-
Hogeschool-Universiteit Brussel, Warmoesberg 26, 1000
Brussel
Tel: 02-210 12 11, Fax: 02-217 64 64, www.hubrussel.be
Faculty of Economics & Management
Commercial Sciences & Management Field of Study
Master of Science in Business Administration Programme
Internally organised master thesis
The value of Corporate Social Responsibility
for consumers
Master thesis by
Liesbet VAN DER SMISSEN
Submitted for the Degree of
Master of Science in Business Administration
Graduation Subject: International Relations
Supervisor: Christel CLAEYS
Academic Year: 2011 2012
Defended in: September 2012
-
Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
1
THE VALUE OF CORPORATE SOCIAL RESPONSIBILITY FOR CONSUMERS
Liesbet VAN DER SMISSEN
Degree Programme: Master of Science in Business
Administration
Graduation Subject: International Relations
Type of Master Thesis: internally organized master thesis
Confidential: no
Summary
1. Problem definition and research question There are different
views on the relationship between corporate social responsibility
(CSR) and
business: by operating with a CSR perspective, proponents
believe that companies are capable of
making more long term profit and increasing long term success,
while the opponents argue that
CSR would only distract firms from the economic role of
businesses, namely profit generation (Buhr
& Grafstrm, 2007). Both the proponents as well as the
opponents present a list of sound rational
reasons do defend their viewpoint. Despite the ongoing debate as
to whether or not social
responsibilities should be the concern of corporate decision
makers, it cannot be denied that
corporate social responsibility has been increasingly present in
todays world. Research indicates
that consumers care about it and that nowadays most consumers
expect companies to have fairly
high levels of CSR (Boulstridge & Carrigan, 2000; Mohr,
Webb, & Harris, 2001).
Consumers are very important stakeholders for companies and the
success of a companys CSR
policy is to a large extent determined by these consumers.
Hence, understanding them is critical.
Part of understanding these customers relates to trying to find
out why they buy from companies
which incorporate social responsibilities into their business
practices. Green and Peloza (2011)
believe that consumers only support firms that engage in CSR, if
they receive some kind of value
from the exchange. Green and Peloza also point out that
consumers usually dont view CSR as one
overall impression of a firm, but that they look instead to how
each CSR activity can add to their
overall value proposition when making a purchase. This seems to
indicate that consumers are still
more motivated by self-interest than by the interest of society,
which is exactly what DAstous and
Legendre (2009) mentioned.
Consequently companies try to understand consumers through
analyzing what kind of value(s)
these consumers derive from CSR, which brings us to the research
question of this thesis:
What is the value of corporate social responsibility for
consumers?
Before trying to understand the value consumers derive from CSR,
it is important to know what
CSR is. Despite the significant amount of research, literature
has not succeeded in providing one
generally accepted definition on CSR. The definitions offered in
literature can be confusing and
sometimes even contradicting. Therefore taking a consumers point
of view to analyze how they
see CSR and what the value is they derive from it, can be very
useful.
-
Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
2
2. Research method In first instance, a literature study is
carried out to gain understanding of the main theoretical
concepts related to the research and to examine to which extent
existing literature already covers
the subject. Subsequently, a combination of quantitative and
qualitative research is conducted to
investigate the opinions and behaviors of the respondents in
relation to CSR and the value that
could be derived from it. Our research approach is mainly
deductive as we start from a literature
review to find a problem definition and consequently design a
research strategy to try and
formulate an answer to the research question and the separate
research objectives (Saunders,
Lewis, & Thornhill, 2003). Our research combines elements of
descriptive and explanatory research
to report on what CSR is and the value consumers derive from it
(Saunders et al., 2003).
a. Justification of the research method As a result of the
limited amount of available data regarding this topic, we felt the
collection of
primary data to be useful. We reasoned that for some questions a
qualitative approach was more
appropriate, whereas for other questions a quantitative approach
was best. Saunders et al. (2003)
stress that it is often beneficial to combine quantitative and
qualitative methods. Saunders et al.
(2003) also believe the deductive approach to be the most
appropriate when dealing with a topic
on which there is a wealth of literature from which you can
define a theoretical framework (p. 90),
which is certainly the case for CSR.
b. Collection and processing of the data Due to the limited time
and resources, purposive sampling was used to select the
respondents. Our
sample consists of men and women of different ages who shop at
Bio-Planet in Ghent. We chose to
work with them because we believe them to be particularly
informative for our research purpose.
This method of sample selection, however, limits the
generalizability of our research.
The research is executed with the help of interview-administered
questionnaires. Our research
consists of three parts. For parts one and three, the
participants are given a written survey they
have to fill out, while part two consists of some oral
questions, which Saunders et al. (2003) label
structured interviews. The questionnaire mainly consists of
closed questions, but also includes a
few open questions. The closed questions consist of a variety of
multiple choice questions and
some scale questions related to all of our research
objectives.
The processing of the data is done using the statistical program
SPSS and some of the tables are
constructed using Excel. We mainly use descriptive statistics,
but we also execute a factor analysis
to analyze the different types of value consumers derive from
CSR.
3. Findings and conclusions The results of this study show that
consumers associate CSR most often with the environment. This
is not in line with Dahlsruds (2008) study which actually found
that the environmental dimension
is the one the least present in all the existing definitions in
literature. The fact that literature and
the view of the consumers are not in line, only adds to the
confusion companies are already
experiencing.
We also discovered that consumers dont always recognize the CSR
activities of companies as CSR
activities. The CSR activities in the product-related activities
category seem to be the ones that the
respondents most often recognize, while the activities of the
philanthropy category are recognized
the least. Consumers indirectly indicate that they find CSR
important as the activities they perceive
-
Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
3
as most important for companies to engage in, are also the ones
they indicate as being an
expression of CSR. We felt that the level of awareness among
respondents regarding the different
CSR activities of Bio-Planet was rather low.
We believe there to be five distinct types of value consumers
can derive from CSR, being: social
value, emotional value, functional value, supply value and
egocentric behavior value. The results
regarding the two latter types of value are rather weak, so
further research will be necessary in
this area. We came to the conclusion that demographics are not a
good predictor of the type of
value consumers derive from CSR. Also the level of knowledge
people have of CSR and the
frequency of their shopping at Bio-Planet do not seem to have a
significant impact on the value
they derive from CSR. Nevertheless, the results indicate that
the higher the influence the CSR
policy has on a consumers decision to shop at Bio-Planet, the
higher the social, emotional and
functional value they derive from it. The same goes for the
importance of CSR: the more important
the consumer finds CSR, the higher the emotional, functional and
social value they derive from it
and the lower the supply value. We have to be careful with these
conclusions though because there
was no significant difference found between all the different
groups.
Another important question which we also focused on in one of
our research objectives is the
question whether the CSR policy of a company really has an
influence on a consumers purchase
decision and behavior. The results regarding this issue are
inconsistent and contradictory to a
certain extent. Whereas 82.7% of the respondents indicate
indirectly that they consider CSR to be
their main motivator to shop at Bio-Planet, we question this
result as it seems that a lot of
consumers indicated an offer of organic products as their main
motivator to shop at Bio-Planet,
but they dont really seem to be aware that organic products are
a form of CSR. Hence it is
arguable whether the CSR policy really influenced their
decision.
We believe our research to contribute to a better understanding
of the complex consumer
regarding the value they derive from CSR.
-
Preface
Writing my master thesis was a very challenging and enriching
experience. I would like
to thank a few people who helped me during the process. First of
all I would like to thank
my supervisor, Christel Claeys, for her advice and support
throughout the whole master
thesis process. Secondly I would like to express my gratitude to
Philip Sterck, Ruth
Evenepoel and all the other people at Bio-Planet who made it
possible for me to execute
my research at Bio-Planet in Ghent. I would like to thank them
for the nice welcome, the
smooth cooperation and the sponsoring such that all respondents
were offered a drink
while participating in my research. I would also like to thank
my boyfriend, Maxime
Vandenbussche, and my mom, Marijke Gyns, who helped me with the
collection of my
data. Without their help it would have taken a much longer time
to collect the necessary
data for my research. Finally I would like to thank my family
and friends for all the
support they have given me throughout the whole process of
writing my master thesis.
