__MAIN_TEXT__

Page 1

CSR AND

SUSTAINABLE BUSINESS

TOMMY BORGLUND • HANS DE GEER • SUSANNE SWEET Magnus Frostenson • Lin Lerpold • Sara Nordbrand Emma Sjöström • Karolina Windell

FIRST EDITION


CONTENT

Societal responsibility in a time of moralizing  55 Disputed responsibility  59

FOREWORD  7 PREFACE  9 Sanoma Utbildning Postal address: Box 30091, 104 25 Stockholm Visiting address: Alströmergatan 12, Stockholm Website: www.sanomautbildning.se E-mail: info@sanomautbildning.se Order/Information about educational materials Phone: 08-587 642 10 Telefax: 08-587 642 02 Publisher: Amanda Schött Franzén Editor/Project manager: Maria Törnfelt Graphics: Bror Rudi Creative Translation: Linnéa Holmén, Calyptic

INTRODUCTION  10 PART 1 – COMPANIES, RESPONSIBILITY   AND SUSTAINABILITY  17 1. The societal role of enterprises  19 What is an enterprise?  20 The various stakeholders of the enterprise  22 The stakeholder model  22

Whose responsibility − and for what?   60 Case: Merino wool in Swedish clothing companies  62 Defining the extent of responsibility  64 Matters of responsibility are created jointly  67 Legitimacy is a prerequisite for business  72 3. Sustainability and business  75 Increasing resource usage  76 Sustainability and CSR  78 Sustainability and sustainable development  78

CSR AND SUSTAINABLE BUSINESS

Shareholder value  25

International collaboration to protect the environment  79

ISBN 978-91-523-5046-1 © 2017 T Borglund, H De Geer, M Frostenson, L Lerpold, S Nordbrand, E Sjöström, S Sweet, K Windell and Sanoma Utbildning AB, Stockholm

Case: Social responsibility through partnerships  27

Sustainable development − the definition that won out  81

First Edition First printing Copyright This work is under copyright protection. Copying without a teacher’s authorization to copy for educational purposes according to the BONUS Copyright Access agreement is prohibited. This type of agreement is signed between copyright organizations and representatives of educational providers, e.g., cities/universities. For information about this agreement, please refer to the educational provider representative or BONUS Copyright Access. Anyone who commits a copyright infringement may be prosecuted in a court of law and sentenced to a fine or imprisonment for up to two years, as well as be obliged to reimburse the author/copyright holder. Printed in Latvia by Livonia Print Riga 2017

Licence to operate  28 Trust  31 The definition of trust  33 CSR in a global business environment  35 Corporate responsibility in a historical light: the case of Sweden  37 The iron works  37 The industry  41 Post-industrial Sweden  44 CSR broke with the Swedish model  46 CSR in context  49 2. A shift in corporate responsibility  52

The environmental work of the UN and global agreements  82 The global sustainability goals  84 Associated terms and definitions  85 Companies and sustainability  87 Sustainable business  87 Understanding and measuring the company’s environmental impact  88 The environment as a competitive advantage – and an aspect of corporate responsibility  90 Sustainability as a strategic vision  90 Case: Value-generating sustainability efforts  95

A timeless matter  53

Including social and environmental values  96

A history of research on corporate social responsibility  54

Case: Cradle-to-cradle  98

CO N T E N T | 3


CONTENT

Societal responsibility in a time of moralizing  55 Disputed responsibility  59

FOREWORD  7 PREFACE  9 Sanoma Utbildning Postal address: Box 30091, 104 25 Stockholm Visiting address: Alströmergatan 12, Stockholm Website: www.sanomautbildning.se E-mail: info@sanomautbildning.se Order/Information about educational materials Phone: 08-587 642 10 Telefax: 08-587 642 02 Publisher: Amanda Schött Franzén Editor/Project manager: Maria Törnfelt Graphics: Bror Rudi Creative Translation: Linnéa Holmén, Calyptic

INTRODUCTION  10 PART 1 – COMPANIES, RESPONSIBILITY   AND SUSTAINABILITY  17 1. The societal role of enterprises  19 What is an enterprise?  20 The various stakeholders of the enterprise  22 The stakeholder model  22

Whose responsibility − and for what?   60 Case: Merino wool in Swedish clothing companies  62 Defining the extent of responsibility  64 Matters of responsibility are created jointly  67 Legitimacy is a prerequisite for business  72 3. Sustainability and business  75 Increasing resource usage  76 Sustainability and CSR  78 Sustainability and sustainable development  78

CSR AND SUSTAINABLE BUSINESS

Shareholder value  25

International collaboration to protect the environment  79

ISBN 978-91-523-5046-1 © 2017 T Borglund, H De Geer, M Frostenson, L Lerpold, S Nordbrand, E Sjöström, S Sweet, K Windell and Sanoma Utbildning AB, Stockholm

Case: Social responsibility through partnerships  27

Sustainable development − the definition that won out  81

First Edition First printing Copyright This work is under copyright protection. Copying without a teacher’s authorization to copy for educational purposes according to the BONUS Copyright Access agreement is prohibited. This type of agreement is signed between copyright organizations and representatives of educational providers, e.g., cities/universities. For information about this agreement, please refer to the educational provider representative or BONUS Copyright Access. Anyone who commits a copyright infringement may be prosecuted in a court of law and sentenced to a fine or imprisonment for up to two years, as well as be obliged to reimburse the author/copyright holder. Printed in Latvia by Livonia Print Riga 2017

Licence to operate  28 Trust  31 The definition of trust  33 CSR in a global business environment  35 Corporate responsibility in a historical light: the case of Sweden  37 The iron works  37 The industry  41 Post-industrial Sweden  44 CSR broke with the Swedish model  46 CSR in context  49 2. A shift in corporate responsibility  52

The environmental work of the UN and global agreements  82 The global sustainability goals  84 Associated terms and definitions  85 Companies and sustainability  87 Sustainable business  87 Understanding and measuring the company’s environmental impact  88 The environment as a competitive advantage – and an aspect of corporate responsibility  90 Sustainability as a strategic vision  90 Case: Value-generating sustainability efforts  95

A timeless matter  53

Including social and environmental values  96

A history of research on corporate social responsibility  54

Case: Cradle-to-cradle  98

CO N T E N T | 3


4. Ethical decision-making  100 An ethical perspective  101 Definitions  102 Morals and ethics  102 Descriptive and normative ethics  103 Ethics and applied ethics  103 Ethics and professionalism  103 Values and value hierarchies  106 Absolute and relative values  107 Ethical norm theories: the history of philosophy as a quick reference guide for decisions  108 Consequentialism  109 Moral obligations  112 Ethics dialogues   113 Virtue ethics  114 Postmodern ethics  117 Ethics as decision support  117

PART 2 – IN PRACTICE  121 5. The internal perspective

Controlling through belonging − professional ethics   142 The matter of education   143 The matter of autonomy and integrity  144

Two different perspectives  148

From conventions to practice  184 Due diligence   184

6. Sustainable consumption, marketing and consumers 151 Responsibility and the consumer society  152 Marketing to consumers  153 Consumer protection  154 Demands on responsibility in the consumer society  155 The consumer’s role and responsibilities  156

Controlling ethics through rules   137 Controlling ethics through values  138 Different kinds of values  140

Case: Environmental efforts with multiple gains  186 Attempts to influence further down the chain  187 Down-stream sustainability efforts  188 Integrated sustainability throughout the chain  189

Consumers and consumption  156 Consumers as activists  158

Case: The lost girls of India  192

Consumer behaviour and purchasing choices  159

Control and collaboration  194

Case: Business models for sustainable consumption  160

Profitability aspects  198

Case: Climate-labelled menus  163

The boundary between state and company responsibility  200

Companies and the consumer  165

Case: CSR in advertising  166

Ethics governance  135

How to prioritize between issues  185

Case: Conflict minerals from Eastern DR  191

The responsibility within the organization  124

Getting employees to act responsibly  129

New norms have been shaped  180 Complex value chains – different possibilities for control  180

− ethics and CSR governance  123

Functionalistic and idealistic goals  126

Renegotiating responsibility  179

Case: Operation Smile  146

Product labels and certificates as a strategy  165

Taking responsibility for employees  124

7. Sustainable value chains  178

From labelling to branding  171 Future marketing: a focus on the product and value creation  172 The circular economy – designing sustainable products  173

Small and mid-sized enterprises  198

Legitimacy and cultural collisions  201 The possibilities and obstacles of the future  205

Measures and regulations  223 Case: Corrupt business deals  224 A programme on corruption  227 Companies as good citizens  232 Identifying the values at state  233 Reinforcing integrity  235 9. Sustainability reporting  236 Background  237 Being held accountable through reporting  238 Standardization of sustainability reporting  239 From G4 to GRI Standards  240 Management approach and topicspecific disclosures  242 Core reporting or comprehensive reporting  244 Regulations  245 EU regulations on nonfinancial information  246 Swedish legislation  246 The sustainability report  249 Integrated reporting  250 Beyond reporting  251

8. Anti-corruption 208 Society needs good institutions  209 Corruption is a destructive force  210 Corruption in developing countries  211

The sharing economy  173

The definitions of corruption  212

Nudging and attempts to change behaviours  175

The extent of corruption   214 Background and causes  216 The breeding grounds of corruption  218

4 | C S R A N D S US TA I N A B L E B US I N E S S

The forms of corruption  220

PART 3 – STEERING AND STRATEGY  257 10. Sustainable investment  259 Responsibility and sustainability on the financial market  260 Stakeholder value and shareholder value  262

CO N T E N T | 5


4. Ethical decision-making  100 An ethical perspective  101 Definitions  102 Morals and ethics  102 Descriptive and normative ethics  103 Ethics and applied ethics  103 Ethics and professionalism  103 Values and value hierarchies  106 Absolute and relative values  107 Ethical norm theories: the history of philosophy as a quick reference guide for decisions  108 Consequentialism  109 Moral obligations  112 Ethics dialogues   113 Virtue ethics  114 Postmodern ethics  117 Ethics as decision support  117

PART 2 – IN PRACTICE  121 5. The internal perspective

Controlling through belonging − professional ethics   142 The matter of education   143 The matter of autonomy and integrity  144

Two different perspectives  148

From conventions to practice  184 Due diligence   184

6. Sustainable consumption, marketing and consumers 151 Responsibility and the consumer society  152 Marketing to consumers  153 Consumer protection  154 Demands on responsibility in the consumer society  155 The consumer’s role and responsibilities  156

Controlling ethics through rules   137 Controlling ethics through values  138 Different kinds of values  140

Case: Environmental efforts with multiple gains  186 Attempts to influence further down the chain  187 Down-stream sustainability efforts  188 Integrated sustainability throughout the chain  189

Consumers and consumption  156 Consumers as activists  158

Case: The lost girls of India  192

Consumer behaviour and purchasing choices  159

Control and collaboration  194

Case: Business models for sustainable consumption  160

Profitability aspects  198

Case: Climate-labelled menus  163

The boundary between state and company responsibility  200

Companies and the consumer  165

Case: CSR in advertising  166

Ethics governance  135

How to prioritize between issues  185

Case: Conflict minerals from Eastern DR  191

The responsibility within the organization  124

Getting employees to act responsibly  129

New norms have been shaped  180 Complex value chains – different possibilities for control  180

− ethics and CSR governance  123

Functionalistic and idealistic goals  126

Renegotiating responsibility  179

Case: Operation Smile  146

Product labels and certificates as a strategy  165

Taking responsibility for employees  124

7. Sustainable value chains  178

From labelling to branding  171 Future marketing: a focus on the product and value creation  172 The circular economy – designing sustainable products  173

Small and mid-sized enterprises  198

Legitimacy and cultural collisions  201 The possibilities and obstacles of the future  205

Measures and regulations  223 Case: Corrupt business deals  224 A programme on corruption  227 Companies as good citizens  232 Identifying the values at state  233 Reinforcing integrity  235 9. Sustainability reporting  236 Background  237 Being held accountable through reporting  238 Standardization of sustainability reporting  239 From G4 to GRI Standards  240 Management approach and topicspecific disclosures  242 Core reporting or comprehensive reporting  244 Regulations  245 EU regulations on nonfinancial information  246 Swedish legislation  246 The sustainability report  249 Integrated reporting  250 Beyond reporting  251

8. Anti-corruption 208 Society needs good institutions  209 Corruption is a destructive force  210 Corruption in developing countries  211

The sharing economy  173

The definitions of corruption  212

Nudging and attempts to change behaviours  175

The extent of corruption   214 Background and causes  216 The breeding grounds of corruption  218

4 | C S R A N D S US TA I N A B L E B US I N E S S

The forms of corruption  220

PART 3 – STEERING AND STRATEGY  257 10. Sustainable investment  259 Responsibility and sustainability on the financial market  260 Stakeholder value and shareholder value  262

CO N T E N T | 5


Institutional investors and retail investors  264 Responsible and sustainable investment – what is it?  266 Common methods for sustainable investments in listed shares  266 Sustainable investments in other asset classes and investment methods  271 A growing market  274 Financial returns – are sustainable investments doing better or worse?  277 Sustainable investments as a force for change  279 The influence on Swedish shareholders upon companies  280 Shareholders as norm ambassadors  282 Investors want transparency  283 Pension funds  285 Case: Shareholder engagement  287 Sustainable investments and the future  289 11. Strategies  291 Strategies under development  292 Creating a strategy  292 Stakeholder and materiality analysis  293 Case: A global sustainability strategy  295 Practical guidance  296 Strategic thought models  296 CSR as shared value  297 Improving credibility  299 Case: Shared value as a strategy  302 From charity to innovation  303 CSR – the solution to the world’s problems?  305 Case: Base of the Pyramid 1  307

6 | C S R A N D S US TA I N A B L E B US I N E S S

Case: Base of the Pyramid 2  309 Social entrepreneurs  311 Sustainability strategies – a developmental process  313

FOREWORD

By Mette Morsing

Case: Social entrepreneurism − Briggen  314 12. Strategic communication  318 Changing communication channels  319 Increased requirements on communication  321 The growth of CSR communication  322 Toward an increase in regulation?  325 Communication with an impact  326 Communicating with integrity  328 The fear of the media  329 The responsibility of the media  332 Effects on responsibilities  333 Strategic branding work through CSR  334 A warning on distrust  335 Communicating trust  337

CLOSING WORDS  339 ABOUT THE AUTHORS  342 REFERENCES  345 INDEX  359 IMAGE LIST  366

“CSR and Sustainable Business” book edited by Tommy Borglund, Hans De Geer and Susanne Sweet with contributions from Tommy Borglund, Hans De Geer, Magnus Frostenson, Lin Lerpold, Sara Nordbrand, Emma Sjöström, Susanne Sweet and Karolina Windell. “CSR and Sustainable Business” is a book that provides an excellent overview of a burgeoning field of research and practice that has developed at a rapid speed over the past two decades and that has significantly changed the corporate landscape. Not only that. While this book introduces its readers for CSR and sustainable business at the individual firm level, it importantly discusses what CSR is doing for the governance of society today. It takes the reader to think about how systemic injustice, corruption, human rights abuse and climate change are issues of governance, and not just externalities of poor business management. I applaud the book for doing that. If students at universities today are to understand what is CSR, they must understand the governance role of CSR and its entanglement in government regulation, hard and soft law, networks, labour unions, and much more. The book is international in its orientation and readers are introduced to the key CSR issues of importance for international business. However, the editors and authors do so uniquely from a Swedish outlook with strong affiliations at Stockholm School of Economics and the book hereby contributes to develop insights into the Scandinavian perspectives on CSR. The book provides a well-crafted description of the history of Swedish industrial development as a background to understand how CSR has been adopted in Sweden. This serves as a platform to more concretely understand how governments, unions, industrial clusters, patriarchs and traditions matter for the role of CSR in national contexts. And, importantly and interestingly, it brings new light on the Swedish industry’s initial hesitance to take on the concept of CSR. Throughout the book, the Swedish references and cases provide new “empirical flesh” to what Matten and Moon have coined “implicit CSR”, i.e. the values, norms, and rules in a society that result in requirements for corporations to address stakeholder issues in collective

P R E FAC E | 7


Institutional investors and retail investors  264 Responsible and sustainable investment – what is it?  266 Common methods for sustainable investments in listed shares  266 Sustainable investments in other asset classes and investment methods  271 A growing market  274 Financial returns – are sustainable investments doing better or worse?  277 Sustainable investments as a force for change  279 The influence on Swedish shareholders upon companies  280 Shareholders as norm ambassadors  282 Investors want transparency  283 Pension funds  285 Case: Shareholder engagement  287 Sustainable investments and the future  289 11. Strategies  291 Strategies under development  292 Creating a strategy  292 Stakeholder and materiality analysis  293 Case: A global sustainability strategy  295 Practical guidance  296 Strategic thought models  296 CSR as shared value  297 Improving credibility  299 Case: Shared value as a strategy  302 From charity to innovation  303 CSR – the solution to the world’s problems?  305 Case: Base of the Pyramid 1  307

