strategy, the company needs to map the stakeholders and create a stakeholders’ management plan.
Stakeholders mapping involves four phases^10 :
The Identifying phase consists in listing all possible stakeholders and the main focus is to brainstorm a list of stakeholders without screening, including everyone who has an interest in the organization, including:
The analyzing phase requires further analysis to better understand the needs, expectations and relevance of the perspective provided by each stakeholder group and to prioritize their engagement.
According to BSR (Business for Social Responsibility™) the main criteria to analyze each identified stakeholder are:
(^10) Jonathan Morris & Farid Baddache (2012) – BSR. Back to Basics: How to Make Stakeholder Engagement
Meaningful for Your Company, https://www.bsr.org/pdfs/events/Back%20To%20Basics%20- %20How%20to%20Make%20SHE%20Meaningful%20for%20your%20Company(1).pdf
sustainable businesses with focus on impacts in different communities and stakeholders.
Source of information: Web site C&A stakeholder engagement. Nov 2019 More information
http://sustainability.c-and-a.com/our-approach/our- strategy/stakeholder-engagement/
Self-evaluation Quiz
___________________________________________________________________________
b. FALSE c. I'm not quite sure, yet
a. Social & Environmental b. Moral & Ethical c. Legal & Regular d. Monetary & Profit
a. Individual or groups directly affected by the decisions of the organization b. Individual or groups indirectly affected by the decisions of the organization c. Individual or groups who can affect what the organization does
the important social movements of the 1960s, particularly the civil rights movement, consumer movement, environmental movement and women’s movements.
Dozens of definitions of corporate social responsibility have arisen since then. In one study published in 2006, Dahlsrud identified and analyzed 37 different definitions of CSR and his study did not capture all of them (Dahlsrud 2006).
The evolution of the definition is sync with the development of the business environment and many of the early definitions of CSR were rather general. For example, in the 1960s CSR was defined as “ seriously considering the impact of the company’s actions on society. ” Another early definition of CSR states that: “Social responsibility is the obligation of decision makers to take actions which protect and improve the welfare of society along with their own interests” (Davis 1975, quoted by Carroll, 2016).
In general, CSR has typically been understood as policies and practices that business people employ to be sure that society, or stakeholders, other than business owners, are considered and protected in their strategies and operations.
Some definitions of CSR have argued that an action must be purely voluntary to be considered socially responsible; others have argued that it embraces legal compliance as well; still others have argued that ethics is a part of CSR; virtually all definitions incorporate business giving or corporate philanthropy as a part of CSR and many observers equate CSR with philanthropy only and do not factor in these other categories of responsibility^12.
The EU (2011) defines CSR as: "the responsibility of enterprises for their impacts on society" and states that enterprises should have "a process in place to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close co-operation with stakeholders", whilst complying with legislation^13.
The World Business Council for Sustainable Development defines CSR as ‘the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force^14.
In Votaw’s opinion: “CSR means something, but not always the same for everyone”^15.
(^12) Caroll, A.B. (2016). Carroll’s pyramid of CSR: taking another look. International Journal of Corporate Social
Responsibility , 1:3. (^13) European Commision 2011, MEMO/11/ https://europa.eu/rapid/press-release_MEMO-11-730_en.htm 14 Micheal, B. (2003): “Corporate Social Responsibility in International Development: An Overview and Critique” Corporate Social Responsibility Environmental Management, Vol 10(3), pp 115- 128 (^15) Garriga E., Mele D., (2004), Corporate Social Responsibility Theories: Mapping the Territory, Journal of Business Ethics, 53, 51–71.
Figure 3. CSR perspective according to Garriga and Mele (2004)
Carroll, one of the most prestigious scholars in this discipline, characterized the CSR situation as ‘‘an eclectic field with loose boundaries, multiple memberships, and differing training/ perspectives; broadly rather than focused, multidisciplinary; wide breadth; brings in a wider range of literature; and interdisciplinary’’^16.
Historical evolution of CSR
The need for social responsibility among businesses is not a new concept. Ancient Chinese, Egyptian, and Sumerian writings often delineated rules for commerce to facilitate trade and ensure that the wider public’s interests were considered. Ever since public concern about the interaction between business and society has grown in proportion to the growth of corporate activity^17.
The modern era of CSR, or social responsibility as it was often called, is most appropriately marked by the publication by Howard R. Bowen of his landmark book Social Responsibilities of the Businessman in 1953. Since then there has been a shift in terminology from the social responsibility of business to CSR.