-
1
Table of contents
Overview of tables and figures
................................................................................
3
List of appendices
.................................................................................................
3
List of abbreviations
..............................................................................................
3
Introduction
.........................................................................................................
5
PART I: LITERATURE REVIEW
............................................................................
7
Chapter 1: Defining CSR
.....................................................................................
7
1.1 Introduction
.............................................................................................
7
1.2 The history of corporate social responsibility
................................................ 7
1.2.1 Prior to 1950
......................................................................................
7
1.2.2 The 1950s
..........................................................................................
8
1.2.3 The 1960s
..........................................................................................
8
1.2.4 The 1970s
..........................................................................................
9
1.2.5 The 1980s
..........................................................................................
9
1.2.6 The 1990s
........................................................................................
10
1.2.7 The 21st century
...............................................................................
11
1.3 To whom is an organization expected to have responsibility?
........................ 12
1.4 Definitional clarity of CSR
.........................................................................
13
1.5 Synonyms
..............................................................................................
15
1.5.1 Business ethics
.................................................................................
16
1.5.2 Corporate citizenship
.........................................................................
17
1.5.3 Corporate accountability
....................................................................
17
1.5.4 (Corporate)
sustainability...................................................................
17
1.6 Conclusion
.............................................................................................
18
Chapter 2: Different views on CSR
...................................................................
19
2.1 Introduction
...........................................................................................
19
2.2 Different views on CSR
............................................................................
19
2.3 Proponents
.............................................................................................
19
2.3.1 Arguments in favor of CSR
.................................................................
20
2.4 Opponents
.............................................................................................
22
2.4.1 Arguments against CSR
.....................................................................
24
2.5 The link between corporate social performance and corporate
financial
performance
...........................................................................................
25
2.6 The emergence of a new view
..................................................................
27
2.7 Conclusion
.............................................................................................
27
Chapter 3: CSR from a companys point of view
............................................... 29
3.1 Introduction
...........................................................................................
29
3.2 Importance of, and motivation for incorporating CSR
................................... 29
3.3 Return on CSR
........................................................................................
30
3.4 Different types of CSR activities
................................................................
32
3.5 Conclusion
.............................................................................................
33
-
2
Chapter 4: CSR from a consumers point of view
.............................................. 35
4.1 Introduction
...........................................................................................
35
4.2 Importance of CSR for consumers
.............................................................
35
4.3 The value of CSR for consumers
...............................................................
36
4.4 Conclusion
.............................................................................................
40
Chapter 5: Identifying and targeting the ethical consumer
.............................. 41
5.1 Introduction
...........................................................................................
41
5.2 Identifying and targeting the ethical consumer
........................................... 41
5.3 Conclusion
.............................................................................................
43
PART II:
RESEARCH..........................................................................................
45
Chapter 6: Research design
..............................................................................
45
6.1 Introduction
...........................................................................................
45
6.2 Development of the research question
....................................................... 45
6.3 The concretization of the research question through research
objectives ........ 46
6.4 The research design
................................................................................
48
6.4.1 What will be observed?
......................................................................
48
6.4.2 Who will be observed?
.......................................................................
48
6.4.3 How will the observation take place?
................................................... 50
6.4.4 Where will the data collection take place?
............................................ 51
6.4.5 When will the data collection take place?
............................................. 51
6.4.6 Data processing
................................................................................
52
6.5 Expressing the research objectives in operational terms
.............................. 52
6.6 Conclusion
.............................................................................................
55
Chapter 7: Analysis of the research results
...................................................... 57
7.1 Introduction
...........................................................................................
57
7.2 Description of the respondents
.................................................................
57
7.3 Analysis of the research results
................................................................
59
7.4 Conclusion
.............................................................................................
67
Chapter 8: Discussion of the research results
.................................................. 69
8.1 Introduction
...........................................................................................
69
8.2 Discussion of the research results
.............................................................
69
8.3 Contribution to science and practice
.......................................................... 77
8.4 Limitations and future research
................................................................
77
8.5 Conclusion
.............................................................................................
79
General conclusion
..............................................................................................
81
Reference list
.....................................................................................................
83
Appendices
.........................................................................................................
93
A. Questionnaire
.........................................................................................
93
B. Tables concerning the description of the respondents
................................ 103
C. Tables concerning the analysis of the research results
............................... 104
-
3
Overview of tables and figures
Table 1: The multi-faceted customer value of CSR activities
..................................... 39
Table 2: frequency table of the different age groups in our
sample ............................ 57
Table 3: frequency table presenting how often the respondents
shop at Bio-Planet ...... 58
Table 4: frequency table presenting to which extent these
activities are considered
to be an expression of CSR
......................................................................
60
List of appendices
Appendix A: Questionnaire
Appendix B: Tables concerning the description of the
respondents
Appendix C: Tables concerning the analysis of the research
results
List of abbreviations
BSR Business for Social Responsibility
CED Committee for Economic Development
CFP Corporate Financial Performance
CS corporate sustainability
CSP Corporate Social Performance
CSR Corporate Social Responsibility
CSV Creating Shared Value
ICSD Interdepartmental Commission for Sustainable
Development
SR Social Responsibility
WCED World Commission on Environment and Development
-
4
-
5
Introduction
The fact that corporate social responsibility has been
increasingly present in todays
society cannot be denied (Carroll, 2008). Despite the continuous
debate as to whether or
not firms should have social responsibilities, research
indicates that consumers seem to
care about CSR and therefore it is in the best interest of the
company to do so as well
(Boulstridge & Carrigan, 2000; DAstous & Legendre, 2009)
We say seem to care
because the concept of CSR is characterized by a significant
attitude-behavior gap
(Roberts, 1996; Simon, 1995). Nevertheless, studies indicate
that nowadays most
consumers expect companies to have fairly high levels of CSR
(Mohr, Webb, & Harris,
2001).
Even though consumers indicate they expect fairly high levels of
CSR, this does not
clarify what exactly they expect from companies as the concept
of CSR is not clearly
defined in literature. Despite the significant amount of
research, literature has not
succeeded in providing one generally accepted definition on CSR
(Clarkson, 1995). The
lack of a general definition leads to confusion, but also
hinders academic debate and
corporate implementation. This makes it harder for companies to
create effective and
efficient CSR programs (McWilliams, Siegel & Wright, 2006).
Mohr et al. (2001) and
Riddleberger and Hittner (2009) dont believe this to be the only
problem. They also
point out that there has been little research on what the public
expects. As a result
those who run corporations lack a clear understanding of what
the public wants from
them and how far they are expected to go toward helping their
communities (Mohr et
al., 2001, p. 45).
Understanding consumers is crucial for companies as they are
considered major
stakeholders for the company. The question today is also no
longer whether companies
should incorporate CSR into their activities, but rather how
they should do this.
Marketers try to target the consumers who take into account CSR
in their purchase
decisions and purchase behavior. If companies go through the
lengths of incorporating
CSR, they want to make sure that the right consumers, the ones
that care, are made
aware of this and know about it. But to be able to target these
consumers they need to
understand why consumers buy from companies which engage in CSR.
Green and Peloza
(2011) believe that consumers only support firms that engage in
CSR, if they receive
some kind of value from the exchange. This seems to indicate
that consumers are still
more motivated by self-interest than by the interest of society
(DAstous & Legendre,
2009).
With this thesis we want to contribute to a better understanding
of the complex
consumer. We want to take the consumers point of view and
increase understanding of
on the one hand, what CSR actually means to them, given the
definition in literature is
unclear, and on the other hand the value they derive from CSR.
We will use a
combination of a literature review and research, in which we
collect primary data, to
formulate an answer to the research question What is the value
of corporate social
responsibility for consumers? and to the research objectives we
will stipulate
throughout this thesis.
