"Corporate Social Responsibility," by Steven G. Anderson

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Corporate Social Responsibility

as discussed in chapter 1,

corporations are omnipresent in the modern world, and their power in most societies has increased dramatically over time. Corporate ascendancy has been magnified with the rise of the globalized economy and the related growth of large and often poorly regulated transnational corporations with business operations spanning many countries (Bakan, 2004; Stiglitz, 2007). Corporate power also is being manifested in the context of heavily constrained governments competing to attract corporate investments to bolster economic growth, which often has left disadvantaged populations vulnerable to negative impacts associated with unrestrained corporate practices. The 1984 chemical leak in the Union Carbide plant in Bhopal, India, is among the most notable examples of the disastrous effects that can accompany poorly regulated corporate practices.

Thousands of people were killed or seriously injured in this incident, and criminal court cases and litigation continue 30 years later (Fortun, 2009).

The total scope of corporate involvement in the world economy is difficult to capture, because laws of incorporation vary across societies. However, the number of corporations worldwide has risen dramatically, and the growth of transnational corporations has been especially important from a development perspective. According to a United Nations Conference on Trade and Development report (2007), there are more than 78,000 transnational corporations, and these in turn have many more foreign affiliates.

The size of the largest of these transnational corporations is striking. For example, it has been estimated that 51 of the 100 largest economies in the world are corporations, and that the largest 500 multinational corporations

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account for nearly 70% of worldwide trade (World Trade Organization, 2013). Some analysts have gone so far as to suggest that corporations are replacing governments as the most powerful institutions in society, and that this has far-reaching and largely negative ramifications for the provision of social benefits (Bakan, 2004; McMillian, 2007).

Given this extensive corporate reach, as well as limitations in governmental effectiveness in regulating corporate excesses, it should not be surprising that many persons interested in social development focus on strategies designed to influence corporate behavior. Although approaches and orientations differ, the basic idea is that affecting corporate practices can result in substantial benefits to disadvantaged populations. This chapter describes and assesses the principal approaches that have been promoted in this respect, which I will collectively refer to as corporate social responsibility (CSR). ov e r a r c h i ng c o rp o rate s o c i al r e spo n sib il it y ch a n g e i d e as

Although there has been an explosion of interest in CSR in academia and in the broader public in the past 30 to 40 years, there is no widely accepted definition of what CSR should encompass. In fact, the scope and nature of CSR is widely contested, with varying viewpoints regarding what the responsibilities of corporations should be beyond producing products and making profits for shareholders (Dahlsrud, 2008; Lindgreen, Swaen, & Johnston, 2009). CSR proponents likewise vary in their perspectives about how best to influence corporate behavior. They also focus upon many different beneficiary groups and specific benefits expected to be conveyed through influencing corporate behavior. Nonetheless, they share recognition that corporate activities have major social impacts and that identifying and responding to these is important to social development.

Regardless of the particular approach that is emphasized, CSR basically is an intermediary model in which corporations and their decisionmaking officials are the primary targets of change activities, with the belief that changing the behavior of these targeted intermediaries in turn will result in benefits accruing to selected groups. This conceptual idea has been developed in rich and diverse ways, with respect to the particular benefits argued to accrue to targeted groups and in terms of the political strategies

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used to influence corporate behavior. In particular, CSR approaches vary substantially in terms of whether they are internally or externally directed.

In the former case, officials working within corporations serve as change agents and try to move the corporations for which they work in more socially responsible directions. In the latter case, change agents are external to the corporation and attempt to pressure corporations to change through organized appeals to consumers and investors. I will turn to these differing approaches to CSR and related considerations after a brief historical review of the evolution of CSR as a social development approach. cor p or ate s o c i al re s p o ns i b i li ty i n h i s to ri c al p e rs p e c ti ve

Efforts to promote responsible behavior by corporations are not new. In fact, they extend to the Industrial Revolution, when concerns about unabated corporate power and exploitation of workers led to public pressures for restrictions on corporate practices (Welford, 2002). Although there were relatively few publicly traded corporations by the end of the nineteenth century, corporate ascendancy then progressed rapidly (Bakan, 2004). In fact, by the end of World War I, large and powerful corporations not only had emerged but were actively engaged in public relations attempts to portray themselves as socially responsible agents (Bakan, 2004).

