Chapter III
Corporate Social Responsibility
Chapter Outlines
✓Concepts of CSR
✓Meaning of CSR
✓Should corporations be involved in CSR?
✓Views of CSR : Shareholder or Stakeholders
✓Key CSR drivers
✓The pros and cons of CSR
✓Implications for enterprise
✓Implications for development
✓Carroll’s CSR pyramid
Concepts of CSR
CSR Defined
The broader definition of CSR is
• More local Definition is the relationship between
– A corporation and
– Local society
• Another Definition is the relationship between
– A corporation and
– Its stakeholders
• The relation ship between
– Global corporation,
– Governments of countries and
– Citizens
Concepts of CSR…Cnt’d
• According to EU commission (2000)
“CSR is a concept whereby companies integrate a social and
environmental concerns in their business corporations and
in their interaction with their stakeholders on a voluntarily
basis. “
Concepts of CSR…Cont’d
• Carroll (1991) organized different corporate social
responsibilities as a four-layered pyramid model and
called it the pyramid of responsibilities.
• The four different responsibilities - economical, legal,
ethical and philanthropic are the layers of the pyramid.
Concepts of CSR
• Corporate social responsibility (CSR): refers to the ethical
and voluntary actions that organizations take to contribute
to societal well-being and address environmental, social,
and governance (ESG) issues.
• It goes beyond legal compliance and profit maximization,
emphasizing the responsibility of businesses to positively
impact stakeholders, including employees, customers,
communities, and the environment.
• A comprehensive definition of corporate social
responsibility encompasses the following elements:
• Ethical Behavior: CSR involves conducting business in an
ethical and responsible manner, adhering to legal
requirements, and upholding high standards of integrity
and fairness in all interactions.
Concepts of CSR
• Stakeholder Engagement: It entails actively engaging and
considering the interests of various stakeholders, such as
employees, customers, suppliers, communities, and
shareholders, in decision-making processes and practices.
• Social and Environmental Impact: CSR focuses on
minimizing negative social and environmental impacts
while promoting positive contributions. This includes
sustainable resource management, environmental
stewardship, diversity and inclusion, and responsible
supply chain practices.
• Voluntary Initiatives: It involves going beyond legal
obligations by voluntarily undertaking initiatives and
activities that address societal needs and contribute to the
well-being of communities and the environment.
• Long-Term Sustainability: CSR recognizes the importance
of creating sustainable value for all stakeholders, balancing
economic success with social and environmental
considerations to ensure the long-term viability of the
organization.
• In summary, corporate social responsibility encompasses
the ethical and voluntary actions taken by organizations to
integrate social and environmental considerations into their
core business strategies, engage stakeholders, and
contribute to the well-being of society while pursuing
long-term sustainability.
Concepts of CSR…Cont’d
Corporate Ethics
• Ethics is a set of rules prescribing what is good or evil, or
right or wrong.
• Business ethics can be defined as honesty, confidence,
respect and fair acting in all circumstances.
Corporate Behavior
• Corporate behavior is important for company success both
financially and concerning the relationship between
corporate and business interests (stakeholders)
• Corporate behaviors involves legal rules, ethical codes of
conduct and social responsibility principles
• Corporate behavior has effects not only on shareholders
and stakeholders but also the entire economy and society
Concepts of CSR…Cont’d
CSR
Corporate
behavior
Ethics Law
Figure: The components of corporate behavior
Principles of SCR
There are three basic principles which
together comprise all CSR activity:
• Sustainability
• Accountability
• Transparency
Concepts of CSR…Cont’d
• According to Carroll and Buchholtz (2003), the pyramid of
responsibilities should be seen as a whole and the different
parts should not be separated.
• To be profitable as a company, minimize cost and
maximize sales or make sensible strategic decisions are at
the base of economic responsibilities.
• Economic performance is required by the society.
Concepts of CSR…Cont’d
• The second layer is the legal responsibilities and it is also
required by society.
• In these responsibilities companies are expected to obey
the law, because the law mirrors show the society regards
as accepted or unaccepted. .
Concepts of CSR…Cont’d
• The difference of the ethical responsibilities from the first
two responsibilities is that the ethical responsibilities are
not required but expected by society.
• To assert ethical leadership, avoid questionable practices
or operate above the minimum standard of the law could
be examples for the ethical responsibilities
Concepts of CSR…Cont’d
• The philanthropic responsibilities stand at the top of the
pyramid and to be a good corporate citizen and improve
the quality of life for the society is the aim of these
responsibilities.
• Corporate contributions, to support the community by
providing programs or engagement in volunteerism can be
example for the philanthropic responsibilities.
Concepts of CSR…Cont’d
• To some extent the philanthropic responsibilities are
desired and expected by the society.
• A stakeholder model is represented by the Pyramid of CSR
where the different stakeholders are affected by the
different responsibilities.
• If the business is not profitable, Economic responsibilities
will directly affect employees and owners.