6 | C S R A N D S US TA I N A B L E B US I N E S S

Case: Base of the Pyramid 2  309 Social entrepreneurs  311 Sustainability strategies – a developmental process  313

FOREWORD

By Mette Morsing

Case: Social entrepreneurism − Briggen  314 12. Strategic communication  318 Changing communication channels  319 Increased requirements on communication  321 The growth of CSR communication  322 Toward an increase in regulation?  325 Communication with an impact  326 Communicating with integrity  328 The fear of the media  329 The responsibility of the media  332 Effects on responsibilities  333 Strategic branding work through CSR  334 A warning on distrust  335 Communicating trust  337

CLOSING WORDS  339 ABOUT THE AUTHORS  342 REFERENCES  345 INDEX  359 IMAGE LIST  366

“CSR and Sustainable Business” book edited by Tommy Borglund, Hans De Geer and Susanne Sweet with contributions from Tommy Borglund, Hans De Geer, Magnus Frostenson, Lin Lerpold, Sara Nordbrand, Emma Sjöström, Susanne Sweet and Karolina Windell. “CSR and Sustainable Business” is a book that provides an excellent overview of a burgeoning field of research and practice that has developed at a rapid speed over the past two decades and that has significantly changed the corporate landscape. Not only that. While this book introduces its readers for CSR and sustainable business at the individual firm level, it importantly discusses what CSR is doing for the governance of society today. It takes the reader to think about how systemic injustice, corruption, human rights abuse and climate change are issues of governance, and not just externalities of poor business management. I applaud the book for doing that. If students at universities today are to understand what is CSR, they must understand the governance role of CSR and its entanglement in government regulation, hard and soft law, networks, labour unions, and much more. The book is international in its orientation and readers are introduced to the key CSR issues of importance for international business. However, the editors and authors do so uniquely from a Swedish outlook with strong affiliations at Stockholm School of Economics and the book hereby contributes to develop insights into the Scandinavian perspectives on CSR. The book provides a well-crafted description of the history of Swedish industrial development as a background to understand how CSR has been adopted in Sweden. This serves as a platform to more concretely understand how governments, unions, industrial clusters, patriarchs and traditions matter for the role of CSR in national contexts. And, importantly and interestingly, it brings new light on the Swedish industry’s initial hesitance to take on the concept of CSR. Throughout the book, the Swedish references and cases provide new “empirical flesh” to what Matten and Moon have coined “implicit CSR”, i.e. the values, norms, and rules in a society that result in requirements for corporations to address stakeholder issues in collective

P R E FAC E | 7


rather than individual business terms (Matten and Moon, 2008). So, this book is a unique contribution that serves to demarcate how CSR is indeed about new ways of conceptualizing the role of business in society. By positioning CSR in the Swedish political and social context, it becomes evident to the reader that CSR is so much more than “the business case” that can serve to bring more money to shareholders. CSR is about how businesses take on the role of contributing to economic development while at the same time contributing to the public good in a symbiotic relationship to its context. Finally, it is worth to pay attention to the inquisitive tone of the book. The team of editors and authors ask question to their readers. Not only at the end of each book chapter but also in the individual chapters, have the authors invited their readers to reflect. This serves to keep the conversation going in the classroom and, importantly, to stimulate critical thinking about how to improve structures, systems and traditions in practice that can create a more sustainable world. As the editors and authors agree, “there is no one size that fits all” when it comes to CSR. CSR and sustainable business will continue to develop and it is this continuous development that is only prompted if students and managers keep asking themselves and each other these critical questions. I congratulate the editors and the authors for having produced a milestone that I am sure will contribute to achieve this difficult accomplishment. Professor Mette Morsing, PhD, Mistra Chair of Sustainable Markets, Stockholm School of Economics, Stockholm, August 2017

8 |

preface

This English edition is based on the second, revised and extended Swedish edition of our book on CSR and sustainable business. The book presents many perspectives on the topic. It gives a broad introduction to the field, showing its variety and interconnectivity. It can be used in university education at all levels, or by anyone wanting to learn more about CSR and sustainable business. The authors are introduced at the end of the book. They are active at institutes of learning and have a long experience of academic teaching and research in the field. Some of them work at companies or organizations implementing CSR and sustainability in practice. We are proud of the team and grateful for their willingness to make their knowledge, writing skills and time available for this project. Thanks also to all the other advisors and corporate representatives who have shared their experience of the CSR field with us. Also, warm thanks to our publisher, Amanda Schött Franzén, our rock and motivating force! And to the users of the book: We hope you will find the reading interesting and inspiring, informative and useful. Together we can strive for a more responsible business in a sustainable society!

Tommy Borglund, Hans De Geer and Susanne Sweet Stockholm in June 2017

P R E FAC E | 9


rather than individual business terms (Matten and Moon, 2008). So, this book is a unique contribution that serves to demarcate how CSR is indeed about new ways of conceptualizing the role of business in society. By positioning CSR in the Swedish political and social context, it becomes evident to the reader that CSR is so much more than “the business case” that can serve to bring more money to shareholders. CSR is about how businesses take on the role of contributing to economic development while at the same time contributing to the public good in a symbiotic relationship to its context. Finally, it is worth to pay attention to the inquisitive tone of the book. The team of editors and authors ask question to their readers. Not only at the end of each book chapter but also in the individual chapters, have the authors invited their readers to reflect. This serves to keep the conversation going in the classroom and, importantly, to stimulate critical thinking about how to improve structures, systems and traditions in practice that can create a more sustainable world. As the editors and authors agree, “there is no one size that fits all” when it comes to CSR. CSR and sustainable business will continue to develop and it is this continuous development that is only prompted if students and managers keep asking themselves and each other these critical questions. I congratulate the editors and the authors for having produced a milestone that I am sure will contribute to achieve this difficult accomplishment. Professor Mette Morsing, PhD, Mistra Chair of Sustainable Markets, Stockholm School of Economics, Stockholm, August 2017

8 |

preface

This English edition is based on the second, revised and extended Swedish edition of our book on CSR and sustainable business. The book presents many perspectives on the topic. It gives a broad introduction to the field, showing its variety and interconnectivity. It can be used in university education at all levels, or by anyone wanting to learn more about CSR and sustainable business. The authors are introduced at the end of the book. They are active at institutes of learning and have a long experience of academic teaching and research in the field. Some of them work at companies or organizations implementing CSR and sustainability in practice. We are proud of the team and grateful for their willingness to make their knowledge, writing skills and time available for this project. Thanks also to all the other advisors and corporate representatives who have shared their experience of the CSR field with us. Also, warm thanks to our publisher, Amanda Schött Franzén, our rock and motivating force! And to the users of the book: We hope you will find the reading interesting and inspiring, informative and useful. Together we can strive for a more responsible business in a sustainable society!

Tommy Borglund, Hans De Geer and Susanne Sweet Stockholm in June 2017

P R E FAC E | 9


INTRODUCTION

In the preface to the first Swedish edition, we wrote as follows: ”Nowadays, CSR – Corporate Social Responsibility, the social re­spon­ sibilities of companies – is a widely recognized concept, used by an increasing number of companies. Long-term capitalism that nurtures its stakeholders is a more profitable capitalism. The CSR commitments of companies are becoming more and more advanced and strategic. CSR affects the shaping of a company’s business concept.” This is still as topical now as it was five years ago, but the idea of the social responsibilities of companies has been further developed and deepened. Responsibilities relating to the environment and social issues remain front and centre, but the focus has also come to include corporate measures against corruption and their management of tax issues. Widespread corruption is increasingly being seen as the main obstacle hindering positive development of the economy and democracy. We have also consciously changed the usage of words in the discussion. The term CSR, with its focus on the roles and responsibilities of companies, has in many contexts given way to the more general term sustaina­ bility. This is not a matter of replacing one with the other, both terms have been used in parallel in the debate for many years, but at this time it seems that sustainability is gaining ground. The term focuses on longterm goals, while CSR highlights the importance of companies actively identifying problems and contributing to their resolution. A framework and broad definition of the concept sustainability can be seen in the agenda with 17 sustainability goals adopted by the UN in 2015, often referred to as SDG, Sustainable Development Goals. The agenda contains broad and ambitious, but not always tangible, descriptions of developmental goals that should be achieved by the global community before 2030. It is in the nature of the matter that many parties must contribute and the goals must be broken down and operationalized in many different contexts. Efforts have begun at the national level in many places, but the political situation in the world makes it hard to predict what the outcome will be. Companies are expected to relate their sustainability efforts to the matrix of the SDG in order to show that they are taking responsibility and contributing to a better world. The business

1 0 | C S R A N D S US TA I N A B L E B US I N E S S

community is given a positive role in contributing to achieving the goals. Partnerships with companies are necessary in the battle against poverty, environmental threats and social rejection. Another change to the conditions for CSR and sustainability lies in the requirements of more extensive reporting on the part of the companies. Following a Directive from the EU, many countries have increased their requirements on mandatory reporting in sustainability matters. Such obligations shall include not only large companies, but also midsized companies, defined in terms of number of employees and turnover, and companies in certain specific circumstances from a sustainability perspective. Sweden has gone beyond the Directive and other countries, placing the bar higher for Swedish companies. Another new feature in sustainability reporting is the increased interest in so-called integrated reporting, where sustainability data and financial data are united in the annual report. Read more about this in the new Chapter 11. The effect is that sustainability issues are given a larger role in communication with investors and share analysts. The companies that make deliveries to the end customer must also take responsibility for their suppliers several steps back through the value chain. There is a suggestion that large companies should also take responsibility for their customers and the future usage of their products. Terms like circular economy and sharing economy are gaining ground, which puts the focus on reuse, recycling and new business models, for instance rentals instead of sales. More and more parties on the financial markets are getting involved in issues like environmental responsibility, social responsibility and corporate governance. Many investors take account of CSR criteria (or ESG criteria, as they are known on the financial markets) when making investment decisions. Banks and financial institutes have begun matching the growing demand for green bonds and fossil-free funds. A movement of so-called ”Impact Investing” has gained force, with increasing investments in projects that have both social and financial targets. Social entrepreneurs often operate in this niche and a start-up scene is being established in the sustainability field. The vision of sustainable development, with a global system of companies and markets acting in a long-term and resource-efficient way, has grown clearer. The cluster of responsible companies contributes to social and economic development, which will hopefully lead to decreased poverty, better working conditions, increased wellbeing, decreased corruption and a better life for many people. CSR can relate to tangible things, like making sure all employees come home to their families safe and sound after work, that no one is exposed to coercion or discrimination or

I N T RO D U C T I O N | 11


INTRODUCTION

In the preface to the first Swedish edition, we wrote as follows: ”Nowadays, CSR – Corporate Social Responsibility, the social re­spon­ sibilities of companies – is a widely recognized concept, used by an increasing number of companies. Long-term capitalism that nurtures its stakeholders is a more profitable capitalism. The CSR commitments of companies are becoming more and more advanced and strategic. CSR affects the shaping of a company’s business concept.” This is still as topical now as it was five years ago, but the idea of the social responsibilities of companies has been further developed and deepened. Responsibilities relating to the environment and social issues remain front and centre, but the focus has also come to include corporate measures against corruption and their management of tax issues. Widespread corruption is increasingly being seen as the main obstacle hindering positive development of the economy and democracy. We have also consciously changed the usage of words in the discussion. The term CSR, with its focus on the roles and responsibilities of companies, has in many contexts given way to the more general term sustaina­ bility. This is not a matter of replacing one with the other, both terms have been used in parallel in the debate for many years, but at this time it seems that sustainability is gaining ground. The term focuses on longterm goals, while CSR highlights the importance of companies actively identifying problems and contributing to their resolution. A framework and broad definition of the concept sustainability can be seen in the agenda with 17 sustainability goals adopted by the UN in 2015, often referred to as SDG, Sustainable Development Goals. The agenda contains broad and ambitious, but not always tangible, descriptions of developmental goals that should be achieved by the global community before 2030. It is in the nature of the matter that many parties must contribute and the goals must be broken down and operationalized in many different contexts. Efforts have begun at the national level in many places, but the political situation in the world makes it hard to predict what the outcome will be. Companies are expected to relate their sustainability efforts to the matrix of the SDG in order to show that they are taking responsibility and contributing to a better world. The business

1 0 | C S R A N D S US TA I N A B L E B US I N E S S

community is given a positive role in contributing to achieving the goals. Partnerships with companies are necessary in the battle against poverty, environmental threats and social rejection. Another change to the conditions for CSR and sustainability lies in the requirements of more extensive reporting on the part of the companies. Following a Directive from the EU, many countries have increased their requirements on mandatory reporting in sustainability matters. Such obligations shall include not only large companies, but also midsized companies, defined in terms of number of employees and turnover, and companies in certain specific circumstances from a sustainability perspective. Sweden has gone beyond the Directive and other countries, placing the bar higher for Swedish companies. Another new feature in sustainability reporting is the increased interest in so-called integrated reporting, where sustainability data and financial data are united in the annual report. Read more about this in the new Chapter 11. The effect is that sustainability issues are given a larger role in communication with investors and share analysts. The companies that make deliveries to the end customer must also take responsibility for their suppliers several steps back through the value chain. There is a suggestion that large companies should also take responsibility for their customers and the future usage of their products. Terms like circular economy and sharing economy are gaining ground, which puts the focus on reuse, recycling and new business models, for instance rentals instead of sales. More and more parties on the financial markets are getting involved in issues like environmental responsibility, social responsibility and corporate governance. Many investors take account of CSR criteria (or ESG criteria, as they are known on the financial markets) when making investment decisions. Banks and financial institutes have begun matching the growing demand for green bonds and fossil-free funds. A movement of so-called ”Impact Investing” has gained force, with increasing investments in projects that have both social and financial targets. Social entrepreneurs often operate in this niche and a start-up scene is being established in the sustainability field. The vision of sustainable development, with a global system of companies and markets acting in a long-term and resource-efficient way, has grown clearer. The cluster of responsible companies contributes to social and economic development, which will hopefully lead to decreased poverty, better working conditions, increased wellbeing, decreased corruption and a better life for many people. CSR can relate to tangible things, like making sure all employees come home to their families safe and sound after work, that no one is exposed to coercion or discrimination or

I N T RO D U C T I O N | 11


that communities in which heavy industries dominate can also achieve wellbeing and a healthy environment. Various kinds of cooperation be­ tween companies and civil society are also appearing. Corporate sustainability work has developed strategically. Materiality analyses are currently made by most larger companies. This is one way to show stakeholders which sustainability issues are most important, which is a good starting point for a strategy. The entrance into the field of Michael Porter, a professor at Harvard, was most significant. With the term shared value, which focuses on corporate strategies that create both business values and value for society, sustainability efforts have gained support in many corporate management teams and boards. Through combining sustainability benefits and business benefits in the business model, differentiation, innovation and increased competitiveness are achieved. A development can also be seen that has led to responsibility in the value chain encompassing more areas and creating additional links in the chain. Companies have, over time, become braver in their communication, letting sustainability issues become part of the company’s overall brand. The stakeholder perspective is given more space in ad campaigns, with Volvo Car’s campaign ”Made by people” a prime example. Sustainability reports still hold an important role, but have been supplemented with communication through other channels. Social media have become an obvious channel for sustainability messages, not least toward target groups such as consumers and students. The interest in sustainability issues has increased markedly within academia − for instance we can see that the number of student theses on the topics of CSR and sustaina­ bility (”hållbarhet” in Swedish) has increased exponentially in the past few years.