In first instance, a literature study is carried out to gain
understanding of the main
theoretical concepts related to the research and to examine to
which extent existing
-
6
literature already covers the subject. Our literature review
consists of five chapters. A
first chapter focusses on defining CSR. We provide a short
history on CSR, talk about to
whom an organization is expected to have responsibility, talk
about the definition(s) of
CSR and point out some synonyms which are often used. In a
second chapter we deal
with the different views on CSR. We list some proponents and
opponents and discuss the
arguments which both groups use to defend their viewpoint. We
also briefly discuss the
link between social performance and corporate financial
performance and talk about the
emergence of a new view. In the third chapter we look at CSR
from a companys point of
view, whereas we do the same in chapter four, but then from a
consumers point of
view. In both chapters we will analyze the importance of CSR for
the company/consumer
and we will talk about the value both companies and consumers
derive from it. A last
chapter briefly deals with identifying and targeting the ethical
consumer.
Chapters six, seven and eight deal with our research. In chapter
six we will outline the
research design, in chapter seven we analyze the research
results, and chapter eight
focuses on the discussion of these results.
-
7
PART I: LITERATURE REVIEW
Chapter 1: Defining CSR
1.1 Introduction
In this first chapter we try to understand what corporate social
responsibility is and
where it comes from. We will start off with some history of CSR.
In a next section we will
discuss the different views on to whom an organization is
expected to have
responsibility. Afterwards we will devote some time to the
definitional aspect of CSR and
then at the end of the chapter we will shortly look at some
concepts which are often
used interchangeably to talk about corporate social
responsibility.
1.2 The history of corporate social responsibility
Corporate social responsibility is a popular topic nowadays. Its
phenomenal rise to
prominence in the 1990s and 2000s suggests that it is a
relatively new area of academic
research (Crane, McWilliams, Matten, Moon, & Siegel, 2008,
p. 3). Although it is true
that CSR is mainly a product of the second half of the twentieth
century, the roots of the
concept, as we know it today, have a long and wide-ranging
history (Carroll, 2008). The
business communitys concern for society is certainly not a new
thing and can be traced
back for centuries (Carroll, 2008).
CSR is originally considered an American concept (Craps, 2012a).
It came into existence
at the beginning of the 20th century and was at that time mainly
linked to philanthropy.
Even though the CSR concept did not originate in Europe, social
entrepreneurship, which
can be considered a form of CSR, exists even longer, already
since the industrial
revolution (Craps, 2012a).
1.2.1 Prior to 1950
There is not a lot of literature on CSR found prior to 1950, but
this doesnt mean that
this period was lacking social initiatives and practices. During
the Industrial Revolution
there was a strong trend of emerging businesses, whose main
concern during the mid-
to-late 1800s was the employees and more specifically how to
make them more
productive workers (Carroll, 2008). In that time, but also still
nowadays, it is often
difficult to distinguish between what organizations are doing
for social reasons and what
they are doing for business reasons (Carroll, 2008).
In the late 1800s philanthropy, or corporate contributions,
gained importance. Here it
was difficult to distinguish whether this was actually
individual philanthropy or business
philanthropy. According to Carroll (2008) corporate
contributions have assumed a
central role in the development of CSR since the beginning of
the time periods being
examined (p. 23). Before the 1900s corporate contributions were
perceived in a more
negative light as they were being seen as giving away
stockholders assets without their
approval (Carroll, 2008). However, later on, they were perceived
as a positive thing and
something a company should do.
Carroll (2008, pp. 21-23) talks about several initiatives taken
by business owners and
entrepreneurs, prior to 1950, in which they use their own money
to support social
-
8
causes. One of these initiatives is for example providing money
for various community
projects (Carroll, 2008). Many of those initiatives would
probably be categorized as
socially responsible nowadays. It is apparent that even prior to
1950 some degree of
social responsibility was being taken on by companies though
they were never called
social responsibility (Carroll, 2008, p. 22). Even though there
is evidence of socially
responsible business behavior, it was definitely not a
wide-spread practice in those days.
It is important to keep in mind that in those days the term
social responsibility (SR) was
more often used than corporate social responsibility (CSR).
According to Carroll this use
of SR instead of CSR may have been because the age of the modern
corporations
prominence and dominance in the business sector had not yet
occurred nor been noted
(p. 25).
Whereas the largest part of the period prior to 1950 was
dominated by concern for how
to make the employees more productive, starting in the
1920s-1930s corporate
managers slowly started taking on responsibility to balance
competing claims from other
stakeholders (Carroll, 2008). Hay and Gray (1974) claim this to
be a result from some
structural changes both in business institutions as well as in
society. This change in
mindset among business executives, called businessmen in those
days, is made tangible
in the results of a study of Fortune magazine in 1946, Carroll
(2008) refers to. One
question these businessmen were being asked was whether they
were responsible for
consequences of their actions in a sphere wider than that
covered by their profit-and-
loss statements (Carroll, 2008, p. 24). Of the respondents,
93.45% said yes. This
result seems to support the idea that the mindset among business
leaders was changing.
1.2.2 The 1950s
The 1950s are the time in which the first important literature
on CSR started to appear
(Carroll, 2008). According to Carroll (2008) Howard R. Bowens
publication of his
landmark book Social Responsibilities of the Businessman (1953)
best marks the
beginnings of the modern period of literature on this subject
(p. 25). Bowen was also
the first one to formulate a definition on CSR, which we will
discuss later in more detail,
in the section definitional clarity of CSR.
Frederick (2006) summarizes the meaning of CSR in the 1950s by
three core ideas. A
first idea is that business managers should consider themselves
as trustees of the public
interest. A second one is the idea of business managers
balancing competing claims to
the resources of the corporation. A third and last idea is the
acceptance of philanthropy
as a manifestation of business support of good causes (Carroll,
2008, p. 26).
The 1950s were characterized by a lot of talk about CSR, but not
a lot of action. Carroll
(2008) talks about a period in which attitudes were changing and
business executives
were learning to get comfortable with talking about CSR, but he
also points out that
there were very few corporate actions other than
philanthropy.
1.2.3 The 1960s
This period is similar to the previous one as it was
characterized by more talk than action
regarding CSR and as philanthropy continued to be the most
noticeable manifestation of
CSR (Carroll, 2008). However, according to Carroll (2008) the
1960s marked a
momentous growth in attempts to formalize or more precisely
state what CSR meant
(p. 27). Some important contributors of that time include Keith
Davis (1960), William C.
-
9
Frederick (1960) and Clarence Walton. (1967) Each of them set
forward their own
definition on CSR and their works contributed significantly to
the CSR literature.
1.2.4 The 1970s
The 1970s are an important period for the development of CSR
literature. Carroll (2008)
labels it a period of CSR acceleration. Some of the most
important contributors of that
time include Morrell Heald (1970), Harold Johnson (1971), George
Steiner (1971),
Richard Eels and Clarence Walton (1974) and many others.
Carroll (2008) believes that a ground-breaking contribution to
the concept of CSR came
from the Committee for Economic Development (CED) in its 1971
publication, Social
Responsibilities of Business Corporations (p. 29). The CED
(1971) started from the
observation that business functions by public consent and its
basic purpose is to serve
constructively the needs of society to the satisfaction of
society (p. 11). The CED also
pointed out that the social contract between business and
society was changing
substantially in a way that business is being asked to assume
broader responsibilities to
society than ever before and to serve a wider range of human
values (p. 16).
The CED made a distinction between three kinds of social
responsibilities, which it
visualizes by using three concentric circles. The inner circle
refers to the basic
responsibilities for the efficient execution of the economic
function. The intermediate
circle represents the responsibility for the execution of the
economic function, but with
respect for changing social values and priorities. Lastly, the
outer circle refers to the
newly emerging responsibilities that business should assume.
This publication, regarding the CEDs view of CSR, was considered
especially influential
because the CED was composed of business people and educators.
Therefore the
publication reflected an important practitioner view of the
changing social contract
between business and society and businesses newly emerging
social responsibilities
(Carroll, 2008, p. 29).
