Journal 8: Corporate Social Responsibility

In the last session I gain a deeper appreciation of what CSR really meant. I used to think that CSR are mere marketing campaigns of companies to boost good impressions about them in the business community. I've been part of a group of companies wellness team, was part of the "Run for the Pasig River" campaign, been a member of a group of company who has its own foundation. However, I did not really know what everything is for.

What really is CSR?

Traditionally, CSR has been defined much more in terms of a philanphropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

I have read numerous definitions but I think the European CSR model has the most in-dept explanation of what CSR means. The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:

Social responsibility becomes an integral part of the wealth creation process - which if managed properly should enhance the competitiveness of business and maximize the value of wealth creation to society.

When times get hard, there is the incentive to practice CSR more and better - if it is a philanphropic exercise which is peripheral to the main business, it will always be the first thing to go when push comes to shove.

But as with any process based on the collective activities of communities of human beings (as companies are) there is no 'one size fits all'. In different countries, there will be different priorities, and values ​​that will shape how business act. And even the above observations are changing over time. The US has growing numbers of people looking towards core business issues.

For instance, the CSR definition used by Business for Social Responsibility is:

·         Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.  On the other hand, the European Commission hedges its bets with two definitions wrapped into one:   A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

Reference: http://www.mallenbaker.net/csr

We have also discussed CSR models, outlined the model of how companies conduct business. The first is Carroll's Pyramid of Corporate Social Responsibility.

Economic responsibility in Carroll's CSR Pyramid: It concerns the responsibility of the business of producing goods and services needed by society and making a profit selling them. Novak (1996) has contributed to this by defining seven responsibilities of companies. Companies have shareholders who demand a reasonable return on their investments, they have employees who want safe and fairly paid jobs, and they have customers who demand good quality products at a fair price. So, here comes the first responsibility of the business as it is to be a properly functioning economic unit and stay in business. And this is the bottom of the pyramid, where all the other layers rest on.

Legal responsibility in Carroll's CSR Pyramid: the legal responsibility of corporations demands that businesses abide by the law and play by the rules of the game. Should companies choose to "bend" or even ignore their legal responsibilities the price can be very high for the business. And the US software giant Microsoft has faced a long-running antitrust case in Europe for abusing its monopolistic position to disadvantage its competitors which resulted in settlements tough against the company.

Ethical Responsibility in Carroll's CSR Pyramid: The main concept of ethical responsibility as defined and expressed by Carroll (1991) is that the ethical responsibility consists of what is generally expected by society over and above economic and legal expectations. Ethical responsibilities of companies cover its wide range of responsibilities. Ethical responsibilities are not necessarily imposed by law, but they are expected from ethical companies by the public and governments and this case was seen in the example of Shell, where the decision of the government was reversed for disposing of oil platforms after a campaign and disagreement by the society and public.

Philanthropic responsibility in Carroll's CSR Pyramid , as it is in the top of the pyramid, it focuses on more luxurious things such as improving the quality of life of employees, local communities and ultimately society in general. Some points of the philanthropic responsibilities of the business can be controversial and requires separate studies aimed to it. For example, who should decide on what cause to spend the money, how much, and on what basis these decisions should be made.

Comparatively recent theories concerning our firm's social responsibility is "Theory of the Firm / strategic leadership theory" which was proposed by Waldman et al (2004). The theory states that some aspects of CEO leadership can have a direct effect on the inclination of firms to engage in CSR and companies which are run by intellectually stimulating CEOs do engage in strategic CSR more than average companies.

Reference:

Waldman, D, Siegel, D & Javidan, M, 2004, "CEO Transformational Leadership and Corporate Social Responsibility", Working Paper, Rensselaer Polytechnic Institute

And then the, CSR Pyramid 2.0

In this model, the company incorporates CSR in all of its processes. Philanthropy is now placed at the bottom of the pyramid. Since risk management and strategic CSR is a priority and placed on top. An example of this is the strategic CSR model that incorporates Nestle in one of its bestselling product in the Philippines which is Nescafe. They provide education, training and support to coffee bean farmers and their families in a way that also helps the company.

As a future business leader, now I have this idea of ​​how I will manage the business in the future. I plan to go beyond gaining profit but I will manage the business in terms that it will have an impact and contribution to the society.