The concept of CSR was articulated more explicitly by Bowen (1953) during the period of corporate growth after World War II. Early writings often used the term “social responsibility” in writing about desirable corporate actions. Bowen’s definition is reflective of perspectives on CSR during this period: “It 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” (p. 6).

Socially oriented behavior was seen as a civic responsibility of business, as opposed to deriving primarily from self-interest.

Since that time, there have been ebbs and flows in attention to CSR, which scholars have suggested stem from factors such as the aggregate state of the economy or the relative prominence of corporate scandals (Cheney, Roper, & May, 2007). Most analysts agree, however, that there has been a new wave of attention to CSR since the early 1990s ( Jenkins, 2005).

This is partly due to the now well-understood reach of corporate power

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throughout the world and its corresponding widespread influence on most societies. It consequently is reasonable to assume that prominent attention to CSR issues will continue.

The rise of global economic development likewise has been widely viewed as a critical contributor to the recent interest in CSR (Cheney, Roper, & May, 2007; Jenkins, 2005). Globalization has been especially important for two reasons. First, it has rendered governments less powerful in controlling corporate impacts, and hence, it has created increasing interest in establishing alternative forms of control (Welford, 2002). Second, with the advent of modern communications technology that has made the world “smaller,” diverse publics have growing access to information on corporate impacts around the world (Stiglitz, 2007). At the same time, interest in social issues related to corporate production impacts, such as environmental degradation or the exploitation of corporate workers, has steadily risen (Cheney, Roper, & May, 2007; Welford, 2002). Working together, these forces have helped fuel major increases in the level of activists and voluntary groups interested in changing corporate practices (Bendell, 2004).

In addition to rising overall interest in CSR, the prominent models of CSR also have changed. Especially in the 1980s and 1990s, academic and corporate attention increasingly turned to models of CSR that focused on corporations engaging in socially responsible behavior due to perceptions that it could be beneficial to the corporation in the longer term (Wood, 2010). These more self-interested conceptions formed the basis for what became known as “double bottom line” and “triple bottom line” CSR (Elkington, 1998) or the “business case” for CSR (Carroll & Shabana, 2010).

The triple bottom line involves systematic consideration of economic, social, and environmental factors in corporate decision making.

The growing interest in CSR is recognizable in many ways, some of which will be elaborated in later sections. For example, before 1970, university business programs rarely focused on business ethics, but in the United States and many other countries nearly all strong business programs now include such courses (Christensen, et al., 2007; Shaw, 1996). Further, some programs include entire courses or even entire programs related to corporate social responsibility.1 Corporations have responded to the internal interests of some officials and to rising external pressures by establishing more sophisticated corporate strategies for considering and demonstrating social impacts, and increasingly have created units tasked with implementing such

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strategies and interacting with stakeholders around them (Weaver, Trevi単o, & Cochran, 1999). These corporate efforts have been at least partially driven by a perceived need to protect and improve corporate imaging with the public. Further, media interest in corporate practices and impacts has grown steadily in the last 20 to 30 years, and has included many investigative reports that have resulted in external pressures being generated for corporate change (McWilliams & Siegel, 2001).

External advocates, many of whom are located in nonprofit organizations or very loosely affiliated groups, likewise have emerged in increasing numbers to challenge corporate practices along many dimensions (Kendall, Gill, & Cheney, 2007). These advocates often have engaged in largescale and widely publicized demonstrations and boycotts directed either at broad corporate practices or at those of specific corporations. For example, the Royal Dutch Shell oil company suffered significant sales losses in 1995 in the face of protests by Greenpeace and other activists related to Shell created environmental damages and the hanging of Nigerian activists associated with this struggle (Schwartz & Gibb, 1999). The boycott of the Nike Corporation in the late 1990s due to its heavy use of sweatshop labor practices in Southeast Asia is another prominent example (Knight, 2007).

These and other boycotts of or demonstrations against corporations have received considerable media attention, which has been an important factor in the success of these efforts (Greenberg & Knight, 2004).

Collectively, these diverse stakeholders have created rich possibilities for promoting changes related to the social impacts of corporate production.

At the same time, the previously alluded to weakening governmental regulation of many corporate activities has led change advocates to consider mechanisms for controlling corporate behavior outside of the governmental realm (Cheney, Roper, & May, 2007). I turn next to a more detailed examination of the behavioral logic and related political development of CSR approaches, including some of their principal variations. ch a n g i n g c o rp o rate p rac ti c e s : t he b e hav io r a l di me n s i o ns o f c o rp o rate s o c i al r e spo n sib il it y

Thinking through the behavioral dynamics of CSR models can be complicated. This stems from the fact that CSR approaches not only focus upon diverse benefits and beneficiary groups, but also differ with respect

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to how various stakeholders are perceived to influence corporate behavior. Thus, the specific outcomes sought and the associated behavioral logic through which changes are hypothesized to occur vary in different CSR characterizations.