We previously mentioned that SR was more often used than CSR in
the early days.
However, in the 1970s increasing reference is being made to
corporate social
responsibility (Carroll, 2008). The 1970s are also the period
during which many articles
began suggesting a managerial approach to CSR. A managerial
approach to CSR refers
to the idea of applying traditional management functions to deal
with CSR issues
(Carroll, 2008).
This period is still characterized by more talk from an academic
side than action at
company level. But slowly legislative initiatives start to
emerge dealing with certain
aspects of CSR. These initiatives mandate that companies create
organizational
mechanisms for complying with federal laws dealing with the
environment, product
safety, employment discrimination, and worker safety (Carroll,
2008, p. 34).
1.2.5 The 1980s
Up till the 1980s there had been a strong focus on the
definitional aspect of CSR. Many
academics tried to formulate new or refined definitions
(Carroll, 2008). The 1980s,
however, became known as the period in which research became
more important and as
the period in which writings emerged on alternative or
complementary concepts and
-
10
themes such as corporate social responsiveness, corporate social
performance, public
policy, business ethics, and stakeholder theory/management to
mention a few (Carroll,
2008, p. 34). We will not further explore these concepts, even
though they are linked to
CSR, as they fall outside our scope of focusing on CSR. However,
later on we will shortly
discuss some of them when talking about synonyms of CSR.
These writings about alternative or complementary concepts did
not mean that the
interest in CSR diminished. The CSR debate continued throughout
the 1980s. Thomas M.
Jones (1980) was one of those writers who participated in the
debate in those days. One
of his major contributions is his emphasis on CSR as a process
instead of as a set of
outcomes (Jones, 1980). He believes that corporate behaviour
should not, in most
cases, be judged by the decisions actually reached, but by the
process by which they are
reached (Jones, 1980, p. 65).
Jones (1980) also already pointed out in 1980 that one of the
arguments used by those
opposed to CSR is that social responsibility is too vague to be
useful (p. 60). This
argument is still present in the debate regarding CSR which
takes place nowadays.
The 1980s are also the period in which research started taking
place on the relationship
between corporate social responsibility and firm profitability
(Carroll, 2008). This
relationship continued to be debated over time and is still
controversial nowadays. We
will discuss it in chapter 2.
1.2.6 The 1990s
During the 1990s the trend of the 1980s continued as a lot of
attention was given to
concepts complementary to CSR. Carroll (2008) states that the
CSR concept served as
the basepoint, building block, or point-of-departure for other
complementary concepts
and themes, many of which embraced CSR thinking and were quite
compatible with
CSR (p. 37). The prominent themes of that period include
corporate social performance
(CSP), stakeholder theory, business ethics, sustainability, and
corporate citizenship1
(Carroll, 2008).
The 1990s were also characterized by a considerable expansion of
philanthropy. In those
days companies also evolved in how they were dealing with CSR.
It was the period in
which we start to see management positions solely dedicated to
corporate giving on the
organizational charts of major companies. Carroll (2008)
mentions a few examples:
managers of corporate giving, corporate social responsibility,
and public/community
affairs (p. 38).
These management positions, dedicated to corporate giving,
contributed to another
trend of the 90s, which still continues today, namely the
appearance of distinct
companies which have developed outstanding reputations for CSR
practices. Despite the
skepticism regarding the nature of some of their practices,
certain companies are often
associated with having good CSR practices. A few examples
include The Body Shop, Ben
& Jerrys, and Johnson and Johnson (Carroll, 2008).
1 Here again we will not further explore these concepts as they
fall outside our scope of focusing on CSR.
However, later on we will shortly discuss some of them when
talking about synonyms of CSR.
-
11
Carroll (2008) believes that the most significant advances to
CSR in this period came in
the business practice territory and more specifically due to the
creation of a non-profit
organization called Business for Social Responsibility (BSR) in
1992. BSR was the first of
its kind and was founded by a group of entrepreneurs and
businesses who sought to
create an organization that could help companies act in a more
responsible manner
(Business for Social Responsibility [BSR], 2012a, how and when
was BSR founded). The
founders wanted to bring together on the one hand the businesses
which still had to
embrace corporate responsibility and on the other hand the
organizations promoting
corporate responsibility (BSR, 2012a). The official mission on
the website of BSR says
the following: our mission is to work with business to create a
just and sustainable
world (BSR, 2012b, what is the mission of BSR). BSR is still
active today and while their
mission hasnt changed throughout their 20-year history, how they
pursue their mission
evolves continuously.
1.2.7 The 21st century
During the 21st century the emphasis, so far, remains on
empirical research of CSR and
into related topics instead of on theoretical contributions to
the concept, which
dominated a few decades before (Carroll, 2008). This emphasis
however does not mean
that there has been no evolution on the conceptual front the
past decade. Writers
continued their work on definitions, concepts, frameworks,
approaches, Carroll (2008)
believes that the interest and growth of CSR has been most
evident in the European
Community (p. 41).
From a business-point-of-view this period is characterized by an
increased interest in
CSR best practices. Carroll (2008) refers to a book, targeting a
business audience,
written by Kotler and Lee (2005) cataloguing these best
practices. In their book the
authors present 25 best practices which could be very valuable
in assisting companies
with their own CSR programs. Among the best practices are
examples from The Body
Shop, Ben & Jerrys, Johnson and Johnson, and many more
(Kotler & Lee, 2005). A lot of
these companies already developed an excellent reputation for
CSR practices in the 90s,
as mentioned before.
The growing interest of businesses in CSR has been driven by a
number of factors. One
of those factors is a reaction to the scandals, during the 21st
century, such as Enron and
Worldcom, which led to diminished public support for businesses.
Another factor is the
increased pressure from non-governmental organizations and trade
unions to respect
human rights and adopt good practices. A last factor is the
belief that there is a
business case2 for ethical management (corporate social
responsibility, 2008, para. 1).
Especially since the beginning of the 21st century, the CSR
movement has been a global
phenomenon. But even though its a global phenomenon, there are
important inter- and
even intra-regional variations in practice (Carroll, 2008).
There appears to be some
divergence of commitment and management practices. Carroll
(2008) also points out
that some initiatives are more voluntary than others as some
companies have been
under legal and regulatory pressure to adopt them (p. 41).
2 This refers to the justification of ethical management in
terms of its contribution to business performance (Business case,
2008)
-
12
Nonetheless, 2012 is not the year in which the development of
CSR stops, CSR is still a
developing field of research. The delineation of the field is
not easy as it is interrelated
with so many other concepts. Carroll (2008) states the
following: the field of
scholarship that CSR represents is a broad and diverse one,
encompassing debates of
many perspectives, disciplines and ideological positions; it is
located at an intersection of
many contributing disciplines (p. 7), which clearly makes it
hard to study.
1.3 To whom is an organization expected to have
responsibility?
The different views on to whom an organization is expected to
have responsibility have
not been constant over time. Van Marrewijk (2003) acknowledges a
sequence of three
approaches to CSR that has been referred to by various authors
in academic literature.
Each approach includes and transcends the previous one and tries
to formulate the
subject of responsibility for the organization (Van Marrewijk,
2003).
A first approach is the shareholder approach. Van Marrewijk
(2003) quotes Friedman
(1962), who says that according to the shareholder approach the
social responsibility of
business is to increase its profits (p. 96). This approach
starts from profit maximization
as an ultimate goal and believes that socially responsible
activities dont belong to the
domain of organizations but are a major task of governments (Van
Marrewijk, 2003, p.
96). This approach states that organizations should only be
concerned with CSR to the
extent that it contributes to the profit maximization goal of
the business (Van Marrewijk,
2003).
A second approach is the stakeholder approach. This approach
indicates that an
organization should not only be accountable to its shareholders,
but that it should also
take into consideration the interests of all its stakeholders
which might be affected by
the organization trying to achieve its objectives (Van
Marrewijk, 2003). Under this
definition an organization is accountable to all its
stakeholders, which are according to
Jensen (2002) all individuals or groups who can substantially
affect the welfare of the
firm not only financial claimants, but also employees,
customers, communities and
government officials (p. 236).