Figure 1. CSR and sustainability in student dissertations in Sweden. CSR, sustainability and ”hållbarhet” in student theses in Sweden

450

Number of theses Year

400 350 300 250 200 150 100 50 0 2002

CSR

2003

2004

Sustainability

2005

2006

”Hållbarhet”

Source: DiVA-portal, 2017-02-03

1 2 | C S R A N D S US TA I N A B L E B US I N E S S

2007

2008

2009

Year

2010

2011

2012

2013

2014

2015

2016

The structure of the book The book is divided into three parts. This first section of four chapters gives a general background to CSR and sustainability, as well as introducing various terms and definitions. Part 2 discusses different aspects of the practices of companies and business operations, while Part 3 lifts the presentation to a more strategic level. It is not necessary to read the chapters in the order they are presented. However, it can be a good idea to first get your bearings through the first four chapters, to get a general background and explanation of terms and definitions used in the following chapters. Once that is done, the reader can dive into whichever chapters he or she finds most interesting, in any order. Each chapter ends with a set of questions that can serve as starting points for personal reflection or group discussions. There is also a list of suggested reading. The complete list of references for all chapters is found at the end of the book, along with an index that makes it easier to find specific topics or themes. Chapter 1, written by Hans De Geer, highlights the theoretical discussion regarding what kind of organization a company really is and how it fits into society. Basic terms, such as the stakeholder model and the shareholder value model, are explained. Based on these starting points, the responsibility of companies can be defined. Next, the author discusses how companies get a “licence to operate,” why trust is a prerequisite on the market and different ways for companies to reinforce their credi­ bility. The chapter ends with a historical perspective on corporate social responsibility, with the Swedish development as an example. Chapter 2 provides an introduction to CSR. Karolina Windell presents the ideas, development and arguments behind it. Here, the important role of the media becomes apparent − both as a review body and as an arena in which stakeholders can hold companies accountable. Chapter 3, written by Susanne Sweet, contains a basic overview of corporate environmental responsibility and how it was developed and be­come linked to the concept of sustainable development. The chapter relates how developmental and environmental issues at the system level have developed and become institutionalized over time, as well as how they are connected to a company’s operations. The author highlights strategic challenges where companies must take individual and collective responsibility, for instance regarding the climate. The environmental issue is one of the cornerstones upon which the current sustainability debate rests. Another is the moral philosophy basis for economic matters. Why do we make efforts and for what? Ethics helps us clarify such questions and sort goals into a hierarchy. Is a rich life better than a good life? Should we allow profit in the welfare sector?

I N T RO D U C T I O N | 13


that communities in which heavy industries dominate can also achieve wellbeing and a healthy environment. Various kinds of cooperation be­ tween companies and civil society are also appearing. Corporate sustainability work has developed strategically. Materiality analyses are currently made by most larger companies. This is one way to show stakeholders which sustainability issues are most important, which is a good starting point for a strategy. The entrance into the field of Michael Porter, a professor at Harvard, was most significant. With the term shared value, which focuses on corporate strategies that create both business values and value for society, sustainability efforts have gained support in many corporate management teams and boards. Through combining sustainability benefits and business benefits in the business model, differentiation, innovation and increased competitiveness are achieved. A development can also be seen that has led to responsibility in the value chain encompassing more areas and creating additional links in the chain. Companies have, over time, become braver in their communication, letting sustainability issues become part of the company’s overall brand. The stakeholder perspective is given more space in ad campaigns, with Volvo Car’s campaign ”Made by people” a prime example. Sustainability reports still hold an important role, but have been supplemented with communication through other channels. Social media have become an obvious channel for sustainability messages, not least toward target groups such as consumers and students. The interest in sustainability issues has increased markedly within academia − for instance we can see that the number of student theses on the topics of CSR and sustaina­ bility (”hållbarhet” in Swedish) has increased exponentially in the past few years.

Figure 1. CSR and sustainability in student dissertations in Sweden. CSR, sustainability and ”hållbarhet” in student theses in Sweden

450

Number of theses Year

400 350 300 250 200 150 100 50 0 2002

CSR

2003

2004

Sustainability

2005

2006

”Hållbarhet”

Source: DiVA-portal, 2017-02-03

1 2 | C S R A N D S US TA I N A B L E B US I N E S S

2007

2008

2009

Year

2010

2011

2012

2013

2014

2015

2016

The structure of the book The book is divided into three parts. This first section of four chapters gives a general background to CSR and sustainability, as well as introducing various terms and definitions. Part 2 discusses different aspects of the practices of companies and business operations, while Part 3 lifts the presentation to a more strategic level. It is not necessary to read the chapters in the order they are presented. However, it can be a good idea to first get your bearings through the first four chapters, to get a general background and explanation of terms and definitions used in the following chapters. Once that is done, the reader can dive into whichever chapters he or she finds most interesting, in any order. Each chapter ends with a set of questions that can serve as starting points for personal reflection or group discussions. There is also a list of suggested reading. The complete list of references for all chapters is found at the end of the book, along with an index that makes it easier to find specific topics or themes. Chapter 1, written by Hans De Geer, highlights the theoretical discussion regarding what kind of organization a company really is and how it fits into society. Basic terms, such as the stakeholder model and the shareholder value model, are explained. Based on these starting points, the responsibility of companies can be defined. Next, the author discusses how companies get a “licence to operate,” why trust is a prerequisite on the market and different ways for companies to reinforce their credi­ bility. The chapter ends with a historical perspective on corporate social responsibility, with the Swedish development as an example. Chapter 2 provides an introduction to CSR. Karolina Windell presents the ideas, development and arguments behind it. Here, the important role of the media becomes apparent − both as a review body and as an arena in which stakeholders can hold companies accountable. Chapter 3, written by Susanne Sweet, contains a basic overview of corporate environmental responsibility and how it was developed and be­come linked to the concept of sustainable development. The chapter relates how developmental and environmental issues at the system level have developed and become institutionalized over time, as well as how they are connected to a company’s operations. The author highlights strategic challenges where companies must take individual and collective responsibility, for instance regarding the climate. The environmental issue is one of the cornerstones upon which the current sustainability debate rests. Another is the moral philosophy basis for economic matters. Why do we make efforts and for what? Ethics helps us clarify such questions and sort goals into a hierarchy. Is a rich life better than a good life? Should we allow profit in the welfare sector?

I N T RO D U C T I O N | 13


Which are the higher values that drive and inspire us? Business ethics is one of many forms of applied ethics. In Chapter 4, Hans De Geer relates the basic features of the moral reasoning upon which most decisionmaking in Western societies is based. In Chapter 5, Magnus Frostenson discusses how a company can relate to the ethics of its organization and employees, and how this can be connected to sustainability efforts. Here, employees are seen as stakeholders and their role in shaping corporate values is emphasized. How does a company arrange for good, stable ethical competence among leaders and employees: is it best done using rules, through implementing values, by developing professional ethics or in some other way? How can value governance affect the integrity of employees? Susanne Sweet has written Chapter 6, about sustainability and marketing, consumption and the consumer’s role, and corporate responsibility. She discusses the paradox that consumer groups have had an important role in the growth of CSR, but individual consumers do not base their purchasing choices on sustainability criteria to any large extent. The chapter also contains an overview of various terms, market-focused instruments and models that companies can use to support work with sustainable business models and help consumers choose more sustainable consumption. Lin Lerpold and Sara Nordbrand describe in Chapter 7 how sustainability recurs in various parts of the value chain and how companies are expected to take responsibility for their suppliers and customers. Here it becomes apparent how risky it is not to have an overview of your supply chain, and how important it is for companies to guarantee reasonable environmental responsibility and good working conditions among their suppliers. This is particularly challenging if responsibility is extended back through the value chain as well as forward to customers and end users. Chapter 8 covers the topic of corruption. The risk of corruption must be managed, both within an organization and on the market. Corruption leads to a weakening of the focus within the organization. It threatens general trust in the market economy and in society at large. Globally, corruption means that resources are taken from the poor and given to the wealthy. The former Secretary-General of the UN, Kofi Annan, said that the fight against corruption must fall within the responsibilities of companies. Hans De Geer describes how this can be achieved. In Chapter 9, Magnus Frostenson presents the conditions for accounting and reporting of companies’ sustaina­bility efforts. He highlights standardization of reporting and how it can be conducted in practice. Integrated reporting is also discussed.

1 4 | C S R A N D S US TA I N A B L E B US I N E S S

In Chapter 10, the focus is shifted toward owners and the financial markets. The chapter, written by Emma Sjöström, describes how important investors have become for driving matters of responsibility, which on this market are often referred to as ESG (environment, social and governance issues) or SRI (socially responsible investments). Since more than ten percent of all capital is invested in accordance with such criteria, it is likely that investors are one of the most important and effective lobby groups when it comes to demanding sustainability in companies, for instance fossil-free energy. New financial instruments have also been created for customers who want to express their concern for the environment and good working conditions through their investments. Tommy Borglund has written Chapter 11, which raises the question of how sustainability aspects can be connected to the strategic levels of business. Some companies have already developed sustainability strategies. By formulating sustainability responsibilities at a strategic level, determined jointly by its board and executive management, a company can highlight the importance of sustainability efforts. Another step can be taken by many companies by integrating sustainability in the central business strategies, in line with shared value or similar concepts. In the concluding Chapter 12, Tommy Borglund describes how the communicative aspects of CSR have had a significant effect on increasing responsibility. In a more digital, global world, companies must not only take responsibility, but also learn to tell others about this, in order to gain and retain the trust of stakeholders. A good, substantial and true presentation of responsibility can be a decisive success factor on an inter­national market. And what companies are expected to disclose, they must also be accountable for.

I N T RO D U C T I O N | 15


Which are the higher values that drive and inspire us? Business ethics is one of many forms of applied ethics. In Chapter 4, Hans De Geer relates the basic features of the moral reasoning upon which most decisionmaking in Western societies is based. In Chapter 5, Magnus Frostenson discusses how a company can relate to the ethics of its organization and employees, and how this can be connected to sustainability efforts. Here, employees are seen as stakeholders and their role in shaping corporate values is emphasized. How does a company arrange for good, stable ethical competence among leaders and employees: is it best done using rules, through implementing values, by developing professional ethics or in some other way? How can value governance affect the integrity of employees? Susanne Sweet has written Chapter 6, about sustainability and marketing, consumption and the consumer’s role, and corporate responsibility. She discusses the paradox that consumer groups have had an important role in the growth of CSR, but individual consumers do not base their purchasing choices on sustainability criteria to any large extent. The chapter also contains an overview of various terms, market-focused instruments and models that companies can use to support work with sustainable business models and help consumers choose more sustainable consumption. Lin Lerpold and Sara Nordbrand describe in Chapter 7 how sustainability recurs in various parts of the value chain and how companies are expected to take responsibility for their suppliers and customers. Here it becomes apparent how risky it is not to have an overview of your supply chain, and how important it is for companies to guarantee reasonable environmental responsibility and good working conditions among their suppliers. This is particularly challenging if responsibility is extended back through the value chain as well as forward to customers and end users. Chapter 8 covers the topic of corruption. The risk of corruption must be managed, both within an organization and on the market. Corruption leads to a weakening of the focus within the organization. It threatens general trust in the market economy and in society at large. Globally, corruption means that resources are taken from the poor and given to the wealthy. The former Secretary-General of the UN, Kofi Annan, said that the fight against corruption must fall within the responsibilities of companies. Hans De Geer describes how this can be achieved. In Chapter 9, Magnus Frostenson presents the conditions for accounting and reporting of companies’ sustaina­bility efforts. He highlights standardization of reporting and how it can be conducted in practice. Integrated reporting is also discussed.

1 4 | C S R A N D S US TA I N A B L E B US I N E S S

In Chapter 10, the focus is shifted toward owners and the financial markets. The chapter, written by Emma Sjöström, describes how important investors have become for driving matters of responsibility, which on this market are often referred to as ESG (environment, social and governance issues) or SRI (socially responsible investments). Since more than ten percent of all capital is invested in accordance with such criteria, it is likely that investors are one of the most important and effective lobby groups when it comes to demanding sustainability in companies, for instance fossil-free energy. New financial instruments have also been created for customers who want to express their concern for the environment and good working conditions through their investments. Tommy Borglund has written Chapter 11, which raises the question of how sustainability aspects can be connected to the strategic levels of business. Some companies have already developed sustainability strategies. By formulating sustainability responsibilities at a strategic level, determined jointly by its board and executive management, a company can highlight the importance of sustainability efforts. Another step can be taken by many companies by integrating sustainability in the central business strategies, in line with shared value or similar concepts. In the concluding Chapter 12, Tommy Borglund describes how the communicative aspects of CSR have had a significant effect on increasing responsibility. In a more digital, global world, companies must not only take responsibility, but also learn to tell others about this, in order to gain and retain the trust of stakeholders. A good, substantial and true presentation of responsibility can be a decisive success factor on an inter­national market. And what companies are expected to disclose, they must also be accountable for.

I N T RO D U C T I O N | 15


PART 1 COMPANIES, RESPONSIBILITY   AND SUSTAINABILITY CHAPTER 1 – THE SOCIETAL ROLE OF ENTERPRISES CHAPTER 2 – A SHIFT IN CORPORATE RESPONSIBILITY CHAPTER 3 – SUSTAINABILITY AND BUSINESS CHAPTER 4 – ETHICAL DECISION-MAKING


PART 1 COMPANIES, RESPONSIBILITY   AND SUSTAINABILITY CHAPTER 1 – THE SOCIETAL ROLE OF ENTERPRISES CHAPTER 2 – A SHIFT IN CORPORATE RESPONSIBILITY CHAPTER 3 – SUSTAINABILITY AND BUSINESS CHAPTER 4 – ETHICAL DECISION-MAKING


CHAPTER 1   THE SOCIETAL ROLE OF ENTERPRISES There are many ideas about what an enterprise or company is and how it is expected to act. This introductory chapter sheds light on the basis of corporate responsibility for the environment, social conditions and good institutions. Taking such responsibility is crucial if a company is to get a licence to operate, which is an expression of trust and confidence on the part of the company’s stakeholders. Trust is a complex matter in a globalized society: does trust for a company require it to behave the same on different markets, or should a company in Rome do as the Romans? The chapter ends with an exposition of how the matter of corporate responsibility has been dealt with in Sweden during different epochs.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 19


CHAPTER 1   THE SOCIETAL ROLE OF ENTERPRISES There are many ideas about what an enterprise or company is and how it is expected to act. This introductory chapter sheds light on the basis of corporate responsibility for the environment, social conditions and good institutions. Taking such responsibility is crucial if a company is to get a licence to operate, which is an expression of trust and confidence on the part of the company’s stakeholders. Trust is a complex matter in a globalized society: does trust for a company require it to behave the same on different markets, or should a company in Rome do as the Romans? The chapter ends with an exposition of how the matter of corporate responsibility has been dealt with in Sweden during different epochs.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 19


What is an enterprise? Corporate Social Responsibility refers to the responsibility of enterprises to society. But what is an enterprise and can an enterprise really take moral responsibility? The answers to these questions depend on how you define an enterprise. It is difficult to find a basic description that encompasses small, single-person firms, social entrepreneurs, mid-sized service companies and large manufacturing corporations with significant and hefty investments. Should one focus on the possibility of economic gains or on the opportunity to test an idea? Or is the social aspect, the chance to meet other people and get acknowledgement, the basic driver? Logically, the enterprise concept should cover all these aspects and then some. There is no single truth, no single definition, no single theory and no single practice that can define “the enterprise.” There are many. None is necessarily more accurate than any other − the multitude of perspectives offers a choice. Once, an enterprise could refer to something that enterprising people did. An example could be gathering all their assets, renting a ship and setting off for the East Indies, to come home with a shipload of the valu­ able goods that could be bought there. This was a risky enterprise, but if it succeeded, the revenue was often significant. Once at port, the enterprise was dissolved and each member took their portion. Enterprises in that sense − which would now be referred to as projects − had a limited lifetime and no obvious geographical affiliation. There were of course other kinds of business enterprises, which extended over several de­cades, but they were generally strongly tied to a person or family, with a basis in strictly regulated crafts. From a theoretical viewpoint, why did more long-lived, complex enterprises or companies eventually arise? The influential British economist Ronald Coase, in his essay The Nature of the Firm (1937), highlighted the balance between transaction costs and organizational costs. His starting point was the classic view of the market where, all other things being equal, whoever offered the most competitive price would get the chance to strike a deal. The price, in Coase’s view, encompassed both the costs of the product and the costs of the transaction itself, such as the costs that searching for the best selection can entail. In some cases, the transaction cost can be so high that it would pay to produce the product rather than buy it on the market. This also has its costs, but as long as the costs of creating a production organization do not exceed the transaction costs, the former is the better option. In this way, enterprises become organizations, as an alternative to market transactions. Coase’s analysis has been successfully expanded on by the Nobel laureate Oliver E. Williamson, among others. But the choice is not, in Williamson’s words,

