Corporate Social Responsibility

Corporate social responsibility (CSR) reports provide stakeholders with valuable information about the relationship between a given corporation and society; additionally, these reports may serve as a public relations vehicle. Corporate Social Responsibility reports improving communication between a corporation and its local constituents as well as the greater society. CSR reports and corporate accounting data combine to offer investors and other stakeholders a larger picture of a corporation’s strategy and financial condition. By merging the two, stakeholders have a better understanding of how a corporation’s social initiatives improve their overall health. For example, when energy conservation programs allow a corporation to cut spending costs and cause the development of a new product while at the same time increasing jobs the CSR report acts as a financial statement and a public image enhancer.

CSR reports provide information that is valuable for different reasons for different people. Employees and prospective employees can decide which companies they want to work for based on safety information about the work contained in these reports. Corporate managers can use the reports to monitor how successful they are in attaining their stated goals. They can also examine the progress made by other companies. Customers concerned with issues such as sustainability and social justice can decide what company to shop. Governments and agencies can monitor a corporation’s environmental records and researchers can calculate data. Naturally, investors will read CSR reports with an eye toward performance, stock prices, and business decisions. Thus, the information in CSR reports is of interest to a variety of users beyond the financial community (Wallace, 2008, pp. 3-5).

According to Moir, a workable definition of CSR is the one provided by the World Business Council for Sustainable Development: ‘the ethical behavior of a company towards society [sic] and a management acting responsibly in its relationships with other stakeholders who have a legitimate interest in the business’ (Moir, 2009, p. 6). In this definition, there is an immediate reference to ethics. In theories of ethics as they apply to CSR there are several points of refinement. Firstly, that all stakeholders should be treated with equal justice, not according to how much power they wield in a given corporation. All stakeholders should be considered with respect and their investments, regardless of amount, should be handled with care. Smaller stakeholders deserve as much information as large stakeholders regardless of their apparent relativeness (Moir, 2009, p. 7).

Other ethical considerations concern obligations to corporate employees. Corporations have an obligation to treat all employees with equal justice. The foundations of the corporation should be built upon ideals of ethical conduct and integrity. Corporations have a duty to respect the basic human rights of all of its employees. Hence, corporations must show the same respect in meeting the needs of their employees as they do in providing for the concerns of their investors.

Other philosophies about CSR, such as social contract theory, derive from traditional political theories. Social contract theory has been explored for millennia and at its most basic concerns the moral and political responsibilities between a person and the society in which he lives. A thesis by M. Kalstad examines the social contract in classical terms; applying Hobbes and Locke to ideas about what is morally justifiable. This application of social contract eschews the corporate interpretation of CSR, that is, the corporation’s responsibility to create wealth for its stakeholders. Classical notions of the social contract set human rights as central to corporate responsibility (Kalstad, 2007, pp. 5-11).

Some corporations want to have the same rights as humans and applying social contract theory is a way to explore the expectations society has of those entities. In this way, the CSR elucidates ‘a series of social contracts between members of society and society itself’ (Moir, 2009, pp. 7-8). Society assumes that corporations have an inherent responsibility to abide by implied social contracts. Social contract theory demands that employees of a given corporation behave ethically. The social contract applied to this context would, therefore, imply that a corporation provides benefits to not only the country but also the municipality in which it operates.

Not surprisingly, corporations focus their discussions about CSR on how best they can serve their investors. In Garriga & Melé (2008) the discussion of instrumental theories such as stakeholder theory focuses on where best to emphasize a corporation’s resources. Garriga & Melé examine four theories about CSR that are based on the perception of social reality: economics, politics, social integration, and ethics. Economics assigns corporations the role of wealth generator. Politics considers the social powers wielded by corporations and how their power influences government policy. Social integration is an umbrella for theories about business integration. Finally, ethics is considered at length as an important and fundamental part of corporate responsibility (76-106). If, as Moir and others suggest, corporations are viewed as a network of stakeholders then all groups and individuals concerned with the success of the corporation are stakeholders. This means that CSR concerns itself with economic success. CSR involves the creation of wealth for stakeholders, funds to pay salaries, benefits suppliers, and offers services or products for sale to their communities.

Legitimacy theory is closely associated with stakeholder theory. Legitimacy assumes that corporate activities are positive and correct based on a pre-agreed set of definitions. One generally accepted definition is Pragmatic Moral Cognitive, which assumes that CSR practices are driven by some form of principle as described in social contracts theory, analyzed based on the character of its stakeholders. This approach focuses on corporate status and legitimacy (Moir, 2009, pp. 8-12).