Intellectual debates concerning the appropriate reach of corporate responsibility to society have been central to considerations of the nature and scope of CSR initiatives (Werhane, 2007). The Nobel-prize winning economist Milton Friedman is famous for his article, “The Social Responsibility of Business is to Increase its Profits” (Friedman, 1970), and for related statements arguing that business officials should not be oriented to social concerns in their professional roles. Although many view such “greed is good” statements with cynicism, serious thinkers like Friedman believe that such a unitary focus creates otherwise unobtainable efficiencies that enlarge the collective benefits ultimately possible in a society. The most benign form of this argument is that corporations should focus on what they do best, which is to produce goods and services that result in profits for their shareholders. It is argued that other more socially or environmentally oriented behaviors serve as distractions from this primary purpose, and are unlikely to be done well at any rate; it is best to leave such tasks to governmental or voluntary sectors that focus on such collective values and benefits.

Many corporate scholars have balked at this narrow view of corporate behavior. They argue that corporations are products of societies and therefore incur important societal obligations. As Lindblom (2001) and others aptly describe, governments create the broad rules of the game by establishing and enforcing general market structures, private property rights, and the more specific operating environments in which corporations function.

It is reasonable to assume that such favorable treatment should only be granted with the expectation that resulting societal benefits will result, and additionally, that externalities that seriously diminish the quality of life for affected groups will be avoided or paid for (Blomström & Kokko, 1998).

Free market enthusiasts counter that the jobs and products that corporations produce represent sufficient social returns.

These arguments are complex. But as Werhane (2007) has argued, corporations cannot be expected to solve all of society’s problems, and the breadth of their responsibilities may be very extensive if broadly construed.

For example, should CSR extend mainly to corporate consumers, workers, and the communities in which corporations operate? Are corporations

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responsible for the dealings of corrupt governments where they have an operating presence? Should they be responsible for the business practices of their suppliers as well as their own employees? These are just a few of the thorny questions raised in the literature that illustrate the difficulty in defining the scope and limitations of CSR. Although definitional issues remain largely contested, there does appear to be a broadening of the concept of CSR over time. For example, Stohl, Stohl, and Townsley (2007) argue that CSR has evolved in three stages, much akin to broadening conceptions of human rights. In the first stage, CSR advocates focused on assuring that corporations did not deny access to certain corporate benefits. Then, a second stage concentrated more proactively on what it is the corporation should provide to various groups, such as the right to a living wage, health benefits, or free assembly. Finally, attention recently has extended to the impacts of corporate operations beyond their own operations and markets, and to their attendant broader societal responsibilities. This more collective orientation considers longer-term sustainability issues, such as environmental impacts that extend well beyond corporate locations.

Debates about the specific actions that corporations should or should not take occur in this broader context of disagreements about the scope of corporate responsibilities. The list of potential social impacts resulting from corporate actions is long, and discussions concerning those social domains with which corporations should be most concerned are complex.

I am unaware of any work in the literature that attempts to prioritize or rank which corporate behaviors should be or are the most common targets for those promoting CSR. A useful first step therefore may be to define and classify the range of behaviors that CSR advocates have focused upon.

It then is the task of empirical research to measure whether CSR initiatives appear to meaningfully impact any of these corporate behaviors and, in turn, to determine if some behaviors may be more affected by these approaches than others.

Some analysts have attempted to at least crudely classify the domains in which corporations are influential, and so to stake the broad terrain in which corporate responsibilities can be characterized. For example, Dahlsrud (2008) assessed existing CSR definitions and identified five dimensions of CSR that were most prevalent: environmental, social, economic, stakeholder, and voluntariness. Carroll (1979) defined four CSR categories: economic, legal, ethical, and philanthropic. For the purpose of thinking

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table 3 .1. Potential Beneficiaries of Corporate Social Responsibility

Initiatives beneficiary group

b e n e f i t s o f g r e at e s t i n t e r e s t

Corporate employees and subcontractors

Wages, fringe benefits, working conditions, hiring practices, gender and racial equity