20 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

simply between hierarchy and market (Williamson 1985). There might also be blended forms − such as fixed network collaborations between different small companies, which are formally independent, but which jointly create a strong brand. Benetton is one example of this. The popular clothes are manufactured by many small companies, with a joint brand and unified marketing and distribution. The so-called contract theory sees enterprises mainly as a set of legal contracts, defining the participants’ rights and duties in relation to one another, thus creating a platform to manage their collaborations and conflicts (Williamson 1985 and 1991, see also Hart 1995). From a liability perspective, there is a difference between a market and an organization. A market can hardly be a moral player, even if the media all too often describe markets as players. A market cannot take on any responsibility; this falls upon those who organize the market or who operate on it. A company can, however, be a moral player − although some theorists feel that only people can make moral decision. A pre­ requisite is that the company has a clear and relatively stable organization over time (see, e.g., French 2005). Analysis of relative costs does not, however, automatically lead to the creation of a company. Coase also highlighted the significance of entrepreneurs in the establishment of companies. This often requires innovative creativity and the ability to see possibilities that others have missed. The concept of the entrepreneur was coined in economic science by the Austrian Joseph Schumpeter (1883–1950). He saw inventive pioneers − the people who had dared and won − as the engines of economic development. These could be legendary corporate leaders, like Rockefeller, Carnegie and Gates in the USA, or Erling Persson and Axel Wennergren in Sweden. They could be people who started with two empty hands, or people who transformed and developed old enterprises into something new and different: Jan Stenbeck and Antonia Ax:son Johnson are two Swedish examples of the latter. But it is not necessary to focus on really large companies or big money at an international level. Entrepreneurs are primarily found in smaller companies and are very important in local contexts. The entrepreneur, says Schumpeter, is not driven by money, but by the will to realize his or her vision, valuing the freedom to act above the size of the organization (for a report and excerpts of Schumpeter’s works, see Svedberg 1994). Schumpeter also highlighted the conflict between the establishment and new thinking. New ideas, new products and new processes are not simply added to the repertoire of possible action − they also impact on the old. Schumpeter uses the term creative destruction. This means that the new is often in opposition with the old and that new forms must be created and new institutions established to manage development.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 1


What is an enterprise? Corporate Social Responsibility refers to the responsibility of enterprises to society. But what is an enterprise and can an enterprise really take moral responsibility? The answers to these questions depend on how you define an enterprise. It is difficult to find a basic description that encompasses small, single-person firms, social entrepreneurs, mid-sized service companies and large manufacturing corporations with significant and hefty investments. Should one focus on the possibility of economic gains or on the opportunity to test an idea? Or is the social aspect, the chance to meet other people and get acknowledgement, the basic driver? Logically, the enterprise concept should cover all these aspects and then some. There is no single truth, no single definition, no single theory and no single practice that can define “the enterprise.” There are many. None is necessarily more accurate than any other − the multitude of perspectives offers a choice. Once, an enterprise could refer to something that enterprising people did. An example could be gathering all their assets, renting a ship and setting off for the East Indies, to come home with a shipload of the valu­ able goods that could be bought there. This was a risky enterprise, but if it succeeded, the revenue was often significant. Once at port, the enterprise was dissolved and each member took their portion. Enterprises in that sense − which would now be referred to as projects − had a limited lifetime and no obvious geographical affiliation. There were of course other kinds of business enterprises, which extended over several de­cades, but they were generally strongly tied to a person or family, with a basis in strictly regulated crafts. From a theoretical viewpoint, why did more long-lived, complex enterprises or companies eventually arise? The influential British economist Ronald Coase, in his essay The Nature of the Firm (1937), highlighted the balance between transaction costs and organizational costs. His starting point was the classic view of the market where, all other things being equal, whoever offered the most competitive price would get the chance to strike a deal. The price, in Coase’s view, encompassed both the costs of the product and the costs of the transaction itself, such as the costs that searching for the best selection can entail. In some cases, the transaction cost can be so high that it would pay to produce the product rather than buy it on the market. This also has its costs, but as long as the costs of creating a production organization do not exceed the transaction costs, the former is the better option. In this way, enterprises become organizations, as an alternative to market transactions. Coase’s analysis has been successfully expanded on by the Nobel laureate Oliver E. Williamson, among others. But the choice is not, in Williamson’s words,

20 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

simply between hierarchy and market (Williamson 1985). There might also be blended forms − such as fixed network collaborations between different small companies, which are formally independent, but which jointly create a strong brand. Benetton is one example of this. The popular clothes are manufactured by many small companies, with a joint brand and unified marketing and distribution. The so-called contract theory sees enterprises mainly as a set of legal contracts, defining the participants’ rights and duties in relation to one another, thus creating a platform to manage their collaborations and conflicts (Williamson 1985 and 1991, see also Hart 1995). From a liability perspective, there is a difference between a market and an organization. A market can hardly be a moral player, even if the media all too often describe markets as players. A market cannot take on any responsibility; this falls upon those who organize the market or who operate on it. A company can, however, be a moral player − although some theorists feel that only people can make moral decision. A pre­ requisite is that the company has a clear and relatively stable organization over time (see, e.g., French 2005). Analysis of relative costs does not, however, automatically lead to the creation of a company. Coase also highlighted the significance of entrepreneurs in the establishment of companies. This often requires innovative creativity and the ability to see possibilities that others have missed. The concept of the entrepreneur was coined in economic science by the Austrian Joseph Schumpeter (1883–1950). He saw inventive pioneers − the people who had dared and won − as the engines of economic development. These could be legendary corporate leaders, like Rockefeller, Carnegie and Gates in the USA, or Erling Persson and Axel Wennergren in Sweden. They could be people who started with two empty hands, or people who transformed and developed old enterprises into something new and different: Jan Stenbeck and Antonia Ax:son Johnson are two Swedish examples of the latter. But it is not necessary to focus on really large companies or big money at an international level. Entrepreneurs are primarily found in smaller companies and are very important in local contexts. The entrepreneur, says Schumpeter, is not driven by money, but by the will to realize his or her vision, valuing the freedom to act above the size of the organization (for a report and excerpts of Schumpeter’s works, see Svedberg 1994). Schumpeter also highlighted the conflict between the establishment and new thinking. New ideas, new products and new processes are not simply added to the repertoire of possible action − they also impact on the old. Schumpeter uses the term creative destruction. This means that the new is often in opposition with the old and that new forms must be created and new institutions established to manage development.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 1


Different interests are set against each other in business, and in politics. Which consideration should be taken of what has been, what is and what has not yet come to pass in transformative processes? What responsibilities should be taken by various parties − companies, capitalists, local and national politicians and social organizations − to both stimulate change and development and ameliorate the effects on those who end up on the negative side of development? This is an ideological question, discussed in many fields of politics. It is connected to the question of in whose interest a company should be run.

From an ethical perspective, the most vulnerable are foremost. The American expression “stakeholder” also includes a risk aspect: whoever has most “at stake” in a context (the expression comes from horse betting) is taking the largest risk. Stakeholder models can be designed around all human endeavours, not just companies. As regards the latter, the typi­ cal stakeholders (aside from owners) are clients or customers, suppliers and investors. Employees, if there are any, are obvious stakeholders; some­times they are called primary stakeholders, while the others are called secondary stakeholders. Society at large, the local environment and future generations are also ranked among the stake­holders, even though they are not really “parties.” The American professor Edward R. Freeman is considered to be the person who introduced the stakeholder model into discussions on corporate social responsi­bility. This was in the 1980s, but similar ideas can be found in the works of the Swedish eco­ nomist Eric Rehnman in the 1960s (Freeman 1984, Stymne 1995). Stakeholder models are often drawn as in Figure 1.1. The operations (the company) are at the centre, with identified stakeholders surrounding it.

The various stakeholders of the enterprise Most companies begin as entrepreneurial projects, where the dividing line between the entrepreneur’s personal liability and economy and the development of the enterprise is unclear. The pioneer lives with, for and in his or her enterprise. Many enterprises remain small and led by their owners, in every practical sense. Others develop into mid-sized and large companies, hire employees and, eventually, executives and mid-level managers. The organization grows and becomes a type of bureaucracy. The perspectives of the company and the owner diverge − if not before, then at generational shifts, as the heirs might not have the same level of commitment. At such times, if not before, the question arises if the owners’ or the company’s interests should take priority. What is the goal and purpose of the company? This is, at its heart, an ideological question and has no obvious “scien­ tific” answer. In more recent debates, two primary views can be distinguished in the matter of which interests are fundamental or primary: the owners’ (shareholder value) or those of other affected parties (stakeholder value; for a discussion of these concepts, see Borglund 2006).

CLIENTS

The stakeholder model The latter view is based on the idea that all companies are surrounded by a number of stakeholders (stakeholder value). A stakeholder is defined as a party either affected by operations or that has a possibility to influence them in some way. The stakeholder concept thus pertains to power and vulnerability. From a strategic perspective, the powerful stake­holders usually warrant more attention from management.

SUPPLIERS

EMPLOYEES

THE MEDIA

THE COMPANY

INVESTORS

THE PUBLIC

SHAREHOLDERS

COMPETITORS

Figure 1.1 Classic stakeholder model: the groups identified as stakeholders may vary.

22 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 3


Different interests are set against each other in business, and in politics. Which consideration should be taken of what has been, what is and what has not yet come to pass in transformative processes? What responsibilities should be taken by various parties − companies, capitalists, local and national politicians and social organizations − to both stimulate change and development and ameliorate the effects on those who end up on the negative side of development? This is an ideological question, discussed in many fields of politics. It is connected to the question of in whose interest a company should be run.

From an ethical perspective, the most vulnerable are foremost. The American expression “stakeholder” also includes a risk aspect: whoever has most “at stake” in a context (the expression comes from horse betting) is taking the largest risk. Stakeholder models can be designed around all human endeavours, not just companies. As regards the latter, the typi­ cal stakeholders (aside from owners) are clients or customers, suppliers and investors. Employees, if there are any, are obvious stakeholders; some­times they are called primary stakeholders, while the others are called secondary stakeholders. Society at large, the local environment and future generations are also ranked among the stake­holders, even though they are not really “parties.” The American professor Edward R. Freeman is considered to be the person who introduced the stakeholder model into discussions on corporate social responsi­bility. This was in the 1980s, but similar ideas can be found in the works of the Swedish eco­ nomist Eric Rehnman in the 1960s (Freeman 1984, Stymne 1995). Stakeholder models are often drawn as in Figure 1.1. The operations (the company) are at the centre, with identified stakeholders surrounding it.

The various stakeholders of the enterprise Most companies begin as entrepreneurial projects, where the dividing line between the entrepreneur’s personal liability and economy and the development of the enterprise is unclear. The pioneer lives with, for and in his or her enterprise. Many enterprises remain small and led by their owners, in every practical sense. Others develop into mid-sized and large companies, hire employees and, eventually, executives and mid-level managers. The organization grows and becomes a type of bureaucracy. The perspectives of the company and the owner diverge − if not before, then at generational shifts, as the heirs might not have the same level of commitment. At such times, if not before, the question arises if the owners’ or the company’s interests should take priority. What is the goal and purpose of the company? This is, at its heart, an ideological question and has no obvious “scien­ tific” answer. In more recent debates, two primary views can be distinguished in the matter of which interests are fundamental or primary: the owners’ (shareholder value) or those of other affected parties (stakeholder value; for a discussion of these concepts, see Borglund 2006).

CLIENTS

The stakeholder model The latter view is based on the idea that all companies are surrounded by a number of stakeholders (stakeholder value). A stakeholder is defined as a party either affected by operations or that has a possibility to influence them in some way. The stakeholder concept thus pertains to power and vulnerability. From a strategic perspective, the powerful stake­holders usually warrant more attention from management.

SUPPLIERS

EMPLOYEES

THE MEDIA

THE COMPANY

INVESTORS

THE PUBLIC

SHAREHOLDERS

COMPETITORS

Figure 1.1 Classic stakeholder model: the groups identified as stakeholders may vary.

22 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 3


Arrows and their directions reveal the type of relationship with each stakeholder, with the most important ones highlighted. In recent years, it has become more common to portray stakeholder relations as a spider web, still with the operations (the subject) in the middle, and spokes pointing radially outwards. The difference is, as seen in Figure 1.2, that the relationships portrayed include not only those between the stakeholders and the party in the centre, but also those between the stake­holders, which can be important to identify.

co m p e t i t o r

or

est

nv

t

cl

ien

s

er

or

m

or

pli

clien t

Figure 1.2 Spider web stakeholder model.

24 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

co

m

t pe

it

t i to r

i

er

t

THE COMPANY

cl i en

t

co

tit

r

er

s

en

up

t

pp l i

c lien t

r e ho l d e

ld

cli

pe

sha

en

su

t i to

p

cli

mpe

up

t

r lie

shareho

co m p e

ien

co

r

cl

Shareholder value The concept of shareholder value has a different focus. Among the stake­ holders, owners are seen as a group apart, with interests that should take top priority: the operations of the company serve primarily to increase the value of the capital owners’ investments. There is a historical logic to this line of reasoning. Most companies begin through some form of owner initiative and risk. An entrepreneur invests his or her resources in a business concept, without being guaranteed success. The returns on the ventured owner capital cannot be guaranteed, unlike the investments made by other parties, whose share in returns are usually regulated through contracts or agreements: lenders, employees, suppliers etc. The higher risk is compensated through greater influence on the operations. Considerations of the owners’ interests should therefore take priority over other interests. The owners also have the right to the company’s residual. In small or family-owned companies, the owners may have many diffe­rent goals. In larger, listed corporations, the owners’ interests must be defined in a narrower, but also more general, way. Shareholder value is one such general interpretation of what different groups of owners might want to achieve with their investment: seeing their fortune increase, in the long or short term, regardless of what has been sacrificed to achieve this goal. “The business of business is business” is an expression for this stream­ lining of the complex web of motivations behind a company. The message has a powerful simplicity and what the man behind it − the Noble Laureate Milton Friedman − meant was to highlight the task given to the employees in an executive team by the company’s owners: to increase the value of their investments. Social or environmental considerations, beyond those regulated by law, should not be taken into account by the operative managers. Nor do they have the right to use the company’s resources to support various not-for-profit goals. Of course, the capital owners could use their resources freely for such purposes, which they in many cases were expected to do in the American society (Friedman 1970). Following in Friedman’s footsteps, his successors in the so-called Chicago school of economics – Friedman was a professor at the University of Chicago – formulated an ideologically coloured message regarding the role of companies in modern society. It contained a strong rejection of everything that, with time, would come to be referred to as CSR: the role of the company was to increase the value of invested capital and the task of management was to procure such value for the owners (Borglund 2006). Alongside this fundamental, ideological critique of the idea of CSR, a more practically based critique has also been formulated, for instance by Dave Henderson, the former chief economist of the OECD. He pointed

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 5


Arrows and their directions reveal the type of relationship with each stakeholder, with the most important ones highlighted. In recent years, it has become more common to portray stakeholder relations as a spider web, still with the operations (the subject) in the middle, and spokes pointing radially outwards. The difference is, as seen in Figure 1.2, that the relationships portrayed include not only those between the stakeholders and the party in the centre, but also those between the stake­holders, which can be important to identify.

co m p e t i t o r

or

est

nv

t

cl

ien

s

er

or

m

or

pli

clien t

Figure 1.2 Spider web stakeholder model.