When a corporation focuses on reputation in order to manage its legitimacy it is an effort to create wealth by increasing its position in the marketplace. This may be done by representing themselves as an economic power. By offering their CSR agenda to improve their reputation and thereby increase their market share ethicists often view this action as opportunistic. This is because the corporations have used their responsibility to behave ethically as a means to create more wealth (Vourvachis, 2008, 8-9). In the strictest philosophical sense, these ethicists are correct.

Using CSR reports in a public relations campaign makes those activities more palatable to executives with an eye toward the capital. What if the way in which a corporation increases its legitimacy is by treating employees honestly, making a fair representation of their financials to investors, and being environmentally responsible? For example, BMW offers stakeholders and other interested parties access to their environmental commitments in the CSR section of their website. The work that BMW had done to promote “recycling, energy, water, wildlife, and biodiversity; environmental datasets regarding energy use, emissions, water consumption and waste levels” is available in detail (Environment: BMW UK, n.d.). BMW has used its investments in the environment as a means of increasing its legitimacy and enhancing its reputation and they outperform Japanese auto dealers as a result. From a purely philosophical view, this may be mere sophistry, but from a practical standpoint, it is a reasonable, even laudable, use of CSR reporting (Environment: BMW UK, n.d.).

White considers stockholders, customers, benefactors, and employees of all stakeholders. It is harder to gauge the CSR commitments of a corporation that makes profits off the war and/or the sale of tobacco, alcohol, and firearms (White, 2009). That is another philosophical discussion to be undertaken. White examines ideas about corporate responsibility, creating wealth, investing in the environment, and behaving correctly while contributing to the wealth of its investors. Corporate social responsibility reports deliver worthwhile information to investors and stakeholders about a corporation’s social and environmental performance. There are a clear need and constant demand for transparency from corporations. The public has a stake in what the corporation is doing in regard to the environment as well as how it is treating its social responsibilities.

Here is an example of a hard to answer an ethical question about corporate responsibility that calls for further research and discussion. What is British American Tobacco’s corporate social responsibility? Surely they are contributing to the destruction of people’s health in the millions as well as their early deaths. Should their CSR reports include some way in which they make reparations for the evil they do? What good action offset the activities of a company that poisons its clientele and addicts new customers daily? Surely there is a need for all corporations to explain their policies about environmental sustainability, human rights, and employee labor practices. Explaining how they are responsibly engaged in making and selling a product causes great harm to society is problematic. There is much analysis left to be done in regards to CSR reports.

There has been an increase in the number of corporations who voluntarily are compiling CSR reports. Governments and stock exchanges are beginning to require CSR reports. CSR reporting will soon become an international discussion as the public and governments seek corporate transparency and accountability. Corporations will assume increased responsibility for their actions and offer more information about their activities and investments worldwide. Responsible corporate activities that also benefit a business’s reputation and thereby increase its revenue may be considered means-ends rationale by strict ethicist but in the world of business, it is a sound strategy.

Bibliography

Environment: (n.d.). BMW UK. http://www.intute.ac.uk/sciences/cgi-bin/fullrecord.pl?handle=20070418-110638. Internet Resource from WorldCat.

Garriga, E., & Melé, D. (2008). Corporate Social Responsibility Theories: Mapping the Territory. Corporate Social Responsibility: Readings and Cases in a Global Context. 76-106.

Gray, R., Owen, D., & Maunders, K. T. (1987). Corporate social reporting: accounting and accountability. Englewood Cliffs, Prentice-Hall International.

Kalstad, Marius Aas. (2007). Corporations as social contractors: a study on corporate social responsibility. University Of Oslo. University Of Oslo.

Moir, Lance. (2009). What do we mean by corporate social responsibility? MCB UP Ltd (Emerald).

Vourvachis, P. (2008). In search of explanations for corporate social reporting (CSR): An attempt to revisit legitimacy theory. London, Kingston Business School, Univ.

Wallace E. Carroll School Of Management, Net Impact, World Business Council For Sustainable Development, & Edelman (Firm). (2008). Corporate responsibility & sustainability communications. [Boston, MA], Boston College Carrol School of Management.

White, G. B. (2009). Sustainability reporting managing for wealth and corporate health. [New York, N.Y.] (222 East 46th Street, New York, NY 10017), Business Expert Press.