Consumers

Product safety and quality, psychic values related to production practices

Community members in corporate locations

Environmental effects on local communities— air, traffic, congestion, water, noise, and other quality of life indicators; effects on local businesses

Broader community members

Nonlocal environmental effects, such as global warming, depletion of nonrenewable resources or other production activities with far-reaching externalities

through the dynamics of CSR change models, it is preferable to think of corporate impacts on different beneficiary or stakeholder groups and, in turn, to consider how corporate behaviors are most likely to influence these groups. Table 3.1 consequently summarizes the range of social concerns that CSR advocates have focused upon in attempting to affect corporate behaviors in relation to different beneficiary groups. Four broad groups are seen as being impacted by corporate actions: employees and contractors, consumers, corporate location community members, and broader communities. I will describe here how corporate social actions most often are argued to affect each of these groups.

Many CSR initiatives have focused narrowly upon those who work for the corporation, either as direct employees or as subcontractors; I will refer to such individuals collectively as employees. A wide range of employee concerns have been the subject of CSR initiatives, with wages and related compensation perhaps the most prominent. This issue has been most dramatically portrayed in CSR campaigns that pressure corporations to improve wages to subcontractors who either produce goods or serve as suppliers. The aforementioned boycott of Nike in 1996 due to the low wages paid to subcontractors in Southeast Asia is a good example of this type of CSR initiative (Wang, 2005). More recently, CSR advocates have focused

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on wages and working conditions in Bangladesh garment factories; a fatal 2012 fire at a factory making clothes for global retailers including Walmart and Sears served as an important galvanizing event in this area (New York Times, 2012).

Employee-related CSR efforts also have focused on a variety of corporate working conditions. In some cases, these include considerations such as the number of hours that employees work, safety of working facilities, and other measures affecting the quality of the work environment for individual employees. In others, CSR initiatives emphasize broader compositional issues in the workforce, such as workforce diversity or employment of specific disadvantaged groups. Some CSR initiatives also have focused on discouraging corporations from hiring workers considered at risk of being exploited, especially children.

Despite responding to a wide range of corporate practices, these employee-related CSR activities share a focus on improving benefits for employee and contractor groups. The ultimate intended outcome of such CSR initiatives is to improve income or related material circumstances for these groups, usually with the general idea that these improvements will allow groups to better move forward in whatever manner they choose.

The behavioral dynamics of consumer participation in CSR is more complex and may involve a mix of tangible and psychological benefits. Initiatives targeted at consumers most directly result in tangible benefits for specific consumer groups based on the resulting production of safer, more effective, or longer lasting products. For example, encouraging or pressuring corporations to assure that children’s toys are safe is one example of a strategy to promote consumer-related CSR, as are attempts to stimulate corporations to provide product quality and safety related information about the products they sell.

However, consumers also may be more idealistically interested in CSR if they believe they carry responsibilities to consume products that are made in responsible ways. In this sense, consumers may be seen as attaching psychic value to selected corporate production practices, and they may derive either positive or negative value from consuming various products. These psychic benefits may be related to the wages and working conditions of corporate employees or to issues such as the environmental imprint of corporate production practices. As will be discussed in the following section, psychic benefits extend beyond improving life satisfaction for individual

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participants; they are the driving force in aggregating interests to improve benefits for corporate employees or broader communities.

In addition to employees and consumers, other community members may be affected by corporate actions. Such effects often are viewed by economists and corporate officials alike as externalities, in that persons outside of the immediate realm of market exchange nonetheless bear some costs due to corporate activities. Most obvious in this sense are persons living in communities in which corporate production or distribution activities are common. For example, corporate presence in a community may result in increased traffic or noise or other inconveniences that may diminish quality of life. More dramatically, corporate production practices may result in high levels of air or water pollution, and the impacts are likely to be concentrated most heavily in the immediate vicinity of corporate production.

In addition, corporations such as Walmart often have been argued to have unfair competitive advantages over locally owned small businesses, and to ruthlessly exploit such advantages in attempts to run local competition out of business (Dukes, Zhu, & Singh, 2005). This also has been contended to have related effects such as the removal of profits from communities, the loss of local business role models, and the diminishment of community spirit and voluntary participation (Goetz & Rupasingha, 2006; Haltiwanger, Jarmin, & Krizan, 2010).