24 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

co

m

t pe

it

t i to r

i

er

t

THE COMPANY

cl i en

t

co

tit

r

er

s

en

up

t

pp l i

c lien t

r e ho l d e

ld

cli

pe

sha

en

su

t i to

p

cli

mpe

up

t

r lie

shareho

co m p e

ien

co

r

cl

Shareholder value The concept of shareholder value has a different focus. Among the stake­ holders, owners are seen as a group apart, with interests that should take top priority: the operations of the company serve primarily to increase the value of the capital owners’ investments. There is a historical logic to this line of reasoning. Most companies begin through some form of owner initiative and risk. An entrepreneur invests his or her resources in a business concept, without being guaranteed success. The returns on the ventured owner capital cannot be guaranteed, unlike the investments made by other parties, whose share in returns are usually regulated through contracts or agreements: lenders, employees, suppliers etc. The higher risk is compensated through greater influence on the operations. Considerations of the owners’ interests should therefore take priority over other interests. The owners also have the right to the company’s residual. In small or family-owned companies, the owners may have many diffe­rent goals. In larger, listed corporations, the owners’ interests must be defined in a narrower, but also more general, way. Shareholder value is one such general interpretation of what different groups of owners might want to achieve with their investment: seeing their fortune increase, in the long or short term, regardless of what has been sacrificed to achieve this goal. “The business of business is business” is an expression for this stream­ lining of the complex web of motivations behind a company. The message has a powerful simplicity and what the man behind it − the Noble Laureate Milton Friedman − meant was to highlight the task given to the employees in an executive team by the company’s owners: to increase the value of their investments. Social or environmental considerations, beyond those regulated by law, should not be taken into account by the operative managers. Nor do they have the right to use the company’s resources to support various not-for-profit goals. Of course, the capital owners could use their resources freely for such purposes, which they in many cases were expected to do in the American society (Friedman 1970). Following in Friedman’s footsteps, his successors in the so-called Chicago school of economics – Friedman was a professor at the University of Chicago – formulated an ideologically coloured message regarding the role of companies in modern society. It contained a strong rejection of everything that, with time, would come to be referred to as CSR: the role of the company was to increase the value of invested capital and the task of management was to procure such value for the owners (Borglund 2006). Alongside this fundamental, ideological critique of the idea of CSR, a more practically based critique has also been formulated, for instance by Dave Henderson, the former chief economist of the OECD. He pointed

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 5


uu

out that companies normally do not have the competence for various social or environmental projects. On the other hand, there are often specialized and highly effective organizations in the public sector or the international community focused on such tasks. Henderson suggested that it was thus sub-optimal resource usage to have various companies take on CSR commitments (Henderson 2001). Toward the end of his life, Milton Friedman modified his strict rejection of CSR and admitted that companies should show certain forms of environmental and social responsibility in order to fulfil their tasks in the long term. Michael Jensen, one of Friedman’s successors at the University of Chicago, started referring to this modified stance as enlightened share­ holder value. This concept offered space for environ­mental responsibility, social responsibility, good working conditions and proactive efforts against corruption, in order for companies to reinforce their ability to deliver value to their owners in the long term. The risk of having operations referred to as environmentally dangerous, insensitive to inhumane working conditions or corrupt had grown too large. For this very reason, more and more companies find it strategically important to be proactive about matters encompassed by the concept CSR, i.e., sometimes taking greater responsibility than what is explicit from regulations. Another step in linking the strictly economic aspects with the broader social aspects can be seen in Michael Porter’s and Mark Kramer’s ideas on shared value. Porter, a professor at Harvard, who became famous for, inter alia, theories on the role of corporate clusters in economic development, has been very critical of the CSR concept but changed foot in an article from 2011 which garnered a lot of attention. On the back of the criticism against capitalism and lacking responsibility on the part of the industry, following the economic crisis of 2008, he and his co-author Kramer stated that a short-term and one-sided focus on profit need not be the norm. The success of companies can be united with positive social development. Goods and markets can be seen from new perspectives, productivity can be defined in new ways and companies can find new methods of working jointly toward goals that meet crucial needs among several important stakeholders. This change in the views on how shareholder value is created is based on a shift in the bulk of entrepreneurial endeavours, from production to distribution and marketing. Shareholder value is increasingly based on intellectual property, on the reputation a company has and the ideas that consumers connect to a company’s processes and products. Especially in sectors and fields where product development has achieved such maturity that the difference between different companies’ product ranges is negligible, it is increasingly important to associate the products with other

26 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

case

Social responsibility through partnerships Long-term actions and value creation are the watchwords for a successful partnership between NGOs and companies. This is the view of both Accenture and Save the Children, which both agree that their joint collaboration leads to precisely these things. They have been collaborating in Sweden since 2005 and in their partnership, both parties contribute with their expertise to achieve the joint goal of giving more children and youths the right conditions and the opportunity to succeed. Accenture primarily contributes know­ ledge as consultants in management and strategy, in order to help make Save the Children a more effective organization, to reach more children. Save the Children helps Accenture achieve its social goals as a responsible company in the framework of the theme “Skills to Succeed,” which serves to help give people the prerequisites for getting a job or founding a company. Save the Children can contribute with priceless experience, competence and local support at a grassroots level. “The operations of Save the Children are in line with our strategy and they have knowledge that we lack. We would not be able to maximize our social impact without them and other NGOs,” says Fredrik Nilzén, CSR manager at Accenture Nordic. In a partner­ship, each party should contribute what they do well

and what is needed. Sharing knowledge and information efficiently and jointly measuring actual effects are other important aspects. Fredrik Nilzén says that Save the Children teaches Accenture how best to create social sustainability for children and youths. The challenge can be that for-profit companies and non-profit organizations sometimes have different ideas on how to solve problems − but this is also where the oppor­ tunities and the potential for organizational development and innovative thinking exist. This is why the long-term aspect is important, something confirmed by Marie Dahlgren, head of business development at Save the Children Sweden. “It takes time to get to know and understand one another, which is the challenge, but it is also the key to success in a partnership,” she says. When companies support NGOs, these are often one-time investments, but Marie Dahlgren points out that the case of Accenture and Save the Children is quite the opposite. She says that both parties evolve together and can thus achieve more goals and better results. That Save the Children and Accenture have gone from a Swedish, to a Nordic, and now a global partnership shows that the longterm view is the crucial key to success and that it is entirely possible for non-profit and for-profit organizations to find joint values.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 7


uu

out that companies normally do not have the competence for various social or environmental projects. On the other hand, there are often specialized and highly effective organizations in the public sector or the international community focused on such tasks. Henderson suggested that it was thus sub-optimal resource usage to have various companies take on CSR commitments (Henderson 2001). Toward the end of his life, Milton Friedman modified his strict rejection of CSR and admitted that companies should show certain forms of environmental and social responsibility in order to fulfil their tasks in the long term. Michael Jensen, one of Friedman’s successors at the University of Chicago, started referring to this modified stance as enlightened share­ holder value. This concept offered space for environ­mental responsibility, social responsibility, good working conditions and proactive efforts against corruption, in order for companies to reinforce their ability to deliver value to their owners in the long term. The risk of having operations referred to as environmentally dangerous, insensitive to inhumane working conditions or corrupt had grown too large. For this very reason, more and more companies find it strategically important to be proactive about matters encompassed by the concept CSR, i.e., sometimes taking greater responsibility than what is explicit from regulations. Another step in linking the strictly economic aspects with the broader social aspects can be seen in Michael Porter’s and Mark Kramer’s ideas on shared value. Porter, a professor at Harvard, who became famous for, inter alia, theories on the role of corporate clusters in economic development, has been very critical of the CSR concept but changed foot in an article from 2011 which garnered a lot of attention. On the back of the criticism against capitalism and lacking responsibility on the part of the industry, following the economic crisis of 2008, he and his co-author Kramer stated that a short-term and one-sided focus on profit need not be the norm. The success of companies can be united with positive social development. Goods and markets can be seen from new perspectives, productivity can be defined in new ways and companies can find new methods of working jointly toward goals that meet crucial needs among several important stakeholders. This change in the views on how shareholder value is created is based on a shift in the bulk of entrepreneurial endeavours, from production to distribution and marketing. Shareholder value is increasingly based on intellectual property, on the reputation a company has and the ideas that consumers connect to a company’s processes and products. Especially in sectors and fields where product development has achieved such maturity that the difference between different companies’ product ranges is negligible, it is increasingly important to associate the products with other

26 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

case

Social responsibility through partnerships Long-term actions and value creation are the watchwords for a successful partnership between NGOs and companies. This is the view of both Accenture and Save the Children, which both agree that their joint collaboration leads to precisely these things. They have been collaborating in Sweden since 2005 and in their partnership, both parties contribute with their expertise to achieve the joint goal of giving more children and youths the right conditions and the opportunity to succeed. Accenture primarily contributes know­ ledge as consultants in management and strategy, in order to help make Save the Children a more effective organization, to reach more children. Save the Children helps Accenture achieve its social goals as a responsible company in the framework of the theme “Skills to Succeed,” which serves to help give people the prerequisites for getting a job or founding a company. Save the Children can contribute with priceless experience, competence and local support at a grassroots level. “The operations of Save the Children are in line with our strategy and they have knowledge that we lack. We would not be able to maximize our social impact without them and other NGOs,” says Fredrik Nilzén, CSR manager at Accenture Nordic. In a partner­ship, each party should contribute what they do well

and what is needed. Sharing knowledge and information efficiently and jointly measuring actual effects are other important aspects. Fredrik Nilzén says that Save the Children teaches Accenture how best to create social sustainability for children and youths. The challenge can be that for-profit companies and non-profit organizations sometimes have different ideas on how to solve problems − but this is also where the oppor­ tunities and the potential for organizational development and innovative thinking exist. This is why the long-term aspect is important, something confirmed by Marie Dahlgren, head of business development at Save the Children Sweden. “It takes time to get to know and understand one another, which is the challenge, but it is also the key to success in a partnership,” she says. When companies support NGOs, these are often one-time investments, but Marie Dahlgren points out that the case of Accenture and Save the Children is quite the opposite. She says that both parties evolve together and can thus achieve more goals and better results. That Save the Children and Accenture have gone from a Swedish, to a Nordic, and now a global partnership shows that the longterm view is the crucial key to success and that it is entirely possible for non-profit and for-profit organizations to find joint values.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 7


values. Taking responsibility in CSR matters becomes important: environmentally friendly products, production processes that do not harm those involved, honest business methods, etc., become assets in the creation of a strong brand: reputation management is an area that is attracting more and more interest, both academically and in practice (see further Chapter 8). Henderson’s critique should, however, be taken seriously. This can be done by developing CSR commitments along two lines of action, which can be combined. One entails that companies should develop their CSR commitments as an extension of their own operations and based on their own competence. This would mean that a telecom company does other things to take responsibility than a forestry company and that a consumeroriented chain of shops finds other areas to focus on than a producer of raw industrial materials. The other line of action, which has become increasingly common to achieve intelligent CSR, is creating an alliance between the company and a volunteer organization. This does not have to entail sponsorship or a simple exchange of resources against legitimacy − rather, this is a long-term, mutual learning process.

ventures: they have been strictly regulated and companies have adapted − or they have been relatively liberal, with companies adapting accordingly. Flexibility is a virtue in running a company. But today, it is not enough for companies to do what the law and other regulations require. There are other stakeholder groups who want to have a say, including an increasingly powerful category of transnational, institutional investors. They have, since the deregulation of the financial markets in the 1980s, using increasingly fast technology, expressed their preferences through purchases, sales and various forms of corporate governance (CG). Corporate management teams spend more and more time in a dialogue with investors at the financial centre of the world (see also Chapter 10). A fourth group in the debate about what companies are expected to do, in addition to the companies’ own representatives, politicians and financial players, are the new interest organizations, often called NGOs (NonGovernmental Organizations). As already mentioned, collaborations between large companies and NGOs have become very common; many large companies announce on their website that they are collaborating with some NGO.

Licence to operate The efforts of companies to meet the expectations on social and environ­ mental responsibility have, over the past few years, increased quite a bit, both internationally and in the Nordic countries. Almost all larger companies mention such matters in their annual reports, in special sustainability reports, in integrated reports and on their websites (see, e.g., Comprend and Halvarsson & Hallvarsson: CSR spotlight report 2015–2016). It is not clear if this is due to a deeper conviction or if it is a charade to show a responsible facade. What is clear is that the question is no longer if a listed company should take on CSR responsibility, but how. Merely polishing the surface may serve to increase the risks: CSR commitments are to be seen as promises to the world and cannot be neglected without risking your reputation. Individual companies do not decide independently what responsibility they are expected to take. Various industry collaborations and memberships in industry organizations play a part. It is easier to take on responsibility if it is “competition-neutral,” i.e., if all the competitors make similar promises. Through political decisions, there is defined regulation in the form of legal acts at a national level and overall guidelines at an international level (see soft regulation, below). Many companies refer to such regulations when their CSR commitments are mentioned: “We obey the law.” Since time immemorial, the political system has set the boundaries for economic

28 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

NGO (NON-GOVERNMENTAL ORGANIZATION) NGOs are also called Civil Society Organizations. There are around 3,000–4,000 such organizations, which operate in many countries and usually focus on one or a few issues. They may be broad membership organizations or more activist-influenced groups. Amnesty and Greenpeace are two examples. This field also includes volunteer organizations of a more general type, like the Red Cross and Save the Children. They lift their issues in relation to other groups of stakeholders or the powers that be, in a collaborative or confrontational way, depending on the circumstances.

In the communication with these stakeholder groups, an arena for dis­ course has been created, where ideas regarding what companies should do take form. The media make up one part of this discussion, acting as both arena and player. The follow-up of companies’ commitments through the media is a prerequisite if companies are to go from words to action. The discussion on this arena is characterized by the different possibilities for alliances and attitudes toward other groups. The discussion can become a closed debate between elite groups, but can also provide space for a broader, more democratic debate.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 9


values. Taking responsibility in CSR matters becomes important: environmentally friendly products, production processes that do not harm those involved, honest business methods, etc., become assets in the creation of a strong brand: reputation management is an area that is attracting more and more interest, both academically and in practice (see further Chapter 8). Henderson’s critique should, however, be taken seriously. This can be done by developing CSR commitments along two lines of action, which can be combined. One entails that companies should develop their CSR commitments as an extension of their own operations and based on their own competence. This would mean that a telecom company does other things to take responsibility than a forestry company and that a consumeroriented chain of shops finds other areas to focus on than a producer of raw industrial materials. The other line of action, which has become increasingly common to achieve intelligent CSR, is creating an alliance between the company and a volunteer organization. This does not have to entail sponsorship or a simple exchange of resources against legitimacy − rather, this is a long-term, mutual learning process.

ventures: they have been strictly regulated and companies have adapted − or they have been relatively liberal, with companies adapting accordingly. Flexibility is a virtue in running a company. But today, it is not enough for companies to do what the law and other regulations require. There are other stakeholder groups who want to have a say, including an increasingly powerful category of transnational, institutional investors. They have, since the deregulation of the financial markets in the 1980s, using increasingly fast technology, expressed their preferences through purchases, sales and various forms of corporate governance (CG). Corporate management teams spend more and more time in a dialogue with investors at the financial centre of the world (see also Chapter 10). A fourth group in the debate about what companies are expected to do, in addition to the companies’ own representatives, politicians and financial players, are the new interest organizations, often called NGOs (NonGovernmental Organizations). As already mentioned, collaborations between large companies and NGOs have become very common; many large companies announce on their website that they are collaborating with some NGO.

Licence to operate The efforts of companies to meet the expectations on social and environ­ mental responsibility have, over the past few years, increased quite a bit, both internationally and in the Nordic countries. Almost all larger companies mention such matters in their annual reports, in special sustainability reports, in integrated reports and on their websites (see, e.g., Comprend and Halvarsson & Hallvarsson: CSR spotlight report 2015–2016). It is not clear if this is due to a deeper conviction or if it is a charade to show a responsible facade. What is clear is that the question is no longer if a listed company should take on CSR responsibility, but how. Merely polishing the surface may serve to increase the risks: CSR commitments are to be seen as promises to the world and cannot be neglected without risking your reputation. Individual companies do not decide independently what responsibility they are expected to take. Various industry collaborations and memberships in industry organizations play a part. It is easier to take on responsibility if it is “competition-neutral,” i.e., if all the competitors make similar promises. Through political decisions, there is defined regulation in the form of legal acts at a national level and overall guidelines at an international level (see soft regulation, below). Many companies refer to such regulations when their CSR commitments are mentioned: “We obey the law.” Since time immemorial, the political system has set the boundaries for economic

28 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

NGO (NON-GOVERNMENTAL ORGANIZATION) NGOs are also called Civil Society Organizations. There are around 3,000–4,000 such organizations, which operate in many countries and usually focus on one or a few issues. They may be broad membership organizations or more activist-influenced groups. Amnesty and Greenpeace are two examples. This field also includes volunteer organizations of a more general type, like the Red Cross and Save the Children. They lift their issues in relation to other groups of stakeholders or the powers that be, in a collaborative or confrontational way, depending on the circumstances.

In the communication with these stakeholder groups, an arena for dis­ course has been created, where ideas regarding what companies should do take form. The media make up one part of this discussion, acting as both arena and player. The follow-up of companies’ commitments through the media is a prerequisite if companies are to go from words to action. The discussion on this arena is characterized by the different possibilities for alliances and attitudes toward other groups. The discussion can become a closed debate between elite groups, but can also provide space for a broader, more democratic debate.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 2 9


Investors/savers

actors on the financial market the media political actors

Corporate Governance (cg)

csr

the economy

employees & clients

NGOs citizens

members Figure 1.3 A company must live up to the expectations of its surroundings in order to gain legitimacy. In this way, the company gains its “licence to operate.”

