2.

CSR THEORIES:
MAPPING THE TERRITORY
OUTLINE

This session discusses mainstream theories about the responsibilities of business in society.
• Corporate social responsibility (CSR) is a self-
regulating business model that helps a company
be socially accountable—to itself, its
stakeholders, and the public.

• By practicing corporate social responsibility,

companies can be conscious of the kind of impact
they are having on all aspects of society, including
economic, social, and environmental.
 CSR AS A ROUTE TO
SUSTAINABLE DEVELOPMENT

• Sustainable development is development that

meets the needs of the present, without
compromising the ability of future generations to
meet their own needs.
 OPENING CASE:
NIKE RE-USE A SHOE CAMPAIGN

https://www.youtube.com/watch?v=0WYNI5X9cWY
• Nike Re-Use a Shoe Initiative encourages customers to
recycle their old athletic shoes by dropping them off at
designated Nike stores or collection points. The collected
shoes are then processed and turned into Nike Grind, a
material made from recycled rubber and foam that can be
used to make sports surfaces, playgrounds, and other
products (like zipper pulls, buttons and promotional items)
• The campaign not only helps to reduce waste and promote
sustainability, but it also provides access to sports and
physical activity for underserved communities by
repurposing the recycled material into sports surfaces and
equipment.

• Furthermore, Nike offers a discount to customers who

donate their old shoes, providing an incentive to participate
in the campaign. The program has been successful in
engaging customers and raising awareness about the
importance of sustainability and reducing waste.
NIKE’S UNDERLYING
MOTIVATION?
INSTRUMENTAL ?
POLITICAL?
POLITICAL?
INTEGRATIVE?
ETHICAL?
CSR theories and related approaches in four groups:

(1) Instrumental theories, in which the corporation is seen as only an instrument for wealth creation,
and that this is its sole social responsibility.
- This group of theories are called instrumental theories because they understand CSR as a mere means to
the end of profits.
- Social activities are therefore only a means to achieve economic results. So any supposed social activity is
accepted if, and only if, it is consistent with wealth creation.
(2) Political theories, which concern themselves with the power of corporations in society and a
responsible use of this power in the political arena. This leads the corporation to accept social
duties and rights or participate in certain social cooperation.
(3) Integrative theories, in which the corporation is focused on the satisfaction of social demands.
Herein, corporations usually argue that business depends on society for its continuity and growth
and even for the existence of business itself.
(4) Ethical theories, based on ethical responsibilities of corporations to society. This leads to a vision
of CSR from an ethical perspective and as a consequence, firms ought to accept social
responsibilities as an ethical obligation above any other consideration
In practice, each CSR theory presents four dimensions
related to:

• Profits (i.e. economics),

• Political performance,
• Social demands (i.e. social integration), and
• Ethical values.
1. INSTRUMENTAL THEORIES,
Representative of this approach is the well-known
Friedman view that ‘‘the only one responsibility of
business towards society is the maximization of
profits to the shareholders within the legal
framework and the ethical custom of the country’’
(1970).
 CSR CASE:
COCA COLA PLANT BASED BOTTLE
Three main groups of instrumental theories can be identified,
depending on the economic objective proposed.

a. In the first group the objective is the maximization of

shareholder value, measured by the share price.
b. The second group of theories focuses on the strategic goal of
achieving competitive advantages, which would produce
long-term profits.
c. The third is related to cause-related marketing and is very
close to the second.
 A. MAXIMIZATION OF SHAREHOLDER VALUE
• Shareholder value maximization is the supreme reference for corporate
decision-making:
• Any investment in social demands that would produce an increase of
shareholder value should be made, acting without deception and fraud. In
contrast, if the social demands only impose a cost on the company they
should be rejected.
• “It will be in the long run interest of a corporation that is a major employer in
a small community to devote resources to providing amenities to that
community or to improving its government. That makes it easier to attract
desirable employees, it may reduce the wage bill or lessen losses from
pilferage and sabotage or have other worthwhile effects.’’ So, the socio-
economic objectives are completely separate from the economic objectives”.
 B. ACHIEVING COMPETITIVE ADVANTAGE
• Social investment in competitive landscape:
• Investing in philanthropic activities (especially those related to a company’s mission) may be the only way
to improve the context of competitive advantage of a firm and usually creates greater social value than
individual donors or government can.
• Natural resource-based view of the firm and dynamic capabilities:
• The resource-based view of the firm (Barney, 1991; Wernerfelt, 1984) maintains that the ability of a firm to
perform better than its competitors depends on the unique interplay of human, organizational, and physical
resources over time. These resources include social and ethical resources and capabilities which can be a
source of competitive advantage, such as the process of moral decision-making
• E.g. dynamic capabilities view
• Strategies for bottom of the economic pyramid:
• Disruptive innovation could be applied to expand customer base to include those at the bottom of the
economic pyramid.
 C. CAUSE RELATED MARKETING
• Cause-related marketing activities enhance company revenues
and sales or customer relationship by building the brand
through the acquisition of, and association with the ethical
dimension or social responsibility dimension (Murray and
Montanari, 1986; Varadarajan and Menon, 1988). In a way, a
company seeks product differentiation by creating socially
responsible attributes that affect company reputation
2. POLITICAL THEORIES
• These theories focus on interactions and connections between
business and society and on the power and position of business
and its inherent responsibility.
• Three major theories can be distinguished:
a. Corporate Constitutionalism
b. Integrative Social Contract Theory
c. Corporate Citizenship
 A. CORPORATE CONSTITUTIONALISM