Although typically less concerned than employee-driven CSR initiatives with providing money or immediately tangible benefits to a well-defined group, CSR initiatives aimed at influencing corporate effects on communities generally focus on providing benefits in a specifically defined location. For example, an initiative that seeks to reduce the noise emitted by a local factory during production processes would have the primary intent of improving the quality of life for nearby community residents. Similarly, efforts to convince a corporation to change its building plans in a manner that is friendlier to local traffic patterns are intended to have a targeted effect on local residents.

Finally, corporate activities commonly extend well beyond the communities in which production is located. In the simplest case, production often results in externalities that transcend narrow spatial boundaries, such as when industrial pollutants get into the air or water and carry their damage to distant localities. More recent concerns with worldwide environmental degradation have made the definitions of such extended communities

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broader and more difficult to demarcate. In particular, CSR advocates have increasingly focused on examining the sustainability of corporate production practices, and on advocating for changes in sustainability related practices that are national or international in scope (Marrewijk, 2003; McIntosh, 2007). Examples in this respect are initiatives to encourage corporations to more sustainably manage global fishing resources, or to decrease practices that may contribute to global warming such as depletions of rain forests and inadequate industrial pollution controls (Cummins, 2004; Stohl, Stohl, & Townsley, 2007). This emphasis may increase the potential for CSR change agents to more extensively aggregate interests regarding corporate behavior, and at the same time makes geographic foci on bringing together such interests somewhat less important.

The benefits thought to result from CSR efforts targeted on such nonplace-specific environmental or social outcomes often are more difficult to identify precisely. In this sense, they are more likely to be largely ideologically driven and to have the intent of affecting broader patterns of practice as opposed to conveying narrowly defined benefits. For example, if a corporation makes a decision to use only wood harvested using sustainable forestry techniques, the short-term effects on consumers or local communities may be negligible or even result in additional costs. However, CSR advocates in this case are likely to be driven by the belief that such practices will result in more diffuse benefits that will be shared across society over time.

A similar argument can be made with respect to most initiatives directed at stimulating corporations to engage in sustainable production practices; in essence, corporations are being asked to forsake some level of immediate profit to enhance or preserve longer-term benefits. The difficulty of such actions is that the immediate costs are fairly easy to define and measure, while the longer-term benefits are more diffuse and uncertain.

Regardless of whether the benefits of CSR actions are narrowly targeted on particular employee groups or are broader and more diffuse, one other aspect of many CSR initiatives is notable. That is, CSR advocates often view the corporate practices targeted for action to be pattern setting in that if one corporation acts, others may follow. I will return to this issue momentarily when discussing political strategy, but the point with respect to behavioral logic is that CSR change agents often are hoping to bring about changes in corporate practices that extend beyond the confines of the particular corporate interaction in which they are engaged.

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t h e p o l i t i c al d e ve lo p m e nt o f c or po r at e so c ia l r e s p o n si b i li ty ap p roac h e s

CSR approaches share an emphasis on influencing corporations to focus on selected social issues in addition to profit-making. However, CSR advocates follow very different strategies in pursuing their objectives. In particular, three strategic variations emerge most clearly in previous literature, with the differences in approaches mainly related to who the primary instigators are and how they view the driving motivations for corporate change.

I will turn next to an elaboration of these issues.

The first two of these, which I will refer to as internally driven CSR approaches, emanate largely from within the business and corporate world.

One emphasizes attempting to improve corporate ethics through inculcating corporate leaders with broader perspectives on social values, while the other involves the more strategic consideration of social values as a part of corporate planning. Both of these internal approaches to improving corporate social practices have received extensive treatment in the business literature, and are exemplified by growing attention to social responsibility plans, corporate philanthropy offices, or to comparable vehicles for promoting community or service endeavors within corporations.

The third approach instead emphasizes the potential of external agents to affect corporate behavior, largely by influencing consumption and investment decisions of those on whom corporations depend for support. This approach, which will be referred to as externally directed or pressure-driven CSR, involves strategies such as boycotts, buycotts, and socially conscious investing designed to either economically punish or reward selected corporations for particular practices. Many case examples of externally driven CSR strategies have been presented in the literature, but more generalized conceptualizations regarding the mechanics of such approaches have been limited. I therefore will develop a general model of externally driven CSR in conjunction with describing that approach.

Internally Driven Corporate Social Responsibility Approaches

Many corporate scholars have balked at a narrow view of short-term profit maximizing behavior, and instead have developed approaches intended to broaden corporate decision-making perspectives to include attention to