What is corporate social responsibility (CSR)?

In this video, we are going to have a look at corporate social responsibility, or CSR for short. We’re going to address the fundamental principles underpinning this concept, and we are going to find the answer to the question, what is CSR?

CSR is still a relatively new and emerging practice, and it’s largely defined and pragmatically developed by companies. And for this reason, there is no one agreed upon definition of CSR, but we do find a definition on this slide. And Crane and colleagues, they say that “CSR is oriented towards the wider role of the corporation in the global economy.” We also find four schools of thought here. So we have CSR on the very left. So this is the most long-standing concept in the area, and it’s been used by business and academia for more than 50 years.

We also have business ethics on there, and that refers to the study of business situations, activities, and decisions where we’re looking at issues of right and wrong, so the morality of different business practices. The concept of sustainability is another bracket under which CSR is discussed in business, politics, and academia, and it originates from forestry and environmental management. And in a business context, what it aims to do is to map out how an organisation can successfully survive without compromising the ecological, social, and economic survival of its current and future environment. So sustainability appears to be the most common interpretation of contemporary CSR. And then we have corporate citizenship.

So this is business-driven new terminology, and within the academic debate, corporate citizenship has focused on highlighting the political nature of CSR. So many CSR activities are carried out in close cooperation with political actors. On this slide, we find two basic approaches to CSR, the traditional approach and the contemporary approach. Within the traditional approach to CSR, we’re looking at a company that would generate its profits and create value without much consideration for wider societal expectations beyond shareholders and perhaps customers. So once the profit is generated, the company will spend the money, will distribute the value that it has created on a variety of CSR projects that are considered of value to important stakeholders.

So this corporation engages in unilateral philanthropy, so they act on their own. For a company characterised by contemporary CSR, responsible behaviour is seen as an opportunity to generate profits whilst at the same time living up to the expectations of society. So rather than donating money that they’ve generated from their normal business, these companies make CSR part of their normal business. So CSR is an integral, built-in management practice, a part of their core value-creating activity that is driven by attention to market trends, product development, and performance throughout the entire supply chain. So this is collaborative value creation.

When we read the literature associated with CSR and when we listen to media reports, we quickly realise that there is a whole range of theories and approaches and different terminology. And on this slide, we find just a handful of examples - so, society and business, social issues management, public policy and business, stakeholder management, corporate accountability, corporate citizenship, corporate sustainability. And they are just a few of a whole range of different concepts and terminologies used.

What we see on this slide is an attempt at mapping the territory of CSR. The way we do that is to consider each theory from the perspective of how the interaction happens between business and society. The most relevant CSR theories are related to approaches that are focused on four aspects of social reality, so we look at economics, politics, social integration, and ethics. So in front of us, we’ve got four groups of theories. We have the instrumental theories. These assume that the corporation is an instrument for wealth creation, and that’s the sole responsibility of the company. So only the economic aspect of the interaction between business and society is considered.

Any social activity will only be accepted if it’s consistent with wealth creation. One example of a theory here is that associated with maximising shareholder value, and this is measured by share price. And a well-known approach here is that which takes the straightforward contribution to maximising the shareholder value as the supreme criterion to evaluate specific corporate social activity. So if investment in social demands would produce an increase of the shareholder value, then it should go ahead. If it doesn’t, it should be rejected. Then we have political theories. These theories emphasise the social power of the corporation specifically in its relationship with society and its responsibility in the political arena associated with this power.

An organisation that recognises this would then accept social duties and rights, and they would participate in certain social cooperation. One example of a theory here is that associated with corporate citizenship. These theories are focused on rights, responsibilities, and possible partnerships of business in society, so just as individuals can be citizens, the same applies to businesses. Businesses that accept this role of having a corporate citizenship, they would display a strong sense of business responsibility towards, say, the local community and for considerations of the environment. Then we have integrative theories. These consider that business ought to integrate social demands, and that’s on the basis of business depending on society for its continuity and growth and even for its existence.

One example of a theory here is that of stakeholder management and this approach is oriented towards stakeholders or people who affect or who are affected by corporate policies and practices. So stakeholder management tries to integrate groups with a stake in the firm into managerial decision-making Then we have ethical theories. These theories understand that the relationship between business and society is embedded with ethical values, so this leads to a vision of CSR from an ethical perspective. And as a consequence of this, firms ought to accept social responsibilities as an ethical obligation above any other consideration. One example here is that associated with universal rights, so this takes human rights as a basis for CSR.

So, in recent years, we’ve seen human rights-based approaches for corporate responsibility. So, for instance, the UN Global Compact, which includes nine principles in the areas of human rights, labour, and the environment - that’s one example, and all are based on the Universal Declaration of Human Rights adopted by the United Nations General Assembly in 1948.

So, in conclusion to this video on CSR: CSR theories are focused on four main aspects - meeting objectives that produce long-term profits, using business power in a responsible way, integrating social demands, and contributing to a good society by doing what’s ethically correct. Thank you for your attention. Now let’s have a look at what this may mean in practice.