As an individual citizen, you can influence companies both in the capa­ city of employee and that of consumer. It is possible to express preferences as regards CSR through your choice of goods and services, or in your choice of employer. Employer branding is highly based on a company making its views on responsibilities known. As a citizen, the individual can vote for the party that expresses reasonable expectations on companies. You can join an NGO and invest your savings with a trustee that requires its portfolio companies to match its own views. The overall view of all the stakeholders, taken as a whole, shapes the expectations that companies must live up to in order to gain legitimacy. This legitimacy constitutes a licence to operate. This does not relate to the

3 0 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

various formal permits from authorities, but to having the world accept a company’s actions in different aspects. There are, however, a number of initiatives aimed at determining the conditions for a licence to operate in the form of different types of norms. These are what is known as soft regulation: their nature is that of regulations, but they are neither law nor ordinance − they are simply norms or guidelines. Such guidelines on companies’ actions exist at both a general level and a more detailed, industry-specific level, with both national and inter­national frameworks. The most important general points of reference for CSR are OECD’s guidelines for multi-national companies, ICC’s Principles for Business in Society and the conventions that form the basis for the UN Global Compact, i.e., the UN’s declarations on Human Rights and Corruption, the ILO’s Fundamental Conventions on Labour Law, and the Rio Declaration on the environment. The significance of the Paris agreement in 2015 is yet to be seen. The same is true for the seventeen global Sustainable Development Goals that the UN adopted in 2016 up until the year 2030. These are to be seen as prioritized, but fairly roughly defined areas of policy, in which various societal players are expected to contribute to a desired development. These norms have, to various extent, been implemented in national laws here and there, but taken overall, they have the formal position of “soft rules.” However, they are “hard” enough that they almost take on the role of international law. The contents of the different documents are, in many aspects, similar, but the creators and “owners” of the guide­ lines, as well as the target groups, differ. At an industry and sub-industry level, the steering documents are more specific and take on the role of international contracts between companies in the industry. GRI, Global Reporting Initiative, has grown into a recognized, but also criticized, standard for corporate reporting on CSR commitments. The criticism relates to demands for more extensive reporting, viewed by the companies as superfluous or too detailed, but which they cannot refuse to fulfil (see further in Chapter 9 on sustainability reporting).

Trust A licence to operate is a vote of confidence from the surroundings. The question of trust or reliability has been debated within social sciences over the past decades, following initiatives on the part of researchers like Francis Fukuyama and Robert Putnam. The latter, in particular, played an important role in coining the phrases high trust- and low trust-societies. Putnam discusses a type of overall trust as a characteristic of or an asset within a society. In societies where citizens trust their

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 31


Investors/savers

actors on the financial market the media political actors

Corporate Governance (cg)

csr

the economy

employees & clients

NGOs citizens

members Figure 1.3 A company must live up to the expectations of its surroundings in order to gain legitimacy. In this way, the company gains its “licence to operate.”

As an individual citizen, you can influence companies both in the capa­ city of employee and that of consumer. It is possible to express preferences as regards CSR through your choice of goods and services, or in your choice of employer. Employer branding is highly based on a company making its views on responsibilities known. As a citizen, the individual can vote for the party that expresses reasonable expectations on companies. You can join an NGO and invest your savings with a trustee that requires its portfolio companies to match its own views. The overall view of all the stakeholders, taken as a whole, shapes the expectations that companies must live up to in order to gain legitimacy. This legitimacy constitutes a licence to operate. This does not relate to the

3 0 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

various formal permits from authorities, but to having the world accept a company’s actions in different aspects. There are, however, a number of initiatives aimed at determining the conditions for a licence to operate in the form of different types of norms. These are what is known as soft regulation: their nature is that of regulations, but they are neither law nor ordinance − they are simply norms or guidelines. Such guidelines on companies’ actions exist at both a general level and a more detailed, industry-specific level, with both national and inter­national frameworks. The most important general points of reference for CSR are OECD’s guidelines for multi-national companies, ICC’s Principles for Business in Society and the conventions that form the basis for the UN Global Compact, i.e., the UN’s declarations on Human Rights and Corruption, the ILO’s Fundamental Conventions on Labour Law, and the Rio Declaration on the environment. The significance of the Paris agreement in 2015 is yet to be seen. The same is true for the seventeen global Sustainable Development Goals that the UN adopted in 2016 up until the year 2030. These are to be seen as prioritized, but fairly roughly defined areas of policy, in which various societal players are expected to contribute to a desired development. These norms have, to various extent, been implemented in national laws here and there, but taken overall, they have the formal position of “soft rules.” However, they are “hard” enough that they almost take on the role of international law. The contents of the different documents are, in many aspects, similar, but the creators and “owners” of the guide­ lines, as well as the target groups, differ. At an industry and sub-industry level, the steering documents are more specific and take on the role of international contracts between companies in the industry. GRI, Global Reporting Initiative, has grown into a recognized, but also criticized, standard for corporate reporting on CSR commitments. The criticism relates to demands for more extensive reporting, viewed by the companies as superfluous or too detailed, but which they cannot refuse to fulfil (see further in Chapter 9 on sustainability reporting).

Trust A licence to operate is a vote of confidence from the surroundings. The question of trust or reliability has been debated within social sciences over the past decades, following initiatives on the part of researchers like Francis Fukuyama and Robert Putnam. The latter, in particular, played an important role in coining the phrases high trust- and low trust-societies. Putnam discusses a type of overall trust as a characteristic of or an asset within a society. In societies where citizens trust their

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 31


surroundings and the institutions that keep societal order, there is a high level of general trust. The Nordic countries are seen as such societies. Certain transactions that can easily be performed there would not be possible in other places. A high level of general trust lowers transaction costs and thus streamlines the economy in general. If you look to the Baltic countries or Russia, you find a much lower level of general trust, revealed in the general unwillingness to pay tax, based on a scepticism as regards the “good will” of societal institutions (Putnam 2000 and 2002, Trägårdh et al. 2013). The question of how general trust arises in a society is hotly debated and the Swedish political scientist Bo Rothstein has made several notable contributions to the debate. Putnam suggests that civil society and its functions are drivers when it comes to creating trust. Civil society, the third sector, the non-profit sector − there are many names for operations that are run on a voluntary basis, without any real interest in profit and without any form of governmental duties. It would seem that Putnam suggests that with strong, robust players in civil society, citizens can develop trust in one another. Rothstein instead highlights the importance of good public institutions. A public sector that is not corrupt, and operates in accordance with predictable guidelines, delivering qualitative services to citizens, is the primary gene­rator of trust (see, e.g., Rothstein 2011a). There is no reason to, in this context, choose one viewpoint over the other. Both functional volunteer organizations and good public author­ities contribute to developing general trust as an institution, in the sense of the word proposed by the institutional theory: a generally accepted pattern of actions. Another aspect that presents itself immediately as a contributor to general trust is a well-functioning, efficient and non-corrupt market economy. All three sectors are needed for a well-functioning society. When it comes to inspiring trust, companies are fighting against in­ herited scepticism, highlighted by the classic economic theory and ideas regarding rational decision-making. It is not easy for companies to convince the world about their best intentions, when the operational goals are expressed as returns on invested capital, or simply as economic profit. In the Western culture, there is a pervading scepticism against the unification of economic operations and good citizenry. This view has been built up − or used − over many years, by both the church and radical political parties: anyone held in sway by money, or who represents the power of money, has lost his or her societal trustworthiness.

3 2 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

The suspicion against economic development being possible to unite with fair division of property, without political governance, got a powerful thrust in the debate thanks to the French economist Thomas Piketty 2015. He states in his book Capital in the Twenty-First Century that the concentration of fortune to the richest people in the Western world has increased dramatically since the end of the Second World War, as revenue from capital has grown more than revenue from work. Piketty based his study, which covers the time from the early 1800s through to the early 2000s, on a large database including many European countries. The empirical foundation of his project has been generally lauded by the research society, but his political conclusions − including global tax on capital − have been criticized. Either way, the book shed light on the question of how large a difference in wealth a society can harbour without beginning to crack − and the role that growing income disparities between managers and employees plays. What can a company do to improve its legitimacy and trustworthiness? The question has been posed time and again following recurrent industrial and financial crises during the past decades, when both large and small savers have lost fortunes, while those in leading positions in banks and companies get larger and larger compensations. The crisis in the early 2000s led to reinforced legislation in the USA (SarbanesOxley Act). In Sweden, the so-called Corporate Code of Governance was adopted, to achieve greater transparency and clearer rules for listed corporations. The latest large financial crisis (2008–2009) led to a tight­ening of regulations, both in the EU and elsewhere, but it remains to be seen if the confidence of the public in the players on the financial markets has improved.

The definition of trust So, what is confidence or trust? Following the collapse of the apartheid regime in South Africa, a commission on confidence was instated, to bridge the antagonism in society. The commission asked a number of philo­sophers for a definition of the concept trust and a suggestion on how societal trust could be increased. According to these philosophers, trust is:

“The willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party.” — Mayer, Davis and Schoorman, 1995

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 33


surroundings and the institutions that keep societal order, there is a high level of general trust. The Nordic countries are seen as such societies. Certain transactions that can easily be performed there would not be possible in other places. A high level of general trust lowers transaction costs and thus streamlines the economy in general. If you look to the Baltic countries or Russia, you find a much lower level of general trust, revealed in the general unwillingness to pay tax, based on a scepticism as regards the “good will” of societal institutions (Putnam 2000 and 2002, Trägårdh et al. 2013). The question of how general trust arises in a society is hotly debated and the Swedish political scientist Bo Rothstein has made several notable contributions to the debate. Putnam suggests that civil society and its functions are drivers when it comes to creating trust. Civil society, the third sector, the non-profit sector − there are many names for operations that are run on a voluntary basis, without any real interest in profit and without any form of governmental duties. It would seem that Putnam suggests that with strong, robust players in civil society, citizens can develop trust in one another. Rothstein instead highlights the importance of good public institutions. A public sector that is not corrupt, and operates in accordance with predictable guidelines, delivering qualitative services to citizens, is the primary gene­rator of trust (see, e.g., Rothstein 2011a). There is no reason to, in this context, choose one viewpoint over the other. Both functional volunteer organizations and good public author­ities contribute to developing general trust as an institution, in the sense of the word proposed by the institutional theory: a generally accepted pattern of actions. Another aspect that presents itself immediately as a contributor to general trust is a well-functioning, efficient and non-corrupt market economy. All three sectors are needed for a well-functioning society. When it comes to inspiring trust, companies are fighting against in­ herited scepticism, highlighted by the classic economic theory and ideas regarding rational decision-making. It is not easy for companies to convince the world about their best intentions, when the operational goals are expressed as returns on invested capital, or simply as economic profit. In the Western culture, there is a pervading scepticism against the unification of economic operations and good citizenry. This view has been built up − or used − over many years, by both the church and radical political parties: anyone held in sway by money, or who represents the power of money, has lost his or her societal trustworthiness.

3 2 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

The suspicion against economic development being possible to unite with fair division of property, without political governance, got a powerful thrust in the debate thanks to the French economist Thomas Piketty 2015. He states in his book Capital in the Twenty-First Century that the concentration of fortune to the richest people in the Western world has increased dramatically since the end of the Second World War, as revenue from capital has grown more than revenue from work. Piketty based his study, which covers the time from the early 1800s through to the early 2000s, on a large database including many European countries. The empirical foundation of his project has been generally lauded by the research society, but his political conclusions − including global tax on capital − have been criticized. Either way, the book shed light on the question of how large a difference in wealth a society can harbour without beginning to crack − and the role that growing income disparities between managers and employees plays. What can a company do to improve its legitimacy and trustworthiness? The question has been posed time and again following recurrent industrial and financial crises during the past decades, when both large and small savers have lost fortunes, while those in leading positions in banks and companies get larger and larger compensations. The crisis in the early 2000s led to reinforced legislation in the USA (SarbanesOxley Act). In Sweden, the so-called Corporate Code of Governance was adopted, to achieve greater transparency and clearer rules for listed corporations. The latest large financial crisis (2008–2009) led to a tight­ening of regulations, both in the EU and elsewhere, but it remains to be seen if the confidence of the public in the players on the financial markets has improved.

The definition of trust So, what is confidence or trust? Following the collapse of the apartheid regime in South Africa, a commission on confidence was instated, to bridge the antagonism in society. The commission asked a number of philo­sophers for a definition of the concept trust and a suggestion on how societal trust could be increased. According to these philosophers, trust is:

“The willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party.” — Mayer, Davis and Schoorman, 1995

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 33


Trust is, according to this definition, the confidence that a party in power will wield this power in a way that is beneficial to the other party, even though there is no way to control the first party’s actions. Accepting such a position of dependency is to show trust. I cannot monitor what my pension trustee does with my savings − beyond possibly checking after the fact − but I still deposit a sum with them monthly. That is trust. I do not actually know what is in the jar of baby food, even if there is a list of ingredients on the label, but I feed my child with the contents anyway. That is trust. I settle into the airplane seat, secure in the knowledge that someone else has performed all the necessary checks. I surrender my life into the hands of the airline and its staff. That is trust. The definition of trust says that trust arises irrespective of the ability to monitor or control. Still, trust and control are linked. You can see the trust of the world as a type of capital needed to operate certain businesses. The more various stakeholders can control and follow-up, the less this will eat away at the trust capital. Mayer, Davis and Schoorman recommend four facilitators which the companies can use to gain trust. They also emphasize that companies can only indirectly, not directly, create trust. A company can work to improve its trustworthiness. A company that is seen as trustworthy will gain the trust of stakeholders and the world as a reaction to this. Creating opportunities for control is one of the recommended facilitators to improve trustworthiness. This is done through increased openness and transparency and related to corporate communications. It is not enough to passively make all information about the operations accessible. Openness is, first and foremost, an active, communicative action, which also includes assessments of what is worth knowing and what is super­ fluous (see further Chapter 12). The second facilitator to improve trustworthiness is being know­ ledgeable. If a party proves itself as competent, knowledgeable, up-todate and experienced, trust will increase. Getting an external confirmation of this increases the value further: this is where certificates play in, acting as authorizations, licences, legitimizations or otherwise affirming educational levels and following up on operational results. A third facilitator to improve trust is reinforcing the overall inte­ grity of the organization, i.e., the ability of it and its employees to act rationally, adhere to the rules and guidelines in force and adopted by the organization, and resisting temptations of a corrupting nature (see further Chapter 8). The fourth facilitator is benevolence. Here, this relates to the company showing that it wants long-term and mutually beneficial relationships

3 4 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

with stakeholders. Not gaining at someone else’s expense, not letting short-term revenue govern and sacrifice something that would be better from a long-term perspective: that is benevolence. One way of doing this is to develop your CSR commitments.

FOUR WAYS TO GAIN TRUST Create possibilities for control Increase openness and transparency of relevant information.

Know-how Prove yourself as competent, up-to-date and experienced.

Reinforce the integrity of the organization Adhere to rules and regulations and avoid corruption

Show benevolence Create long-term relationships to everyone’s satisfaction. Do not take advantage of others.

CSR in a global business environment Ideas about CSR have, as already mentioned, sprung out of an increasingly global business environment. Still, local or national experiences will characterize the expectations that each company is faced with. How can these differences be managed? Should companies adapt to local expectations or should they stick to a single course of action, wherever they do business? The reasoning regarding this connects to the theoretical difference between absolute and relative values (see further Chapter 4). One key term in the justification behind the introduction of the UN Global Compact in the late 1990s was embeddedness. This line of thought was brought forward by John Ruggie, a professor at Harvard and advisor to former UN Secretary-General Kofi Annan in these matters. The degree of embeddedness affects the expectations on a company taking on responsibility. A company that is or claims to be global will naturally get more responsibility than one that mainly operates and sees itself as local. A company can also choose between a shallower or a deeper commitment to the societies in which it operates. There are some who suggest a restrained stance among international companies: business should be conducted in a correct, professional

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 35


Trust is, according to this definition, the confidence that a party in power will wield this power in a way that is beneficial to the other party, even though there is no way to control the first party’s actions. Accepting such a position of dependency is to show trust. I cannot monitor what my pension trustee does with my savings − beyond possibly checking after the fact − but I still deposit a sum with them monthly. That is trust. I do not actually know what is in the jar of baby food, even if there is a list of ingredients on the label, but I feed my child with the contents anyway. That is trust. I settle into the airplane seat, secure in the knowledge that someone else has performed all the necessary checks. I surrender my life into the hands of the airline and its staff. That is trust. The definition of trust says that trust arises irrespective of the ability to monitor or control. Still, trust and control are linked. You can see the trust of the world as a type of capital needed to operate certain businesses. The more various stakeholders can control and follow-up, the less this will eat away at the trust capital. Mayer, Davis and Schoorman recommend four facilitators which the companies can use to gain trust. They also emphasize that companies can only indirectly, not directly, create trust. A company can work to improve its trustworthiness. A company that is seen as trustworthy will gain the trust of stakeholders and the world as a reaction to this. Creating opportunities for control is one of the recommended facilitators to improve trustworthiness. This is done through increased openness and transparency and related to corporate communications. It is not enough to passively make all information about the operations accessible. Openness is, first and foremost, an active, communicative action, which also includes assessments of what is worth knowing and what is super­ fluous (see further Chapter 12). The second facilitator to improve trustworthiness is being know­ ledgeable. If a party proves itself as competent, knowledgeable, up-todate and experienced, trust will increase. Getting an external confirmation of this increases the value further: this is where certificates play in, acting as authorizations, licences, legitimizations or otherwise affirming educational levels and following up on operational results. A third facilitator to improve trust is reinforcing the overall inte­ grity of the organization, i.e., the ability of it and its employees to act rationally, adhere to the rules and guidelines in force and adopted by the organization, and resisting temptations of a corrupting nature (see further Chapter 8). The fourth facilitator is benevolence. Here, this relates to the company showing that it wants long-term and mutually beneficial relationships

3 4 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

with stakeholders. Not gaining at someone else’s expense, not letting short-term revenue govern and sacrifice something that would be better from a long-term perspective: that is benevolence. One way of doing this is to develop your CSR commitments.