(^16) Carroll, A. B.: 1994, ‘Social Issues in Management Research’, Business and Society 33(1), 5–25. (^17) William B. Werther, Jr., David Chandler B. (2011) Strategic corporate social responsibility: stakeholders in a global environment 2nd ed., pp. 9-
CSR [according to Votaw (Garriga and Mele, 2004)]
requires higher standards of^ 7. Fiduciary rights that behavior for businessmen.
Can be associated with
organizations that intend to implement socially responsible activities; the most relevant initiatives are listed in the table below^20 :
Historical evolution of CSR 1976 The OECD adopted Guidelines for Multinational Enterprises which provide voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, environment, information, disclosure, combating bribery, consumer interests, science and technology, competition and taxation. 1993 The origins of the EU's approach to CSR/SR stem from the Commission's White Paper in 1993 on growth and employment. 1993 The European Environment and Sustainable Development Advisory Councils (EEAC) - a unique collaboration between the advisory councils for environmental policy and sustainable development. It was set up by European governments with the purpose of providing independent, scientifically based consultancy regarding the environmental and sustainable development. Today, over 26 councils from 16 European countries are members of the network. 1995 The establishment of the World Business Council, an international business network set up with the aim to develop closer co-operation between businesses, government and other organizations concerned with the environment and sustainable development 1996 The European Business Network for Social Cohesion (EBNSC) was launched and it became CSR Europe in 2000. CSR Europe is a business network today consisting of more than 70 leading multinational corporations as direct members and of further 3.000 companies. It aims to help companies achieve profitability, sustainable growth and human progress by placing corporate social responsibility in the mainstream of business practice 1997 The OECD Anti-Bribery Convention is launched which establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions, providing related measures that make this effective. 2000 The Presidency Conclusions of the European Council made for the first time “a special appeal to companies’ corporate sense of social responsibility”. 2001 The European Commission published a Green Paper on “Promoting a European Framework for Corporate Social Responsibility” on the basis of which a Communication was proposed in 2002, focusing on increasing knowledge about the positive impact of CSR/SR on business and societies in Europe and abroad, in particular in developing countries and on the development of the exchange of experience and Good Practice on CSR/SR between enterprises. 2002 The establishment of a Multi-Stakeholder Forum, chaired by the European Commission and consisting of organizations of employers, business networks, trade unions and civil society representatives, aimed to support CSR/SR practices, promote innovation, convergence, transparency and tools through improving knowledge and exploring possibilities for establishing common guiding principles at EU level. 2003 European Council Resolution of 6 February 2003 on Corporate Social Responsibility (2003/C 39/02)
(^20) Anca C., Aston J., Stanciu E., Rusu D., (2011), (Corporate) Social Responsibility in Romania, Report prepared as part of the project “Strengthening the capacity of the Romanian companies to develop social partnerships- CSR”, Project co-financed by the European Social Fund, Human Resources Development Operational Program 2007 – 2013.
2005 DG Enterprise implemented the “Responsible Entrepreneurship” project, which identified case studies from SMEs across Europe as well as the “Mainstreaming CSR among SMEs”. 2005 Integrated Guidelines for Growth and jobs (2005 – 2008) – Communication from the European Council aligned with the re-launch of the Lisbon treaty and with a focus on growth and employment in Europe. European Council recommended to member states to encourage enterprises towards engaging in social responsibility. 2006 The EU Strategy for Sustainable Development takes into account the situation of an enlarged EU and pinpoints the importance of creating sustainable communities able to efficiently manage and use resources and to tap the ecological and social innovation potential of the economy, ensuring prosperity, environmental protection and social cohesion to improve present and future quality of life. 2007 DG Enterprise and Industry issued the European Responsible Entrepreneurship Bulletin (first issue: 1st quarter 2007) which is a quarterly e-newsletter aiming to exchange information and ideas about responsible entrepreneurship, corporate social responsibility and small and medium-sized enterprises. 2009 The Commission adopted the 2009 Review of EU Sustainable Development Strategy. The document underlines that in recent years the EU has mainstreamed sustainable development into a broad range of its policies. In particular, the EU has taken the lead in the fight against climate change and the promotion of a low-carbon economy. 2009 The Treaty of Lisbon came into force, providing the EU with the legal framework and tools necessary to meet future challenges and to respond to citizens' demands. The Treaty concerns: a more democratic and transparent Europe; a more efficient Europe; a Europe of rights and values, freedom, solidarity and security; Europe as an actor on the global stage. 2010 Launching the international standard ISO 26000 - Social Responsibility 2011 On the 25th October, the European Commission launched its new Communication on CSR for the period 2011-2014. The renewed Communication aims to strengthen EU global leadership on CSR/SR by implementing an intensive Agenda for Action with around 30 proposals for CSR/SR commitments. 2016 The EU Commission released the Communication Next steps for a sustainable European future. European action for sustainability
Topic 3.2.3.2 Principles and Limits of CSR
According to Aras & Crowther^21 due to the uncertainty surrounding the nature of the CSR activities it is difficult to define CSR and to be certain about any specifics and so It is imperative to be able to identify the principles that CSR activities are based on.
