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CHAPTER 4: WHAT IS CORPORATE

SOCIAL RESPONSIBILITY?

Learning objectives
• Understand CSR importance and its development
• Explain what CSR is
• Describe and analyse components in Carroll’s CSR pyramid
• Understand the relations between CSR and firm functions

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Types of organizations

What is CSR?

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What is CSR?
CSR & STAKEHOLDERS

In any given instance, numerous stakeholders groups clamouring for

managers’ attention.
Þ How managers prioritize stakeholders?

What is CSR?
CSR & STAKEHOLDERS Legitimacy refers to the extent to which a
group has a justifiable right to be making
its claim. For example, a group of 300
From CSR perspective: their legitimacy employees about to be laid off by a
plant-closing decision has a more
legitimate claim on management's
attention than the local chamber of
commerce, which is worried about losing
the firm as one of its dues-paying
members.

From management perspective (efficiency): their power

The stakeholder's power is another factor. Thousands of small,
individual investors, for example, wield very little power unless
they can find a way to get organized. By contrast, institutional
investors and large mutual fund groups have significant power
over management because of the sheer magnitude of their
investments and the fact that they are organized

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What is CSR?
CSR & STAKEHOLDERS

Questions need to be concerned:

1. Who are our stakeholders?
2. What are their stakes?
3. What opportunities and challenges are presented by our
stakeholders?
4. What corporate social responsibilities (economic, legal, ethical, and
philanthropic) do we have to our stakeholders?
5. What strategies, actions, or decisions should we take to best deal
with these responsibilities?

What is CSR?
• Firm’s stakeholders - Any group or individual who can
affect or is affected by the achievement of the firm's
objectives (Freeman, 1984)
• Including: defined customers, employees, suppliers,
creditors, and regulating authorities, local communities,
and even natural environment
• How to prioritize stakeholders?
– Stakeholder concerns
– Strategic outlook
– Societal legitimacy

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Questions?
• What is the relationship between a firm and the
societies within which it operates?
• What responsibility does a firm owe society to self-
regulate its actions in pursuit of profit?

The emergence and development of CSR

Philanthropy, Profitability in the Environment-1st Voluntariness,
profit-seeking, long-run, legalism, mentioned, stakeholder, social,
profit voluntariness, voluntariness, environment, and
maximization- expectations of the legalism, stakeholder profit-making
the only duty publics , businessmen

Before 1950- 1960- 1970- 1980- 1990- 2000-

1950 1960 1970 1980 1990 2000 Now

Corporate social
Somewhat wider than Stakeholder,
performance,
profit-making, values Carroll’s CSR
stakeholder theory,
of our society , definition (4 types
biz ethics theory,
foremost definition of of responsibilities)
corporate citizenship
Bowen (1953)

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What is CSR?
• ‘The social responsibility of business encompasses the
economic, legal, ethical, and discretionary expectations
that society has of organizations at a given point in
time.’ (Carroll 1979)

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What is CSR?

Source: (Carroll 1991)

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What is CSR?
Carroll’s CSR pyramid (1991)

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What is CSR?
Carroll’s CSR pyramid (1991)

Economic responsibilities: The primary responsibilities of companies is to

produce goods and services in a way that is profitable to their owners.

Legal responsibilities: While assuming their fundamental economic role,

companies are expected to comply with the laws and regulation that
reflect society’s values and norms.

Ethical responsibilities: Businesses are also expected to abide by the

ethical norms of society. They are more ambiguous than legal
requirements and therefore more difficult for companies to anticipate
and follow.

Philanthropic responsibilities: Business may engage in activities that go

beyond the expectations of society, including volunteer work,
sponsorship, and donations.

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Strategy & CSR

• Vision – why firm exits, identifying the needs the firm
aspires to solves for others
• Mission – what the organization is going to do to
achieve its vision
• Strategy – how the firm is going to undertake its
mission, how to negotiate its competitive environment
to attain sustainable advantage
• Tactics – day-to-day management decisions made to
implement the firm’s strategy

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Strategy & CSR

Means
(operations ignoring firm’s
broader stakeholder obligations)

St r
ate
gic
C SR End (Profit maximization,
share price growth)

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Strategy & CSR

• Key
stakeholders
of a firm

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Strategy & CSR

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Strategy & CSR

The four steps of stakeholder prioritization

1. Identify the set of stakeholders that are relevant for

this particular issue
2. Analyse the nature of the issue to see how it relates to
firm operations
3. Prioritise among stakeholders and their competing
interests and demands
4. Act as quickly as is prudent, attempting to satisfy as
many stakeholders, in order of priority, that is feasible

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ARGUMENTS FOR AND AGAINST CSR

Main areas of disagreement about the effects of corporate social
responsibility on individual companies and society at large:

Profit maximisation

Resource fit

Lack of accountability

The ‘Iron Law of

Responsibility

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ARGUMENTS FOR AND AGAINST CSR

Arguments for CSR
Arguments against CSR
Ø CSR improves a firm’s
performance, through goodwill, Ø CSR is a waste of resources
reputation, customer and Ø Businesses lack the specific
employee satisfaction knowledge to deal with
Ø Businesses has valuable societal problems
resources to tackle societal Ø Businesses are accountable
problems, e.g. management to shareholders not the
talent and innovation public
Ø “Iron Law of Responsibility”.
Businesses will lose their power
if they do not act responsibly.

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5 driving forces of CSR

1. Affluence
2. Sustainability
3. Globalization
4. Media
5. Brands

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Environmental ethics

1. What is your view of the

environment?
2. How does that relate to your
view of your occupation (which
you chose in Chapter of
Professional ethics)
3. How does it relate to your view
of business?

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Environmental ethics

3 sectors involving the environment:

- Private sector
- State sector: a significant impact on the environment
(legislation and policy initiatives, regulatory and
enabling functions)
- 3rd sector organizations: smaller role, some influential,
such as: environmental lobbyist, ecological protection
org

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Environmental ethics

Solutions to environmental problems

1. Direct reduction approaches
2. Trading approaches: creating market mechanism

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Environmental ethics

Find information about GRI (or any other about

the environment)
1. GRI report
2. Kyoto protocol

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Environmental ethics

Reading and discussion the case study “Carrefour

goes green in China” (BE&CSR, p367)

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CSR – Whose responsibility?

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CSR – Whose responsibility?

CSR – not only corporate responsibility, but also a

stakeholder responsibility
Stakeholders need to be:
- Caring stakeholders
- Proactive stakeholders
- Transparent stakeholders

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Reading case Walmart and discuss

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