A third and last approach is the societal approach. Van
Marrewijk (2003) considers this
to be the broader view on CSR, but not necessarily the
contemporary one. This approach
indicates that companies are responsible to society as a whole,
of which they are an
integral part (Van Marrewijk, 2003, p. 97). It means that an
organization should
operate in a way that serves and satisfies the needs of
society.
Where Van Marrewijk (2003) talks about three approaches to CSR,
Hay and Gray (1974)
talk about three different phases over time and did this already
30 years before Van
Marrewijk. Despite the different choice of wording, both
frameworks are very much alike.
Hay and Gray (1974) labeled the first phase profit maximization
management. The
phase I concept was the belief that business managers have but
one single objective
to maximize profits (Hay & Gray, 1974, p. 135). Hay and Gray
state that there is only
one constraint to this pursuit of profit maximization, namely
the legal framework within
which the firm is operating. This view was widely accepted
throughout the nineteenth
century and the beginning of the twentieth century (Hay &
Gray, 1974).
-
13
A second phase introduced by Hay and Gray (1974) is called the
Trusteeship
management. According to Hay and Gray this phase emerged in the
1920s and 1930s.
They claim this second phase to be a result of some structural
changes both in business
institutions as well as in society. According to this concept,
corporate managers were
responsible not simply for maximizing stockholder wealth but
also for maintaining an
equitable balance among the competing claims of customers,
employees, suppliers,
creditors, and the community, as well as the stockholders (Hay
& Gray, 1974, p. 136).
In this view, the manager is no longer considered simply as an
agent of the owners, but
he is more seen as a trustee for the various contributor groups
to the firm (Hay &
Gray, 1974, p. 136).
A third phase is labeled quality of life management which arose
in the 1950s. Just like
Van Marrewijks (2003) societal approach, the socially
responsible firm under phase III
reasoning is one that becomes deeply involved in the solution of
societys major
problems (Hay & Gray, 1974, p. 138). Societys major problems
refers to social
problems which had developed as direct and indirect results of
economic success of the
preceding years. Hay and Gray (1974, p. 137) give the following
examples: air and
water pollution, deteriorating cities, disregard for
consumers,
1.4 Definitional clarity of CSR
Many definitions of CSR can be found throughout literature.
According to Carroll (2008)
one of the first people to articulate a definition on CSR was R.
Bowen. He did this in his
book Social Responsibilities of the Businessman of 1953. We
previously mentioned that
in those days the term social responsibility (SR) was more often
used than corporate
social responsibility (CSR), therefore thats also the term that
Bowen used in his
definition. Bowens definition stated the following It (SR)
refers to the obligations of
businessmen to pursue those policies, to make those decisions,
or to follow those lines of
action which are desirable in terms of the objectives and values
of our society (Carroll,
2008, p. 25).
Since then many more have tried to formulate a clear and
unbiased definition of CSR
(Dahlsrud, 2008) Despite the high amount of studies empirically
examining CSR and the
numerous efforts to bring about this definition, Clarkson (1995)
believes there has not
yet been established a satisfactory and generally accepted
definition for CSR, which still
leads to great confusion (Dahlsrud, 2008). The confusion stems
from the fact that
without a clear definition theoretical development and
measurement are difficult
(McWilliams, Siegel, & Wright, 2006). Banerjee (2001)
expresses the same idea by
saying that corporate social responsibility is too broad in its
scope to be relevant to
organizations (p. 42). This is not a new idea as we previously
pointed out that Jones
(1980) already said in 1980 that social responsibility is too
vague to be useful (p. 60).
Hence, even though there is 20 years between both articles, the
problem remains
current.
Part of the difficulty in defining CSR lays in the fact that it
is unclear whether CSR is
really a concept. In their book The Oxford Handbook of corporate
social responsibility
Crane, McWilliams, Matten, Moon and Siegel (2008) suggest that
CSR should not be
considered a concept, but rather a field of scholarship. Various
authors have developed
important and influential concepts, constructs, and theories of
CSR, these are competing
with many other concepts, constructs, and theories of CSR (Crane
et al., 2008, p. 6).
-
14
Crane et al. believe that a closely defined term is not the
solution because these
differences should be accommodated for in CSR and not avoided to
obtain a narrow
definition. Kakabadse, Rozuel and Lee-Davies (2005) also believe
that CSR should be
seen as a process rather than a set of outcomes. They state that
CSR cannot be a static
concept because the environment society members live in is
dynamic (Kakabadse et al.,
2005, p. 285). Kakabadse et al. were not the first ones to come
up with this. We
previously mentioned Jones (1980) who also believed that CSR
should be considered a
process instead of a set of outcomes.
Another part of the difficulty in defining CSR lays in the fact
that different types of
organizations present different views on CSR. According to Van
Marrewijk (2003) their
different views on CSR are based on the specific situation and
challenges that distinct
types of organizations are facing. This is in line with the view
of Kakabadse et al. (2005)
who state the following: CSR in practice tends to be very
contextual, very sensitive to
environmental, organisational, even individual specificities (p.
286). They continue:
this characteristic makes CSR a very rich, but highly complex
concept, and certainly
difficult to define once and for all (Kakabadse et al., 2005, p.
286)
Because of this Van Marrewijk (2003) believes that the current
concepts and definitions
are often biased towards specific interests (p. 96) He does,
however believe in the
importance of a definition, but argues that that one solution
fits all definition for
CS(R) should be abandoned, accepting various and more specific
definitions matching
the development, awareness and ambition levels of organizations
(Van Marrewijk, 2003,
p. 95). The reason why Van Marrewijk is not in favor of one
definition is because it would
be too broadly defined and too vague, which would make it
useless in academic debate
or in corporate implementation. He believes that each company
should choose from
the many opportunities which concept and definition is the best
option, matching the
companys aims and intentions and aligned with the companys
strategy, as a response
to the circumstances in which it operates (Van Marrewijk, 2003,
p. 96).
Despite the various definitions and the confusion that comes
with it, Dahlsrud (2008)
came to an interesting conclusion. He recognizes the wide array
of definitions available,
but shows in his analysis that the existing definitions are to a
large degree congruent
(Dahlsrud, 2008, p. 1). Dahlsrud came to this conclusion by
looking for similarities and
differences between existing definitions and executing frequency
counts. Through a
content analysis of existing CSR definitions he reasoned that
all of them were
consistently referring to five dimensions, being: the
environmental dimension, the social
dimension, the economic dimension, the stakeholder dimension and
the voluntariness
dimension. Afterwards he used frequency counts from Google to
analyze how often the
different dimensions were invoked. Dahlsrud (p. 5) found that
four out of five
dimensions have a comparable dimension ratio above 80% (the
stakeholder dimension:
88%, the social dimension: 88%, the economic dimension: 86%, the
voluntariness
dimension: 80%). The fifth dimension, which is the environmental
one, has a
significantly lower dimension ratio of 59%. It is important
however that all the
dimensions have dimension ratios above 50%, which indicate that
they are more likely
than not to be included in a random definition (Dahlsrud, 2008,
p. 5).
In a next step Dahlsrud (2008) studied the consistency between
the definitions by
looking at how many of the five different dimensions each
definition used. He found that
eight of the definitions he worked with include all five
dimensions. These eight, account
-
15
for 40% of the total frequency count. When looking at the
definitions including three or
more dimensions, he counted 31 definitions, constituting 97% of
the total frequency
count. Based on his research Dahlsrud concluded that although
they apply different
phrases, the definitions are predominantly congruent, making the
lack of one universally
accepted definition less problematic than it might seem at first
glance (Dahlsrud, 2008,
p. 7). Dahlsrud therefore concludes that the confusion is not so
much about how CSR is
defined, as about how CSR is socially constructed in a specific
context (p. 1).