FOUR WAYS TO GAIN TRUST Create possibilities for control Increase openness and transparency of relevant information.

Know-how Prove yourself as competent, up-to-date and experienced.

Reinforce the integrity of the organization Adhere to rules and regulations and avoid corruption

Show benevolence Create long-term relationships to everyone’s satisfaction. Do not take advantage of others.

CSR in a global business environment Ideas about CSR have, as already mentioned, sprung out of an increasingly global business environment. Still, local or national experiences will characterize the expectations that each company is faced with. How can these differences be managed? Should companies adapt to local expectations or should they stick to a single course of action, wherever they do business? The reasoning regarding this connects to the theoretical difference between absolute and relative values (see further Chapter 4). One key term in the justification behind the introduction of the UN Global Compact in the late 1990s was embeddedness. This line of thought was brought forward by John Ruggie, a professor at Harvard and advisor to former UN Secretary-General Kofi Annan in these matters. The degree of embeddedness affects the expectations on a company taking on responsibility. A company that is or claims to be global will naturally get more responsibility than one that mainly operates and sees itself as local. A company can also choose between a shallower or a deeper commitment to the societies in which it operates. There are some who suggest a restrained stance among international companies: business should be conducted in a correct, professional

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 35


manner, but not necessarily with a moral commitment in various contexts outside actual operations. Another stance, suggested by American business ethicist Patricia Werhane, is the good guest policy, which means that international companies on a foreign market are expected to respect local rules and customs, but also take responsibility for the environment and social conditions. Much like a good guest in another’s home is expected to be well-behaved; the company in a foreign environment should not criticize or challenge local customs or regulations. The company should work with local players to improve conditions in various ways, but not through confrontation. If the conditions on a market are so foreign that the company cannot accept them, the company should retreat from that market (Donaldson & Werhane 1995). A greater degree of commitment could be expected of those companies which claim domiciliary rights or to be good citizens. A citizen must not only adhere to the law, but also has the right to influence it, develop it and change it, to a greater extent than a non-citizen. Anyone who claims to be a global citizen is taking on an extensive and comprehensive responsibility that is not geographically bound. This is not easy to live up to. Many internationally active companies have their own code of conduct, regulating how the company and its employees shall act when in a foreign country, whatever the regulations in the host country are. According to American federal law, companies that are registered in the USA (or which have significant operations in the USA) must adhere to American law wherever they do business. This can in some cases lead to regulatory conflicts, for instance regarding working conditions, child labour and environmental matters. What moral right does a company from one country have to assert the rules of its home country when doing business elsewhere? The influential American business ethicists Thomas Donaldson and Thomas W. Dunfee have tried to deal with this problem through a combination of faith in absolute rules and recognition of local variations. They suggest that there are number of so-called hyper-norms that anyone, both a company and an individual, has reason to adhere to. They can be defined in a relatively tangible way through internationally recognized conventions, for instance regarding human rights, labour law or environmental concerns. These conventions are not binding for a company unless they have been implemented in national regulations. Making an active choice and taking a stance in relation to various conventions is one way to take on the CSR challenge. There is, however, a risk that the ambition is seen as supercilious, big-brotherly, moralistic or imperialistic (Donaldson & Dunfee 1999).

3 6 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

What is not affected by such general norms is open for shifting local practices; Donaldson and Dunfee call it moral free space. Here, you must recognize that the conditions vary − customs and values shift and flexibility is needed. Naturally, this requires moral competence and an understanding of where the limits are and under what circumstances local customs come in conflict with general norms. For instance, matters relating to child labour can be very hard to deal with in practice. Moral responsibility can sometimes be a cover for protectionism. Many representatives of operations in poorer countries find it hard to accept that their companies are barred from international trade because of circumstances that charac­ terized the Western industry earlier in its development.

Corporate responsibility in a historical light: the case of Sweden Opinions on the social responsibility of enterprises have existed as long as there have been enterprises. They have changed with each new epoch. The following section sheds some light on the different phases of the view on the societal role of enterprises in Sweden − as well as various solutions to the problem of responsibility (De Geer 2009).

The iron works The Swedish iron works have become a model for a way of organizing complex operations, which has gone well beyond the heyday of the works themselves. Iron works started emerging in the 1500s and expanded during the 1600s and 1700s, but were exposed to strong forces of change during the 1800s, resulting in the disappearance of many of them. The death of the works led to a significant structural transformation, a concentration into larger units that were run in a more modern, industrial fashion. During the time when the works flourished, the economic policy in most European countries closely resembled a type of planned economy. The watchword of the day was mercantilism. The national economy was largely closed off and permits were required for both export and import. Even within the country, regulations were strict on who could do what and where. The concept of the nation as divided into four estates – noblemen, priests, burghers and farmers – reflected their different roles in the economy. The owners of the iron works, however, did not fall neatly into any of the four estates. They could be commoners, but still people of rank. They were sometimes richer than noblemen and landed at their works. They could be as well-read as priests, but lived provincially, like farmers. The mobility on the job market was, in this era, quite low. People stayed in their towns or districts. There was a form of duty to work; anyone who

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 37


manner, but not necessarily with a moral commitment in various contexts outside actual operations. Another stance, suggested by American business ethicist Patricia Werhane, is the good guest policy, which means that international companies on a foreign market are expected to respect local rules and customs, but also take responsibility for the environment and social conditions. Much like a good guest in another’s home is expected to be well-behaved; the company in a foreign environment should not criticize or challenge local customs or regulations. The company should work with local players to improve conditions in various ways, but not through confrontation. If the conditions on a market are so foreign that the company cannot accept them, the company should retreat from that market (Donaldson & Werhane 1995). A greater degree of commitment could be expected of those companies which claim domiciliary rights or to be good citizens. A citizen must not only adhere to the law, but also has the right to influence it, develop it and change it, to a greater extent than a non-citizen. Anyone who claims to be a global citizen is taking on an extensive and comprehensive responsibility that is not geographically bound. This is not easy to live up to. Many internationally active companies have their own code of conduct, regulating how the company and its employees shall act when in a foreign country, whatever the regulations in the host country are. According to American federal law, companies that are registered in the USA (or which have significant operations in the USA) must adhere to American law wherever they do business. This can in some cases lead to regulatory conflicts, for instance regarding working conditions, child labour and environmental matters. What moral right does a company from one country have to assert the rules of its home country when doing business elsewhere? The influential American business ethicists Thomas Donaldson and Thomas W. Dunfee have tried to deal with this problem through a combination of faith in absolute rules and recognition of local variations. They suggest that there are number of so-called hyper-norms that anyone, both a company and an individual, has reason to adhere to. They can be defined in a relatively tangible way through internationally recognized conventions, for instance regarding human rights, labour law or environmental concerns. These conventions are not binding for a company unless they have been implemented in national regulations. Making an active choice and taking a stance in relation to various conventions is one way to take on the CSR challenge. There is, however, a risk that the ambition is seen as supercilious, big-brotherly, moralistic or imperialistic (Donaldson & Dunfee 1999).

3 6 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

What is not affected by such general norms is open for shifting local practices; Donaldson and Dunfee call it moral free space. Here, you must recognize that the conditions vary − customs and values shift and flexibility is needed. Naturally, this requires moral competence and an understanding of where the limits are and under what circumstances local customs come in conflict with general norms. For instance, matters relating to child labour can be very hard to deal with in practice. Moral responsibility can sometimes be a cover for protectionism. Many representatives of operations in poorer countries find it hard to accept that their companies are barred from international trade because of circumstances that charac­ terized the Western industry earlier in its development.

Corporate responsibility in a historical light: the case of Sweden Opinions on the social responsibility of enterprises have existed as long as there have been enterprises. They have changed with each new epoch. The following section sheds some light on the different phases of the view on the societal role of enterprises in Sweden − as well as various solutions to the problem of responsibility (De Geer 2009).

The iron works The Swedish iron works have become a model for a way of organizing complex operations, which has gone well beyond the heyday of the works themselves. Iron works started emerging in the 1500s and expanded during the 1600s and 1700s, but were exposed to strong forces of change during the 1800s, resulting in the disappearance of many of them. The death of the works led to a significant structural transformation, a concentration into larger units that were run in a more modern, industrial fashion. During the time when the works flourished, the economic policy in most European countries closely resembled a type of planned economy. The watchword of the day was mercantilism. The national economy was largely closed off and permits were required for both export and import. Even within the country, regulations were strict on who could do what and where. The concept of the nation as divided into four estates – noblemen, priests, burghers and farmers – reflected their different roles in the economy. The owners of the iron works, however, did not fall neatly into any of the four estates. They could be commoners, but still people of rank. They were sometimes richer than noblemen and landed at their works. They could be as well-read as priests, but lived provincially, like farmers. The mobility on the job market was, in this era, quite low. People stayed in their towns or districts. There was a form of duty to work; anyone who

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 37


Lövsta bruk in Uppland, Sweden. The buildings are typical for the works environ­ ment, where worker housing, church and workplaces together form a small town.

did not have a permit for his own operations or a landed estate had to apply to work for some kind of master. A person who did not have a master could be used in forced labour. The works were usually the dominating operations in their region. It was common to be born and die serving the works. The affinity was very strong − which was a mixed blessing: this meant safety in some aspects and lack of freedom in others. The owner of the works led a conglomerate and had to master many things in order to lead the operations. The works often encompassed structures for several stages of iron processing. A furnace, which produced pig iron, could be combined with a hammer, which processed pig iron into malleable bar iron, and a smithy that created various types of iron items. Different kinds of skilled workers were also tied to the iron works. The highest ranking were usually the smiths, who played a significant role in final quality.

3 8 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

Iron production required several different raw materials, mainly iron ore and charcoal. The owner not only had to know about iron manu­ facturing − he also had to be familiar with forestry. The need for fuel required extensive forests, through which charcoal could be created. With time, the demand for wood became the main problem in production and efficient use of raw materials became a crucial success factor for iron works. The works were usually associated with large farms and animal husbandry. Plantations must be maintained to feed both people and animals. Here, farmers and milkmaids were needed, as well as people to perform sowing and reaping and everything else that comes with a large country household. The owner of the works has a responsibility as master to the people in his service. Ideologically, this responsibility had religious roots. This entailed not only wages and leadership, but also significant social responsibility throughout the lives of the people at his works. From the early years through to the weakness of age, people had to be supported, even when they could not contribute with anything in particular. There was often some form of school or teacher at the works. Education could be a springboard out into the world for especially gifted youths and was also a way to sift out who could be entrusted with the more complex tasks at the works. Of course, the responsibility as master was exercised in a patriarchal way. The staff of the works was seen as part of an extended family. Relationships within the family could be referred to as “broad.” This means that they covered many aspects − both personal and professional. People at the works knew one another over many generations. The head of the household’s right to use family members where and as he saw fit was largely unlimited. With time, many came to feel this was offensive. Environmental responsibility was not a common concept at the works. There was reason to exercise husbandry of the land, water and forests belonging to the works, so they could be used by future generations. However, knowledge of sustainable farming and forestry was sadly lacking, although many owners of works studied new findings in this area with great interest, when they began to spread from the new academies in Stockholm during the 1700s. Deforesting remained a problem. Pollution of air and water was, however, a problem for the future. Patriarchal leadership was also common within early industrial enterprises in the 1700s. They were often located in the growing urban centres, like Stockholm, Göteborg and Norrköping, and manufactured items such as iron goods, textiles, tobacco or chemical products. Here, the local insularity was not as large as at the works, although workers at each factory often lived close to it, in houses owned by the

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 39


Lövsta bruk in Uppland, Sweden. The buildings are typical for the works environ­ ment, where worker housing, church and workplaces together form a small town.

did not have a permit for his own operations or a landed estate had to apply to work for some kind of master. A person who did not have a master could be used in forced labour. The works were usually the dominating operations in their region. It was common to be born and die serving the works. The affinity was very strong − which was a mixed blessing: this meant safety in some aspects and lack of freedom in others. The owner of the works led a conglomerate and had to master many things in order to lead the operations. The works often encompassed structures for several stages of iron processing. A furnace, which produced pig iron, could be combined with a hammer, which processed pig iron into malleable bar iron, and a smithy that created various types of iron items. Different kinds of skilled workers were also tied to the iron works. The highest ranking were usually the smiths, who played a significant role in final quality.

3 8 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

Iron production required several different raw materials, mainly iron ore and charcoal. The owner not only had to know about iron manu­ facturing − he also had to be familiar with forestry. The need for fuel required extensive forests, through which charcoal could be created. With time, the demand for wood became the main problem in production and efficient use of raw materials became a crucial success factor for iron works. The works were usually associated with large farms and animal husbandry. Plantations must be maintained to feed both people and animals. Here, farmers and milkmaids were needed, as well as people to perform sowing and reaping and everything else that comes with a large country household. The owner of the works has a responsibility as master to the people in his service. Ideologically, this responsibility had religious roots. This entailed not only wages and leadership, but also significant social responsibility throughout the lives of the people at his works. From the early years through to the weakness of age, people had to be supported, even when they could not contribute with anything in particular. There was often some form of school or teacher at the works. Education could be a springboard out into the world for especially gifted youths and was also a way to sift out who could be entrusted with the more complex tasks at the works. Of course, the responsibility as master was exercised in a patriarchal way. The staff of the works was seen as part of an extended family. Relationships within the family could be referred to as “broad.” This means that they covered many aspects − both personal and professional. People at the works knew one another over many generations. The head of the household’s right to use family members where and as he saw fit was largely unlimited. With time, many came to feel this was offensive. Environmental responsibility was not a common concept at the works. There was reason to exercise husbandry of the land, water and forests belonging to the works, so they could be used by future generations. However, knowledge of sustainable farming and forestry was sadly lacking, although many owners of works studied new findings in this area with great interest, when they began to spread from the new academies in Stockholm during the 1700s. Deforesting remained a problem. Pollution of air and water was, however, a problem for the future. Patriarchal leadership was also common within early industrial enterprises in the 1700s. They were often located in the growing urban centres, like Stockholm, Göteborg and Norrköping, and manufactured items such as iron goods, textiles, tobacco or chemical products. Here, the local insularity was not as large as at the works, although workers at each factory often lived close to it, in houses owned by the

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 39


The shift from craftsmanship to industrial production meant that the need for workforce in the cities grew dramatically. Image from Bolinders Mechanical Works in Stockholm (circa 1910–1920).

factory owner. There was a kind of affinity here too. Even within farming, the work order was patriarchal. A system of agricultural labourers (in Swedish: statare), largely being paid in kind, arose at larger farms in southern Sweden. There, the patriarchal elements remained for longest. This system was not abolished until 1945.

The industry The transition to an industrial society was gradual and long, encompassing the period from the mid-1800s to the mid-1900s. Soon after 1900, more people in Sweden earned a living from industrial work than from agriculture. In the mid-1930s, more than half of Sweden’s citizens earned a living working for the industry. Development of communications, steamboat traffic, railways and roads, as well as the telegraph and the phone, created new conditions and new markets. New energy systems were created. The mobility of the population increased dramatically and many moved from the countryside into cities. As a next phase, many moved on to other countries, primarily the USA. The old works ended up on the wrong side of development, losing their business in the increasing competition, losing their workforce and losing independence to expanding wholesalers working on the export markets. An important condition for the industrial development was the increased liberalism of the economic policies. This included trade both inside and outside the country, a more generous right of establishment for entrepreneurs and the rise of a functional capital market with savings banks, corporate banks and securities exchanges. The Swedish industry gained speed especially through the sawmills, first in the western regions, and then along the coast of the northern region. The strong economic growth in England was the driving force, creating demand for construction materials. One generation later, sawmills were supplemented with pulp factories and paper mills. The chemical industry developed through match factories and factories for manufacturing explosives and fertilizer. The increased usage of machines in agriculture, on rails and at sea created a demand for metal works. Urbanization stimulated the construction industry and construction materials industry. At the end of the 1800s, several industrial companies were founded to exploit new technical inventions. These were the foundations for large, export-oriented and internationally renowned companies like the Nobel Industries, Separator, SKF, AGA, ASEA, LM Ericsson and Atlas Diesel, which in turn led to the growth of a network of subcontractors. Aside from the later car manufacturers, the Swedish industry structure was largely established already during the first decades of the 1900s.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 41


The shift from craftsmanship to industrial production meant that the need for workforce in the cities grew dramatically. Image from Bolinders Mechanical Works in Stockholm (circa 1910–1920).

factory owner. There was a kind of affinity here too. Even within farming, the work order was patriarchal. A system of agricultural labourers (in Swedish: statare), largely being paid in kind, arose at larger farms in southern Sweden. There, the patriarchal elements remained for longest. This system was not abolished until 1945.