• In this view, business is a social institution and it must use power responsibly.
• The causes that generate the social power of the firm are not solely internal of the firm but also
external.
• If a firm does not use its social power, it will lose its position in society because other groups will
occupy it, especially when society demands responsibility from business (Davis, 1960).
• The limits of power come from the pressures of different constituency groups.
• This ‘‘restricts organizational power in the same way that a governmental constitution does.’’
• The constituency groups do not destroy power. Rather they define conditions for its responsible use.
They channel organizational power in a supportive way and to protect other interests against
unreasonable organizational power (Davis, 1967, p. 68).
 B. INTEGRATIVE SOCIAL CONTRACT
THEORY
• There is some sort of implicit social contract between business
and society. This social contract implies some indirect
obligations of business towards society.
 C. CORPORATE CITIZENSHIP
• Three are three views of ‘‘corporate citizenship’’:
1. A limited view: similar to corporate philanthropy
2. A view equivalent to CSR:
3. An extended view of corporate citizenship: some corporations have gradually come to replace the most
powerful institution in the traditional concept of citizenship, namely government.

 Theories and approaches on ‘‘corporate citizenship’’ are focused on rights, responsibilities and
possible partnerships of business in society.

• In spite of some noteworthy differences in corporate citizenship theories, most authors generally
converge on some points, such as a strong sense of business responsibility towards the local
community, partnerships, which are the specific ways of formalizing the willingness to improve the
local community, and for consideration for the environment.
3. INTEGRATIVE THEORIES
• This group of theories looks at how business integrates social demands, arguing that business
depends on society for its existence, continuity and growth.
• Social demands are generally considered to be the way in which society interacts with business and
gives it a certain legitimacy, social acceptance and prestige.
• As a consequence, corporate management should take into account social demands, and integrate
them in such a way that the business operates in accordance with social values.
• In this view, there is no specific action that management is responsible for performing throughout
time and in each industry. Instead, the content of business responsibility is limited to the space and
time of each situation depending on the values of society at that moment, and comes through the
company’s functional roles
• These theories include:
a. Issues management
b. Principle of public responsibility
c. Stakeholder management
d. Corporate social performance
 A. ISSUES MANAGEMENT
• This refers to ‘the processes by which the corporation can identify, evaluate and respond to
those social and political issues which may impact significantly upon it’’.
• Issues management attempts to minimize ‘‘surprises’’ which accompany social and political
change by serving as an early warning system for potential environmental threats and
opportunities.
• Further, it prompts more systematic and effective responses to particular issues by serving as
a coordinating and integrating force within the corporation
 B. THE PRINCIPLE OF PUBLIC RESPONSIBILITY
• The term ‘‘public’’ rather than ‘‘social’’ stresses the importance of the public process, rather than
personal-morality views or narrow interest groups defining the scope of responsibilities.
• This view is inspired by the notion of public policy, which includes not only the literal text of law
and regulation but also the broad pattern of social direction reflected in public opinion, emerging
issues, formal legal requirements.

• Primary involvement includes the essential economic task of the firm, such as locating and establishing its
facilities, procuring suppliers, engaging employees, carrying out its production functions and marketing
products. It also includes legal requirements.
• Secondary involvements come as consequence of the primary. They are, e.g., career and earning
opportunities for some individuals, which come from the primary activity of selection and advancement of
employees.
• There is also some business intervention in the public policy process especially with respect to areas in
which specific public policy is not yet clearly established or it is in transition.
 C. STAKEHOLDER MANAGEMENT
• Instead of focusing on generic responsiveness, specific issues or on the public responsibility
principle, the approach called ‘‘stakeholder management’’ is oriented towards ‘‘stakeholders’’ or
people who affect or are affected by corporate policies and practices.
• Stakeholder management encompasses two basic principles:
• The central goal is to achieve maximum overall cooperation between the entire system of stakeholder
groups and the objectives of the corporation.
• The most efficient strategies for managing stakeholder relations involve efforts, which simultaneously
deal with issues affecting multiple stakeholders.