It is interesting to see how the first definition of (corporate)
social responsibility we
discussed before, formulated by Bowen, mainly focusses on the
social dimension. As
mentioned before: in the days in which the definition was
published, 1953, social
responsibility (SR) was more often used than corporate social
responsibility (CSR)
(Carroll, 2008). It is therefore not surprising that most
attention in this definition is
given to the social dimension and that the other dimensions,
more related to the
corporate aspect, are not really present. As SR evolved more
into CSR over time, the
definitions in literature started to include more
dimensions.
From Dahlsruds (2008) study we could conclude that the
definition of CSR, formulated
by the Commission of the European Communities in 2001, is the
best one. We do this
based on the fact that this definition has the highest frequency
count and because it
includes all 5 dimensions. Their definition on CSR is the
following: A concept whereby
companies integrate social and environmental concerns in their
business operations and
in their interaction with their stakeholders on a voluntary
basis (Commission of the
European Communities, 2001, p. 6; Dahlsrud, 2008, appendix).
Unfortunately Dahlsruds
paper wasnt the solution to the problem regarding the CSR
definition; many definitions
on CSR have continued to exist. Even the European Commission
altered its definition in
2011 and put forward a new, simpler, but also vaguer definition
on CSR being the
responsibility of enterprises for their impacts on society
(European Commission, 2011,
p. 6). The Commission then defines, in more generic terms, what
enterprises should
undertake to meet this responsibility.
As mentioned before, the lack of a general definition leads to
confusion, but also hinders
academic debate and corporate implementation. Nevertheless, for
companies it is critical
to know what consumers consider to be CSR or CSR related
activities. To say it with the
words of Dahlsrud (2008): the challenge for business is not so
much to define CSR, as it
is to understand how CSR is socially constructed in a specific
context and how to take
this into account when business strategies are developed (p.
1).
For the remainder of this thesis we will work with the initially
proposed definition by the
Commission of the European Communities in 2001. We already
motivated why we
believe this to be an appropriate choice.
1.5 Synonyms
We previously mentioned that the lack of a satisfactory and
generally accepted definition
for CSR leads to great confusion (Clarkson, 1995; Dahlsrud,
2008). Furthermore there is
a long list of concepts which are often used synonymously for
CSR, which leads to an
even greater amount of confusion.
-
16
Carroll (2008) provides a list of some of the terms which are
often used interchangeably
to talk about corporate social responsibility. They include the
following: business ethics,
corporate citizenship, corporate accountability, and
sustainability (Carroll, 2008, p. 38).
There are many other synonyms or related concepts which might be
used to talk about
CSR, including: conscious capitalism, corporate governance, and
ecological economics
(Craps, 2012b). However, we believe Carroll (2008) captures the
most important ones
and thats why we will focus on his list.
Just as CSR is not clearly defined and delineated, the concepts
below suffer from the
same problem. Therefore it is important to keep in mind that the
explanations below are
not absolute and just views of different writers.
1.5.1 Business ethics
According to the dictionary of human resource management by
Oxford University Press
(2008), business ethics is the application of ethical reasoning
to the situation of
business organizations (Business ethics, 2008). While CSR
requires ethical reasoning,
business ethics and CSR are not completely the same. Business
ethics can be considered
part of CSR, which is clearly illustrated in the hierarchical
approach to CSR by Archie
Carroll3.
Carroll (2001) talks about the pyramid of corporate social
responsibility and suggests
that four kinds of social responsibilities constitute total CSR:
economic, legal, ethical,
and philanthropic (p. 40). He believes that there is a hierarchy
in these company
responsibilities and thats why his framework is often referred
to as the hierarchical
approach to CSR (Craps, 2012a).
Carroll (2001) believes that the main responsibilities of
companies lay in the economical
field and more precisely through being profitable. It is often
argued that the economic
responsibilities refer to what a business does for itself, and
that the legal, ethical and
philanthropic components refer to what businesses do for others.
Carroll (2008),
however, argues that economic viability is also something
business does for society as it
contributes to maintaining the business system. It is therefore
that Carroll includes
economic responsibilities in its view on CSR.
A next set of responsibilities a company has to fulfill, are
labeled legal responsibilities.
This means that they are required to obey the law. Following the
legal responsibilities
are the ethical responsibilities, which refer to business
ethics. It is clear from this that
business ethics are only a part of CSR. Ethical responsibilities
are the obligation to do
what is right, just and fair (Craps, 2012a). These three
aforementioned responsibilities
are however not enough to constitute CSR. CSR also requires
philanthropic
responsibilities, which means that the company has to be a good
corporate citizen.
Carroll (2001) describes this as contribute resources to the
community, improve the
quality of life (p. 42).
Within the field of business ethics, a range of competing
positions can be found. These
different positions are grounded in different schools of moral
philosophy. The dictionary
of human resource management by Oxford University Press mentions
three positions,
3 Whereas the framework as a whole explains CSR, it is discussed
in this section to illustrate how business
ethics is only just a part of CSR.
-
17
being deontology, utilitarianism, and justice-based theories of
ethics. Essentially, these
positions consist of arguments for identifying ethical or
desirable management practice
(Business ethics, 2008, para. 1). They provide the following
example:
Action (HR policy) may be considered desirable because it treats
employees as
ends-in-themselves with rights to dignity, privacy, and respect
(deontology);
because it promotes the greatest good of the greatest number
(utilitarianism); or
because it satisfies the tests of procedural and distributive
justice (justice-based
theory) (Business ethics, 2008, para. 1).
1.5.2 Corporate citizenship
Corporate citizenship is another concept which is often used
synonymously for CSR. The
Canadian Oxford dictionary by the Oxford University press
defines a corporate citizen as
a business corporation considered in term of its responsibility
to society as a whole
(corporate citizen, 2004). Carroll (2008) states that corporate
citizenship may be
broadly or narrowly conceived (p. 37). Hence, depending on which
way it is defined, the
concept seems to overlap more or less with the concept of
CSR.
Here again we can make a link with the hierarchical framework by
Carroll (2001). The
philanthropic responsibilities, mentioned before, refer to being
a good corporate citizen.
On the one hand, if corporate citizenship is broadly conceived,
it might be that it refers
to philanthropic responsibilities and all the other
responsibilities (ethical, legal and
economic) which precede in the hierarchy. Hence it refers to
CSR. On the other hand, if
corporate citizenship is narrowly conceived, it might be that it
refers only to the
philanthropic responsibilities. In that case, corporate
citizenship cannot be considered a
synonym for CSR as you need all four kinds of responsibilities
to constitute total CSR.
1.5.3 Corporate accountability
Corporate accountability is often used to talk about CSR and
sometimes used as a
synonym for it. However, Craps (2012b) states that corporate
accountability is actually
part of CSR. If a company wants to be socially responsible, it
has to be accountable (M.
Craps, 16 February, 2012). According to Craps, accountability
refers to the recognition
by an organization of the impact it has on the external
environment. On top of that the
organization has to assume responsibility for those effects to
all involved
parties/stakeholders (Craps, 2012b, slide 13). Corporate
accountability also requires a
willingness of the company to report to all its stakeholders in
a transparent way.
1.5.4 (Corporate) sustainability
Sustainability is often used to describe a type of development.
Sustainable development
is a development which meets the needs of the present without
compromising the
ability of future generations to meet their own needs (World
Commission on
Environment and Development [WCED], 1987, article 27). According
to the WCED
(1987), the concept of sustainable development implies limits.
These limits are not
necessarily absolute, but limitations imposed by the present
state of technology and
social organization on environmental resources and by the
ability of the biosphere to
absorb the effects of human activities (WCED, 1987, article
27).
Whereas the C in CSR clearly refers to social responsibility at
a company level,
sustainability is a term often used at a societal level.
Therefore in the following
-
18
paragraphs we will talk about corporate sustainability (CS), to
make the two concepts,
CS and CSR, comparable at a company level.