Concepts of CSR…Cont’d
• Legal responsibilities are vital to the owners, but it is also
necessary in the relation with employees and consumer
stakeholders.
• Ethical responsibilities impact on all stakeholders, but most
frequently they engage consumers and employees.
• The major effect of the Philanthropic responsibilities are on the
community, but there is also impact on the employees since the
company’s philanthropic performance influences the employees’
morale.
• Whcich one comes first (with the highest priority)?
– Legal responsibilities
– Ethical responsibilities
– Economic responsibilities
– philanthropic responsibilities
Concepts of CSR…Cont’d
Concepts of CSR…Cont’d
• Pinkston and Carroll (1994) carried out a survey among top
managers in 591 U.S. subsidiaries of multinational chemical
companies with headquarters in England, Germany, Sweden,
Japan, U.S., Switzerland and France.
• CSR Quest (2006) emphasized that the findings from the
survey confirmed Carroll’s pyramid model, but Sweden and
Germany are shown as exceptions, where legal responsibilities
were ranked the highest priority followed by economic, ethical
and philanthropic aspects.
Concepts of CSR…Cont’d
• Social Contract (Donaldson, 1982; Donaldson and Dunfee,
1999) – There is a tacit social contract between the firm and
society; the contract bestows certain rights in exchange for
certain responsibilities.
• Stakeholder Theory (Freeman, 1984) – A stakeholder is “any
group or individual who can affect or is affected by the
achievement of an organization's purpose.”
• Argues that it is in the company’s strategic interest to respect the
interests of all its stakeholders.
Concepts of CSR…Cont’d
The stakeholder groups?
Phases of Corporate Social Responsibility
➢ Frederick provides expanded framework for
understanding the evolution of CSR concept
➢ Divided into 4 phases:
▪ Corporate social stewardship, 1950s – 1960s
▪ Corporate social responsiveness, 1960s – 1970s
▪ Corporate/business ethics, 1980s – 1990s
▪ Corporate/global citizenship, 1990s – 2000s
Key Issues in CSR
• Labour rights: • Poverty Alleviation
– child labour – job creation
– forced labour – public revenues
– skills and technology
– right to organise
– safety and health
• Environmental conditions
– water & air emissions
– climate change
• Human rights
– cooperation with paramilitary forces
– complicity in extra-judicial killings
Benefits of CSR practices
• Triple bottom line ("People, planet and profit“) - People" refers
to fair labour practices, the community and region where the
business operates.
• "Planet" refers to sustainable environmental practices.
• Profit is the economic value created by the organization after
deducting the cost of all inputs, including the cost of the
capital (by John Elkington1994)
Benefits of CSR practices
• Brand differentiation build customer loyalty based on
distinctive ethical values.
• Reduced scrutiny and/or risk management
Corporations are keen to avoid interference in their
business through taxation and/or regulations and risks.
Benefits of CSR practices
• The ability to have positive impact in the
community hence support public value outcomes
– Keeping social responsibility front of mind
encourages businesses to act ethically and to
consider the social and environmental impacts of
their business.
– In doing so, organizations can avoid or mitigate
detrimental impacts of their business on the
Benefits of CSR practices
• Access to funding opportunities
• Enhancing your influence in the industry
• Enhanced relationship with stakeholders
Key drivers of CSR
Around the world Developing Countries
• NGO Activism • Foreign customers
• Responsible investment • Domestic consumers
• Litigation • FDI
• Gov & IGO initiatives • Government & IGO
Globalization and CSR
• Globlization
– Is the free movement of goods, services and
capital
– Is a process which integrates world economy,
culture, technology and governance.
• Globalization affects the economy, business
life, society and environment through
– Increasing Competition
– Technological change and development
– Knowledge/Information transfer
– Portfolio investment(fund transfer between develobed
countries and emerging markets)
– Market integration
– Intellectual capital
– Financial crisis-contagion/harmful effect-global crisis
Context Globally
• Liberalisation of markets – reduction of the
regulatory approach
• Emergence of global giants, consolidation of
market share
• Development of the ‘embedded firm’ and the
global value chain
– Development of supplier networks in developing
countries
Implications for Enterprises:
CSR Management
How do companies address socio-environmental &
legal compliance issues?
• Policies - Code of Conduct
• Systems - Compliance Management
• Reporting - Accounting and Reporting
CSR Management:
Systems approach
• Sustainable business development does not come about of
its own accord.
• Rather, commitment to sustainability demands that
corporate processes be reliably controlled and that
everyone's actions - in finance as much as in
environmental and social areas - be coordinated.
• Prerequisites for this are binding guidelines,
unambiguous corporate goals and a clear
organizational structure.
CSR Management:
Plan, Do, Check, Act method
Plan Do
• Consult stakeholders • Establish management
systems and personnel
• Establish code of conduct
• Promote code compliance
• Set targets
Act Check
• Corrective action • Measure progress
• Reform of systems • Audit
• Report
Thank you
