Hello everyone and welcome to this episode in the series in which we will explore the term Corporate Social Responsibility. We used this term in Episode 10 on Sustainable Business but we will go into it in more detail in both this episode and the next one as it is an important element of business and sustainability. I am your host Victor and I am pleased to have Catherine helping me with this work today.
Hi everybody. Corporate Social Responsibility or CSR for short, is a term used to describe a lot of different initiatives which are a response to the changing landscape of business and society. If we break down the term we first have Corporate – an adjective which refers to the business unit, entity or enterprise. We use the term corporation to mean a legally registered business organisation. The word social refers to the relationship between the business and society though often CSR involves environmental activities also. Finally responsibility is about the limits of where and when a business is held to be responsible for its activities – and this is far wider today than traditionally. CSR is not a legal term but one of common usage so it is not precise but fluid and flexible.
Corporate Social Responsibility or CSR is a relatively recent term for practices that have been around for many years. For example, historically, some business owners, often driven by their own personal ethics, would provide for their employees in a manner that was far more caring and supportive than any legal requirements. This is called paternalism – meaning like a father. The Quaker religious community is very responsible and socially aware in their business practices and some historical examples of this were Cadbury’s chocolates, Western Union and Clark’s shoes – all of which were exemplary paternalistic employers.
Victor, Can you explain how it is different today?
Well Catherine today’s drive for CSR is more usually rooted in the need to ‘protect the brand image’ of a company. Any business depends on what is called its ‘licence to operate’ which refers to a loose social contract or approval of its relationship to the society within which it operates. In today’s marketplace a business is often supplying a product or service which is not a necessity and for which buyers have many alternative choices. This is called a ‘discretionary market’ because the buyer has discretion on whether to make the purchase or not. Within such a market the value and importance of the licence to operate is far greater than historically when buyers had less or sometimes no choice in their purchasing options. So business has started to pay far more attention to its image and how it is viewed by society – it wants to be seen as ‘good corporate citizen’. Many multi-national corporations undertake to promote a socially important initiative as a way of improving their image. Businesses are engaging with partners such as charities or non-governmental organisations to help administer such projects. An example would be the HSBC Bank’s funding of the Global Action Plan Water Explorer programme in eleven countries. This is a school’s educational programme about understanding the importance of preserving and protecting our water resources.
CSR also has an important role to play within a company. Countless studies have shown that people prefer to work for companies that are good employers and show their commitment to their values. So CSR can be a very important tool used to retain current employees and attract new ones.
We will look now at how there are different ways of approaching and implementing CSR.
Some of the initial engagements with CSR were resisted because many felt that the legal requirement was for management to maximise shareholders’ value and that the shareholders could then decide how to distribute their wealth once the dividend was received. This argument was countered by the issue of protecting the long term worth of the company through protecting its brand.
Next, CSR was viewed as a charitable donation and a necessary cost of doing business through supporting the communities in which a business operated. Allied to this was the promotional opportunity approach to CSR that focused on activities which reflected well on the company. The more successful and engaged programmes led to a consideration of CSR as a real strategic opportunity for a company. It followed that the processes and programmes were then dealt with at a high level within the business. Finally, some businesses are now seeing CSR as addressing the root causes of the problems of irresponsibility and un-sustainability and this involves changing the business model at all levels of the system to make real change happen.
There are some other terms with similar meanings which are worth exploring here. Because Corporate Social Responsibility often includes environmental activities, the word ‘social’ creates problems and so the term Responsible Business is sometimes used instead. Within sustainability, there is a realisation that social and environmental issues are very inter-connected. When an environment is damaged it is often a social justice issue for those who live in and depend on it – such as when deforestation restricts access to fuel for locals who cannot afford to pay for alternatives. Furthermore, if one’s social access is restricted, through unemployment for example, it often involves environmental degradation such as can be seen in the slums around so many cities of the world.
Another term used is Ethical Business and this covers all aspects of responsibilities associated with business because to be ethical would by definition include respect for the social and environmental impacts of the business.
There is also the term Creating Shared Value or CSV. This is sometimes referred to as a development of CSR. CSV was defined by Michael Porter and colleagues and publicised by the Harvard Business Review in 2011. The difference is that whereas CSR focuses on responsibility, CSV focuses on value. CSV suggests that in order to create value businesses will enter into collaborations across industry as a better win-win alternative to CSR where business is seen as a donor to other sectors. The term CSV is used more often used in America than Europe and this reflects the American focus on a transactional approach to business rather than the European relational approach.
So CSR is an unfolding and changing debate about the role of business in society, asking not just what does business do but what is business for.
That concludes this episode of the series which we hope you have found informative and useful. We will continue to explore this further in the next episode. My thanks to Catherine for her help with this and to you for listening. We do hope you can join us on further episodes in the series.