Even though CSR and CS are often used as synonyms, Olawale
(2009) says they are not
exactly identical. According to Olawale: CS seems to concentrate
more on the impact of
a company on its environment and vice-versa, whilst CSR seems to
focus on the
benevolent and beneficial activities of the company to society
(p. 4). Olawale believes
that the major difference is the type of equity on which both
focus. CSR is more focused
on stakeholder benefit or stakeholder equity considerations,
while CS more focusses on
social equity and more specifically how to foster socio-economic
development.
Sustainability is characterized by the fact that generally a
reference is made to the
notion of inter-generational equity. When we talk about
corporate sustainability, this
means a reference to inter-generational equity between present
and future
shareholders and stakeholders of companies (Olawale, 2009, p.
7).
We can argue that the link between CSR and sustainability is
that CSR should be
considered part of sustainability. To achieve sustainable
development efforts at company
level, in the form of CSR, are a necessary condition, but not
sufficient. Sustainable
development also requires efforts at other levels, such as by
the government, by society
as a whole, on individual level,
The Interdepartmental Commission for Sustainable Development
(ICSD, 2006) agrees
with this to a certain extent. The ICSD also believes that
sustainable development is
much wider than CSR and that it does not just concern companies.
They say the
following: sustainable development has a generally transversal
character, which means
that all actors in society are involved (ICSD, 2006, p. 8).
However, they dont consider
CSR to be part of sustainability. Rather they see CSR as an
application of sustainable
development to the activities and accompanying responsibilities
of businesses (ICSD,
2006, p. 8).
Each of the aforementioned topics or concepts has their own
extensive literature, which
overlaps to a certain extent with the CSR literature. However,
it is beyond the scope of
this thesis to further elaborate on those areas of research.
1.6 Conclusion
It is clear that the origins of CSR can be traced back for
centuries. Despite its long-
ranging history, no consensus has been reached yet on the
definition of CSR, due to the
complexity of the subject matter. This lack of satisfactory and
generally accepted
definition together with a variety of concepts which are often
used interchangeably to
describe CSR, leads to great confusion.
For the remainder of this thesis we will work with the initially
proposed definition by the
Commission of the European Communities in 2001. We believe it to
be a good choice
because Dahlsruds (2008) study indicated that this definition
includes all five
dimensions of CSR and he pointed out that its the definition
with the highest frequency
count in his study.
-
19
Chapter 2: Different views on CSR
2.1 Introduction
In this chapter we take a look at the different views on CSR. We
will list a few of the
proponents and opponents and we will look into the arguments
which they generally use
to defend their positions. We will talk a little about the link
between corporate social
performance and corporate financial performance and in a last
section we will briefly
discuss the emergence of a new view.
2.2 Different views on CSR
As discussed before there are three approaches to CSR: the
shareholder approach, the
stakeholder approach and the societal approach. Van Marrewijk
(2003) however does
not state that the latter is also the contemporary one. The
problem is that there are
different views on the relationship between CSR and business and
that there is still an
on-going academic debate as to whether corporate decision makers
should be
concerned with issues other than profitability (Mohr, Webb,
& Harris, 2001, p. 46). This
debate is not a recent phenomenon, but is as old as CSR
itself.
To understand the different views it is useful to look at the
two extreme cases. A first
view is formulated by the proponents or advocates of CSR. They
believe that companies
are capable of making more long term profit and increasing long
term success by
operating with a CSR perspective. Opponents or critics, on the
other hand, argue that
CSR would only distract firms from the economic role of
businesses, namely profit
generation (Buhr & Grafstrm, 2007).
Jensen (2002) also describes these two competing views. He
claims that the proponents
of CSR usually support the stakeholder theory, while the
opponents support the value
maximization proposition. Stakeholder theory says that managers
should make
decisions so as to take account of the interests of all
stakeholders in a firm (p. 236). On
the other hand, value maximization states that managers should
make all decisions so
as to increase the total long-run market value of the firm (p.
236).
According to Mohr et al. (2001), Adam Smith (1863) argued in
1863 that the pursuit of
profit generation and doing well for society can go together, it
doesnt have to be one or
the other. Smith believed that business owners, in pursuit of
profit, will ultimately
produce the greatest social good because of the invisible hand
of the marketplace (Mohr
et al., 2001, p. 46). The view of Adam Smith was, and still is,
subject to a lot of critique
because many contemporary thinkers believe in the presence of
several conditions which
actually hinder the effectiveness of the invisible hand (Mohr et
al., 2001). According to
Mohr et al. some of these conditions include the lack of
consumer information and
imperfect competition (p. 46). Because many believe the view of
Adam Smith to be
unrealistic, we will now take a look at the views formulated by
the proponents and
opponents of CSR.
2.3 Proponents
Keith Davis (1960) is one of the proponents. He believes that
the primary economic
objectives of a business have to come first, because otherwise
the business will lose its
-
20
reason for existence (Davis, 1960). However, while he believes
that economic functions
are the most important for business, he also states that this
does not negate the
existence of non-economic functions and responsibilities (Davis,
1960, p. 76).
Carrolls (2001) hierarchical approach is in line with the view
of Davis (1960). Carroll is
also an advocate of CSR, but as previously discussed, economic
responsibilities are found
at the bottom of Carrolls pyramid of CSR. Hence, just as Davis,
Carroll considers the
economic functions to be the most important ones.
Among the advocates of CSR we also find John Elkington (1997),
who is an important
European scholar in the field of CSR. Elkington is often
compared to Carroll. Whereas
both of them agree on the importance of CSR in business, both
take a different view on
how to approach it. We previously discussed the hierarchical
view of Carroll. Elkingtons
view is often labelled the horizontal view, the triple bottom
line or PPP. It is called the
horizontal view, because whereas Carroll talks about a hierarchy
in responsibilities,
Elkington believes that all Ps, which stand for people, planet
and profit, are equally
important (Craps, 2012a).
Labelling it a horizontal view is not completely correct though.
Elkington (1997) stated
that society depends on the economy and the economy depends on
the global
ecosystem, whose health represents the ultimate bottom line (p.
73). Hence, Elkington
does believe in a kind of hierarchy because he believes there is
an environmental bottom
line, which is the most important one, so not all Ps are equally
important. His
environmental bottom line starts from the idea that you cannot
negotiate with the
environmental system because there are limits. Where two Ps or
two bottom lines come
together, is what Elkington labels the shear zones. He believes
that CSR is put into
practice in those shear zones because the Ps that come together
often contradict.
Post and Sachs (2002) are also found among the proponents. They
talk about the new
stakeholder view and state the following: the new stakeholder
view posits that the
capacity of a firm to generate sustainable wealth over time, and
hence its long-term
value, is determined by its relationships with critical
stakeholders (p. 9). The exact
details of how the new stakeholder view differs from the
traditional stakeholder view are
irrelevant for our CSR discussion. The essence here is that Post
and Sachs believe that
focusing on the interests of the shareholders alone wont be
sufficient to increase long
term success.
2.3.1 Arguments in favor of CSR
While we briefly mentioned a few of the proponents in the
previous section, it is more
interesting to look at some of the arguments used by the
proponents to defend their
position.
Davis (1973) documented the CSR debate and provided an overview
of arguments for
corporate social responsibility and arguments against corporate
social responsibility.
Even though his article was written in 1973, many of the
arguments are still relevant in
the current CSR debate. Jones (1980) is another writer who
briefly documented the
debate in his article corporate social responsibility revisited,
redefined. The view of the
proponents, he labels prosocial responsibility position, which
means that corporations
have an obligation to constituent groups other than shareholders
(p. 61). The view of
-
21
the opponents, he labels the antisocial responsibility position,
which refers to the idea
that corporations have an obligation to stockholders alone (p.
61).
A first argument Davis (1973) discusses is long-run
self-interest (p. 313). This
argument states that spending money on social programs is
actually in the long-run
interest of the business itself. It might seem contradictory
that spending money will
increase profit, but the idea behind it is that there is a
strong link between business and
society. By creating a better community and a better society,
through these social
programs, the firm will benefit as well. In that way companies
create a better
environment for their business. Davis gives a few examples:
labor recruiting will be
easier, and labor will be of higher quality, turnover and
absenteeism will be reduced,
crime will decrease, less taxes will have to be paid to support
police forces, (p. 313).