• In recent times, corporations have been pressured by non-governmental organizations (NGOs),

activists, communities, governments, media and other institutional forces. These groups demand
what they consider to be responsible corporate practices. Now some corporations are seeking
corporate responses to social demands by establishing dialogue with a wide spectrum of
stakeholders.
 D. CORPORATE SOCIAL PERFORMANCE
• The corporate social performance theory integrates some of the previous theories.
• The theory aims to achieve social legitimacy, while identifying processes for giving appropriate
responses.

• According to Carroll, a model of ‘‘corporate performance’’ has three elements:

• A basic definition of social responsibility of a corporation:
• Economic, legal, ethical, and discretionary categories of business performance
• A listing of issues in which social responsibility exists, and
• A specification of the philosophy of response to social issues.
Carroll's Pyramid of Corporate Social Responsibility (CSR) reflects the fundamental roles played and
expected by business in society:

• Herein, the economic responsibility was placed as the base of the pyramid because it is a
foundational requirement in business. Just as the footings of a building must be strong to support the
entire edifice, sustained profitability must be strong to support society’s other expectations of
enterprises. The point here is that the infrastructure of CSR is built upon the premise of an
economically sound and sustainable business.
• At the same time, society is conveying the message to business that it is expected to obey the law
and comply with regulations because law and regulations are society’s codification of the basic
ground rules upon which business is to operate in a civil society.
• In addition, business is expected to operate in an ethical fashion. This means that business has the
expectation, and obligation, that it will do what is right, just, and fair and to avoid or minimize harm
to all the stakeholders with whom it interacts.
• Finally, business is expected to be a good corporate citizen, that is, to give back and to contribute
financial, physical, and human resources to the communities of which it is a part.
4. ETHICAL THEORIES
These theories are based on principles that express the right thing to do or the necessity to
achieve a good society.
a. Normative stakeholder theory
b. Universal rights
c. Sustainable development
d. The common good approach
EMPOW(RED)-
CAMPAIGN
 A. NORMATIVE STAKEHOLDER THEORY

• This represents an extended view of the stakeholder theory that has been included in the
integrative theories group.
• In this view, managers bear a fiduciary (trustee) relationship to stakeholders’’, instead of having
exclusively fiduciary duties towards stockholders, as was held by the conventional view of the
firm.
• Following this theory, the interests of all stakeholders are of intrinsic value and therefore a
socially responsible firm requires simultaneous attention to the legitimate interests of all
appropriate stakeholders and has to balance such a multiplicity of interests and not only the
interests of the firm’s stockholders.
• A generic formulation of stakeholder theory is therefore not sufficient. In order to point out how
corporations have to be governed and how managers ought to act, a normative core of ethical
principles is required.
 B. UNIVERSAL RIGHTS
• Human rights have been taken as a basis for CSR, especially in the global market place.

• In recent years, some human-rights-based approaches for corporate responsibility have been
proposed.
• One of them is the UN Global Compact, which includes nine principles in the areas of human rights,
labor, environment and anticorruption
 C. SUSTAINABLE DEVELOPMENT

• Another values-based concept, which has become popular, is ‘‘sustainable development’’. Although
this approach was developed at macro level rather than corporate level, it demands a relevant
corporate contribution.
 D. THE COMMON GOOD APPROACH
• This approach maintains that business, as with any other social group or individual in society, has to
contribute to the common good, because it is a part of society.

• In this respect, it has been argued that business is a mediating institution. Business should be neither
harmful to nor a parasite on society, but purely a positive contributor to the wellbeing of the society.
• Business contributes to the common good in different ways, such as creating wealth, providing goods and
services in an efficient and fair way, at the same time respecting the dignity and the inalienable and
fundamental rights of the individual. Furthermore, it contributes to social well-being and a harmonic way
of living together in just, peaceful and friendly conditions, both in the present and in the future.
 REFERENCES
• Garriga, E., Melé, D. Corporate Social Responsibility Theories: Mapping the
Territory. Journal of Business Ethics 53, 51–71 (2004).
https://doi.org/10.1023/B:BUSI.0000039399.90587.34