Wood (1991) defined a principle as something fundamental that people believe is true or a basic value that motivates people to act, and identified three different principles of CSR: legitimacy, public responsibility, and managerial discretion^22 :
(^21) Aras G & Crowther D (2008); The social obligation of corporations; Journal of Knowledge Globalisation 1 (1),
43-59 22 Wood DJ. 1991. Corporate social performance Revisited. Academy of Management Review 16(4): 691–718.
Ethical behaviour - an organization should behave ethically. An organization’s behaviour should be based on the values of honesty, equity and integrity. These values imply a concern for people, animals and the environment and a commitment to address the impact of its activities and decisions on stakeholders’ interests.
Respect for the stakeholder interests - an organization should respect, consider and respond to the interests of its stakeholders. An organization should, for example:
Respect for rule of law - an organization should accept that respect for the rule of law is mandatory. The rule of law refers to the supremacy of law and, in particular, to the idea that no individual or organization stands above the law and that government is also subject to the law.
Respect for international norms of behavior - an organization should respect international norms of behavior, while adhering to the principle of respect for the rule of law.
Respect for human rights - an organization should respect human rights and recognize both their importance and their universality.
An organization should, for example:
Although there are seemingly endless amounts of advantages stemming from corporate social responsibility activities, there are also some disadvantages, mainly due to the fact that CSR demands time and resource consumption that may be difficult for companies to allocate^25. Even when it comes to larger companies, the costs implied by corporate social responsibility activities can be seen as an obstacle and some critic voices believe that CSR can be an exercise in futility, as, in their opinions, a company's management has a fiduciary
(^25) Ahmad Ahmadian, Shahrzad Khosrowpour., “Corporate Social Responsibility: Past, Present, And Success Strategy For The Future”, Journal of Service Science, Volume 10, Issue 1, November 2017: 1-
obligation to its shareholders, and implementing CSR directly opposes this, as the managers’ obligations toward shareholders is to maximize profits, while CSR implementation requires resources. This view led Nobel-Prize winning economist Milton Friedman to write a classic article with the title: "The Social Responsibility of Business is to Increase Its Profits."
Topic 3.2.3.3 Triple Bottom Line (TBL)
Most of CSR theories admit that the foundation of the idea is the Triple Bottom Line (TBL) concept that was introduced in 1987 in Brundtland Commission. The TBL concept states that in order for a company to be considered truly sustainable, it should be responsible for three features: Profit, People and Planet, that is economic, social and environmental responsibility. In the simplest terms, the TBL agenda focuses corporations not just on the economic value that they add, but also on the environmental and social value that they add
Profit is a mandatory requirement, thanks to which a company has a possibility to further develop. Hopefully profit leads also to certain measures committed to responsible behaviour. However, the economic part of CSR is not only about making profit, the most important task is to use it well^26. Uddin et al. argue that the economic dimension of CSR has more to do with direct and indirect economic impingement of company’s activity on local community and other stakeholders^27. Socially responsible enterprises are more likely to be profitable in the long term. The main aspects of economic responsibility refer to:
People are the most important resource of a company and organizations need to identify and engage all relevant stakeholders as social responsibility covers all the people affected by a company or those who affect it. Aspects of social responsibility:
(^26) Księżak, Paulina & Fischbach, Barbara. (2018). Triple Bottom Line: The Pillars of CSR. Journal of Corporate Responsibility and Leadership. 4. 95. 10.12775/JCRL.2017.018. (^27) Uddin, M.B., Hassan, M.R., Tarique, K.M. (2008), “Three Dimensional Aspects of Corporate Social Responsibility”, Daffodil International University Journal of Business and Economics, Vol. 3, No. 1, pp. 199–212.