A second argument is public image, which is closely related to
the previous one (Davis,
1973). Each individual firm aims at enhancing its own public
image and hopes it leads to
an increase in customers, better employees, and other benefits.
A firm that wishes to
capture a favorable public image will have to show it supports
the social goals that the
members of the public find important.
Another argument is labeled by Davis (1973) as viability of
business. It relates to the
Iron Law of Responsibility, which says in the long run, those
who do not use power in a
manner which society considers responsible will tend to lose it
(Davis & Blomstrom,
1971, p. 95). It is reasoned that business, as an institution,
only exits because it
performs valuable services for society (Davis, 1973). Davis
states:
Society gave business its charter to exist, and that charter
could be amended or
revoked at any time that business fails to live up to societys
expectations.
Therefore, if business wishes to retain its present social role
and social power, it
must respond to societys needs and give society what it wants
(p. 314).
Hence, if businessmen do not accept social-responsibility
obligations, other groups will
eventually step in and assume those responsibilities. The power
that comes with those
obligations will then be assumed by those other groups.
A fourth argument in favor of CSR has to do with the avoidance
of government
regulation (Davis, 1973). It is argued that if the businessman
on his own engages in
socially responsible behavior, he can prevent the government
from introducing new
regulations. Businesses are not in favor of new regulations
because they are costly to
the business and they restrict their flexibility in decision
making.
A fifth argument deals with sociocultural norms (Davis, 1973).
The idea is that the
operations of a businessman are subject to a set of cultural
constraints in the same way
as any other person in society operates under a set of cultural
constraints. Davis (1973)
says that research shows that those cultural norms are powerful
tools in determining
behavior. Consequently, as the norms in society change, the
businessman will adapt his
behavior as well. For example: if society moves toward norms of
social responsibility as
it is now doing, then the businessman is subtly and inevitably
guided by these same
norms (Davis, 1973, p. 315).
-
22
Another argument in favor of the business engaging in CSR is
that it is in the interest of
the stockholder (Davis, 1973, p. 315). This argument is of
course strongly linked to all
the other ones.
Davis (1973) lists another argument: many other institutions
have failed in handling
social problems, so why not turn to business (p. 316). This
argument, however, is not a
very strong one as it is made more out of desperation and
frustration than out of reason.
A related argument is that business has valuable resources which
could be applied to
social problems, so society should use them (Davis, 1973, p.
316). Resources does not
only refer to money, but also to management talent, functional
expertise, and innovative
abilities. If business were to use these innovative abilities to
deal with social problems,
many of these problems could be handled in a profitable way
according to the traditional
business concepts. In that way problems can become profits,
which is another
argument by Davis (1973, p. 317).
A final argument in favor of CSR is that prevention is better
than curing (Davis, 1973,
p. 317). The social problems will not go away by themselves and
will have to be dealt
with at some point in time. It is argued that it is actually
more economical to deal with
them now before they grow into bigger problems. If business
postpones dealing with
these problems now, it might have to spend a lot more time on
them in the future, which
will leave less time to achieve its primary objectives.
2.4 Opponents
Milton Friedman (1962, 1970) is one of the most notorious
opponents of incorporating
CSR into business practices. He clearly formulated his opinion
on CSR in the title of one
of his works, being: the social responsibility of business is to
increase its profits
(Friedman, 1970, p. 1). He already expressed his opinion before,
in his work of 1962, by
saying: few trends could so thoroughly undermine the very
foundations of our free
society as the acceptance by corporate officials of a social
responsibility other than to
make as much money for their stockholders as possible (Friedman,
1962, p. 133).
Friedman (1970) believes that only people have responsibilities.
He states that a
corporation is an artificial person and in this sense may have
artificial responsibilities,
but business as a whole cannot said to have responsibilities,
even in this vague sense
(Friedman, 1970, p. 1).
In his paper Friedman (1970) makes a distinction between the
business, the owners of
the business and corporate executives. These three are linked by
the fact that Friedman
defines a corporate executive as an employee of the owners of
the business. In this way
the corporate executive has direct responsibility to his
employers (Friedman, 1970). This
responsibility entails conducting the business in accordance
with their desires, which
generally will be to make as much money as possible while
conforming to their basic
rules of the society, both those embodied in law and those
embodied in ethical custom
(Friedman, 1970, p. 1). Of course in some cases the employers
might have a different
objective other than making as much money as possible. Putting
aside the issue of the
objective of the owners, the general idea is that the corporate
executive, also called the
manager, is the agent of the individuals who own the corporation
and his primary
responsibility is to them (Friedman, 1970, p. 1).
-
23
Friedman believes that a distinction should be made between a
person in his role of
corporate executive, as discussed before, and as a person in his
own right (Friedman,
1970, p. 2). As a person, he may have other responsibilities,
for example: to his family.
It might be that he devotes part of his income to some of these
responsibilities, also
referred to as social responsibilities. This situation has to be
distinguished from the
previous one as in this case he is not acting as an agent, but
as a principal because he
is spending his own money or time or energy, not the money of
his employers or the
time or energy he has contracted to devote to their purposes
(Friedman, 1970, p. 2).
Therefore these are social responsibilities of an individual and
not of a business.
According to Friedman, a corporate executive can spend his own
money on general
social interests, but he should not spend the money of his
employers on this. Because if
he does, he is acting in a way that is not in the interest of
his employers, as they wish to
make as much money as possible. He should not spend the money in
a different way
than the employers would have spent it.
Porter and Kramer (2011) refer to the fact that the reasoning
above doesnt suggest that
businesses shouldnt contribute to social benefit. But the belief
here is that CSR shouldnt
be incorporated into business practices because business already
contributes to society
by making profit. In its turn, profit generation leads to
employment, wages, purchases,
investments and taxes. Hence Porter and Kramer state conducting
social business as
usual is sufficient social benefit (Porter & Kramer, 2011,
p. 66) according to this view.
This statement of Porter and Kramer (2011) is in line with the
idea of the invisible hand,
introduced by Adam Smith (1863).
Jensen (2002) is one of those critics who believes that social
responsibility shouldnt be
incorporated into the business because business already
contributes to society by
making profit. He states that 200 years (sic) worth of work in
economics and finance
indicate that social welfare is maximized when all firms in an
economy maximize total
firm value (p. 239). Jensen acknowledges that in order to
succeed, companies must
address multiple constituencies. However, he believes that it is
logically impossible to
maximize along more than one dimension at the same time, so he
claims that there will
always be trade-offs. He believes that maximizing the total
market value of the firm is
one objective function that will resolve the tradeoff problem
among multiple
constituencies (p. 239). Margolis and Walsh (2003) state that
those subscribing to the
view of Jensen believe that if shareholder wealth is maximized,
social welfare is
maximized as well (p. 271).
Another early opponent is Theodore Levitt (1958). In his article
he points out the
dangers of social responsibility (Levitt, 1958). He believes
that CSR leads to the profit
motive being compromised. Levitt states that business will have
a much better chance
of surviving if there is no nonsense about its goals that is, if
long-run profit
maximization is the one dominant objective in practice as well
as in theory (p. 49). He
believes that businesses should let the government take care of
the general welfare and
the business should take care of more material aspects of
welfare.
-
24
2.4.1 Arguments against CSR
After briefly discussing the ideas of Friedman (1970), Jensen
(2002) and Levitt (1958),
we will take a look at the arguments which are generally used by
opponents to defend
their viewpoint.
The most prevailing argument against CSR is the classical
economic doctrine of profit
maximization (Davis, 1973, p. 317). According to this point of
view, business only has
one function, being an economic one. Therefore success will be
measured by only using
economic values as criteria. The manager is the agent of the
stockholders, and all of his
decisions are controlled by his desire to maximize profits
for