The industry The transition to an industrial society was gradual and long, encompassing the period from the mid-1800s to the mid-1900s. Soon after 1900, more people in Sweden earned a living from industrial work than from agriculture. In the mid-1930s, more than half of Sweden’s citizens earned a living working for the industry. Development of communications, steamboat traffic, railways and roads, as well as the telegraph and the phone, created new conditions and new markets. New energy systems were created. The mobility of the population increased dramatically and many moved from the countryside into cities. As a next phase, many moved on to other countries, primarily the USA. The old works ended up on the wrong side of development, losing their business in the increasing competition, losing their workforce and losing independence to expanding wholesalers working on the export markets. An important condition for the industrial development was the increased liberalism of the economic policies. This included trade both inside and outside the country, a more generous right of establishment for entrepreneurs and the rise of a functional capital market with savings banks, corporate banks and securities exchanges. The Swedish industry gained speed especially through the sawmills, first in the western regions, and then along the coast of the northern region. The strong economic growth in England was the driving force, creating demand for construction materials. One generation later, sawmills were supplemented with pulp factories and paper mills. The chemical industry developed through match factories and factories for manufacturing explosives and fertilizer. The increased usage of machines in agriculture, on rails and at sea created a demand for metal works. Urbanization stimulated the construction industry and construction materials industry. At the end of the 1800s, several industrial companies were founded to exploit new technical inventions. These were the foundations for large, export-oriented and internationally renowned companies like the Nobel Industries, Separator, SKF, AGA, ASEA, LM Ericsson and Atlas Diesel, which in turn led to the growth of a network of subcontractors. Aside from the later car manufacturers, the Swedish industry structure was largely established already during the first decades of the 1900s.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 41


The transition from crafts to industrial production entailed increasingly mechanized work and using other energy sources than human and animal. Technology changed the relationship between the human and his or her tools. The construction of machines became vital − setting the pace of production and determining the level of human inter­ action needed to keep the system running. The human’s ability was reduced to one aspect of many in the production process. Technology was based less on manual skill and more on scientific research. It was then a small step to considering the idea that the optimal human role in production was also governed by scientific rules, which could be researched and applied. This was at the heart of the management and organizational systems, such as the American Frederick W. Taylor’s scientific management and the Frenchman Henri Fayol’s theory of business administration, which started to gain prominence around 1900. Where they were implemented, they contributed to clearing away the remains of older forms of corporate management, which could be seen as irrational, emotional or un-economic. Large parts of the patriarchal sense of responsibility were also phased out. The forms of enterprises changed. More and more enterprises became limited liability companies. In such companies, owners had limited liability and only risked the investment they had made to acquire their shares. The company acted as its own legal person. Industrialization in Sweden occurred in rural areas first. Gradually, the city became the typical environment for industrial manufacturing, either by locating manufacturing to cities or by the creation of towns close to industrial companies. In cities, growing numbers of people in search of work gathered and the supply of workforce was generally good. However, the living conditions for the uneducated and their families were terrible, as a rule. Many people were day labourers. Industrialization led to a proletariat forming within the urban, uneducated workforce. For members of the skilled workforce, industrialization created new developmental opportunities. They could build a platform out of their competence, through which they could negotiate the price for their work. Concurrent with industrialization, unionization grew, inspired by the development in Great Britain. It began among skilled workers and reached non-qualified workers later. During the 1880s and 1890s, many unions were formed. They, in turn, joined into industry and professional organizations. In order to manage the joint interest of the unions, which were mainly political, Landsorganisationen (LO) was formed in 1898. For salaried employees, unionization occurred much later − and the

4 2 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

academics’ unions sprang up later yet. As a response to the unionization, companies banded together into employer organizations. The Swedish Employers’ Association (SAF) was founded 1902. Thus, there was a basic structure in place for gradually developing the forms for negotiations regarding production, compensation and workplace conditions. The government contributed with regulations, but allowed the parties to negotiate the contents of their contracts. This was one of the fundaments of the Swedish model, made internationally famous in the 1930s by the book of the American journalist Marquis Childs: Sweden the Middle Way. The other fundament was a division of responsibility between the industry and the public sector, shaped in a negotiation between the social democrats and the liberal parties: the industry would not be nationalized but based on corporate rationality not taking socio-economic considerations into account. A strong public sector would, in turn, take care of both the social conditions that working life was based on (e.g., education) and the transitional phenomena that a changeable industry entailed (such as employment agencies and jobseeker’s allowances), as well as the situations when citizens could not be part of the workforce (due to illness or old age). Thus, the basic idea was that private industry would produce goods and services, while the politically governed public sector would deal with social matters. This meant that the private companies were excused from broader social responsibility, aside from what was part of the production process (such as worker protection and work environment matters). The most important social task of the companies was to be profitable and create jobs. Companies that showed an ambition to take broader social responsibility were not welcome on the social arena. The unions strived to remove all the remains of patriarchal responsibilities: compensation in kind, of any type, was to be replaced by remuneration in money. It was a conscious aim to make the relationships between employers and employees as “thin” as possible: a certain work effort was to be exchanged for a fixed economic compensation. The relationship was to be business-like and rational. Thus, the goals of unions and corporate management met in a minimization of the human relationships within working life: the work force became a purely economic function and social matters were not something for companies to deal with. However, Swedish companies generated jobs and economic growth at an un­ precedented pace during the decades following the Second World War.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 43


The transition from crafts to industrial production entailed increasingly mechanized work and using other energy sources than human and animal. Technology changed the relationship between the human and his or her tools. The construction of machines became vital − setting the pace of production and determining the level of human inter­ action needed to keep the system running. The human’s ability was reduced to one aspect of many in the production process. Technology was based less on manual skill and more on scientific research. It was then a small step to considering the idea that the optimal human role in production was also governed by scientific rules, which could be researched and applied. This was at the heart of the management and organizational systems, such as the American Frederick W. Taylor’s scientific management and the Frenchman Henri Fayol’s theory of business administration, which started to gain prominence around 1900. Where they were implemented, they contributed to clearing away the remains of older forms of corporate management, which could be seen as irrational, emotional or un-economic. Large parts of the patriarchal sense of responsibility were also phased out. The forms of enterprises changed. More and more enterprises became limited liability companies. In such companies, owners had limited liability and only risked the investment they had made to acquire their shares. The company acted as its own legal person. Industrialization in Sweden occurred in rural areas first. Gradually, the city became the typical environment for industrial manufacturing, either by locating manufacturing to cities or by the creation of towns close to industrial companies. In cities, growing numbers of people in search of work gathered and the supply of workforce was generally good. However, the living conditions for the uneducated and their families were terrible, as a rule. Many people were day labourers. Industrialization led to a proletariat forming within the urban, uneducated workforce. For members of the skilled workforce, industrialization created new developmental opportunities. They could build a platform out of their competence, through which they could negotiate the price for their work. Concurrent with industrialization, unionization grew, inspired by the development in Great Britain. It began among skilled workers and reached non-qualified workers later. During the 1880s and 1890s, many unions were formed. They, in turn, joined into industry and professional organizations. In order to manage the joint interest of the unions, which were mainly political, Landsorganisationen (LO) was formed in 1898. For salaried employees, unionization occurred much later − and the

4 2 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

academics’ unions sprang up later yet. As a response to the unionization, companies banded together into employer organizations. The Swedish Employers’ Association (SAF) was founded 1902. Thus, there was a basic structure in place for gradually developing the forms for negotiations regarding production, compensation and workplace conditions. The government contributed with regulations, but allowed the parties to negotiate the contents of their contracts. This was one of the fundaments of the Swedish model, made internationally famous in the 1930s by the book of the American journalist Marquis Childs: Sweden the Middle Way. The other fundament was a division of responsibility between the industry and the public sector, shaped in a negotiation between the social democrats and the liberal parties: the industry would not be nationalized but based on corporate rationality not taking socio-economic considerations into account. A strong public sector would, in turn, take care of both the social conditions that working life was based on (e.g., education) and the transitional phenomena that a changeable industry entailed (such as employment agencies and jobseeker’s allowances), as well as the situations when citizens could not be part of the workforce (due to illness or old age). Thus, the basic idea was that private industry would produce goods and services, while the politically governed public sector would deal with social matters. This meant that the private companies were excused from broader social responsibility, aside from what was part of the production process (such as worker protection and work environment matters). The most important social task of the companies was to be profitable and create jobs. Companies that showed an ambition to take broader social responsibility were not welcome on the social arena. The unions strived to remove all the remains of patriarchal responsibilities: compensation in kind, of any type, was to be replaced by remuneration in money. It was a conscious aim to make the relationships between employers and employees as “thin” as possible: a certain work effort was to be exchanged for a fixed economic compensation. The relationship was to be business-like and rational. Thus, the goals of unions and corporate management met in a minimization of the human relationships within working life: the work force became a purely economic function and social matters were not something for companies to deal with. However, Swedish companies generated jobs and economic growth at an un­ precedented pace during the decades following the Second World War.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 43


Post-industrial Sweden The Swedish model was national. Not in the sense that it was unique or outstanding − rather it was a Swedish version of a model used fairly gene­ rally in northern Europe. It was national in the sense that it, in order to succeed, required a possibility of regulating the relationship with the foreign economy. The model of the job market required regulated immigration. The negotiating system on the job market, which as a rule resulted in overly large wage increases, was based on the possibility of regulating cost levels in relation to foreign countries through devaluations. During the 1980s, the Swedish model began to crack because of international developments. During the 1990s, large parts of it disappeared because of globalization. Sweden entering the European Union in 1995 also changed the playing field and it was not clear how the adaptation to the freedom of movement would be carried out. Globalization can be defined in several different ways. One definition is that the significance of geographic location decreases within the economy. Other parameters are, for instance, costs, access to workforce, infrastructural conditions and institutional frameworks becoming more important in finding the right location. As more and more countries started working together on increasingly open markets, the economic map of the world had to be altered. Another important condition was the deregulation and internationalization of the financial markets. Foreign exchange controls were abo­ lished in many places. The international flow of capital grew in size and strength. The effects of this were obvious in Sweden, where more and more of the largest companies became partly or fully foreign-owned through mergers or acquisitions: AGA, ASEA, Astra, Avesta, Bofors, Saab, Stora, and Volvo, to name but a few. Others, which are still seen as Swedish companies − such as Ericsson − have a very large foreign element among the shareholders. Another change related to the interface between what private companies could do and what was reserved for the public sector. Many fields, where government, counties or municipalities had formerly held a mono­poly, were now open to private initiatives: private schools, healthcare centres, hospitals, job centres, etc. The list is quite long. Even public organizations that were not privatized were reorganized to become more like private companies. Such changes were referred to as “New Public Management” or NPM. The very core operations of the public sector, the exercise of authority, were influenced by the concepts regarding efficiency shaped by private companies. The boundary between the private and the public became vague when they were so similar in form. This made it harder to retain the idea that social responsibility was only

4 4 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

The post-industrial work situation is characterized by flexibility, where the work­ place is not necessarily in a given physical location and where distances have, in many ways, grown shorter.

applicable to the public sector. As a political reaction to this development there is a debate, which sometimes still flares up, regarding the justness of having private companies in the tax-financed welfare sector giving large dividends to their owners. Production became more computerized and knowledge-intense in many sectors. This meant an increased dependence on research and development. Such resources are hard to build up within a national framework. To get access to them, you need larger units or collaborations between different companies. Within the car industry, for instance, you need a very large amount of data to develop a radically new model. Networks stretching far across national borders became more common, and with them followed ideas and impulses that inspired new products and processes within the economy. In this context, the Swedish companies were introduced to the idea that they − especially on international markets − should take a social responsibility they did not take at home. They met CSR. But CSR was a foreign concept in the environment characterized by the traditions of the Swedish model. The resistance toward this fundamentally Anglo-Saxon concept was large, which is not surprising, but might warrant an explanation − given how quickly and easily other forms of

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 45


Post-industrial Sweden The Swedish model was national. Not in the sense that it was unique or outstanding − rather it was a Swedish version of a model used fairly gene­ rally in northern Europe. It was national in the sense that it, in order to succeed, required a possibility of regulating the relationship with the foreign economy. The model of the job market required regulated immigration. The negotiating system on the job market, which as a rule resulted in overly large wage increases, was based on the possibility of regulating cost levels in relation to foreign countries through devaluations. During the 1980s, the Swedish model began to crack because of international developments. During the 1990s, large parts of it disappeared because of globalization. Sweden entering the European Union in 1995 also changed the playing field and it was not clear how the adaptation to the freedom of movement would be carried out. Globalization can be defined in several different ways. One definition is that the significance of geographic location decreases within the economy. Other parameters are, for instance, costs, access to workforce, infrastructural conditions and institutional frameworks becoming more important in finding the right location. As more and more countries started working together on increasingly open markets, the economic map of the world had to be altered. Another important condition was the deregulation and internationalization of the financial markets. Foreign exchange controls were abo­ lished in many places. The international flow of capital grew in size and strength. The effects of this were obvious in Sweden, where more and more of the largest companies became partly or fully foreign-owned through mergers or acquisitions: AGA, ASEA, Astra, Avesta, Bofors, Saab, Stora, and Volvo, to name but a few. Others, which are still seen as Swedish companies − such as Ericsson − have a very large foreign element among the shareholders. Another change related to the interface between what private companies could do and what was reserved for the public sector. Many fields, where government, counties or municipalities had formerly held a mono­poly, were now open to private initiatives: private schools, healthcare centres, hospitals, job centres, etc. The list is quite long. Even public organizations that were not privatized were reorganized to become more like private companies. Such changes were referred to as “New Public Management” or NPM. The very core operations of the public sector, the exercise of authority, were influenced by the concepts regarding efficiency shaped by private companies. The boundary between the private and the public became vague when they were so similar in form. This made it harder to retain the idea that social responsibility was only

4 4 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

The post-industrial work situation is characterized by flexibility, where the work­ place is not necessarily in a given physical location and where distances have, in many ways, grown shorter.

applicable to the public sector. As a political reaction to this development there is a debate, which sometimes still flares up, regarding the justness of having private companies in the tax-financed welfare sector giving large dividends to their owners. Production became more computerized and knowledge-intense in many sectors. This meant an increased dependence on research and development. Such resources are hard to build up within a national framework. To get access to them, you need larger units or collaborations between different companies. Within the car industry, for instance, you need a very large amount of data to develop a radically new model. Networks stretching far across national borders became more common, and with them followed ideas and impulses that inspired new products and processes within the economy. In this context, the Swedish companies were introduced to the idea that they − especially on international markets − should take a social responsibility they did not take at home. They met CSR. But CSR was a foreign concept in the environment characterized by the traditions of the Swedish model. The resistance toward this fundamentally Anglo-Saxon concept was large, which is not surprising, but might warrant an explanation − given how quickly and easily other forms of

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 45


American influences had gained ground in business, culture and society in general. The CSR concept was contrary to established interest, which had invested in the Swedish model and its organizational structure. For companies it was strange to imagine stepping into areas they had formerly been freed from taking any interest in. This attitude remained among many economic organizations, which long after the international companies started to understand the meaning of CSR. “Such commitments might be motivated somewhere in the Third World,” asserted the precursor to the Confederation of Swedish Enterprise during the later 1990s. “But not here, where there is a functioning public sector.” For the unions, the internationalization of companies during the 1980s and 1990s had already caused problems. The Swedish order of negotiation did not fit the forms that unions in other places used for influence. Having ties to trade union federations with the European community was seen as a kind of specialist task. The unions were strongly characterized by their identities as part of the Swedish model. Politicians, especially on the left, were hesitant to allow large companies into the monopoly sphere of the public sector, where social matters had been managed. Even from the highest echelons, there was a suspicious tone regarding the mixing of interest in profit and social goals.

CSR broke with the Swedish model The transition from the Swedish model to a CSR model can be described as a paradigm shift in economic policy. The expression, which was first coined to describe changes within the natural sciences, focuses on the funda­mental assumptions upon which science is based. Such transitions can be surprisingly fast, but remains from the old paradigm can linger for a long time. The shift is necessary because of amassing facts which cannot be explained by or reconciled with the old model. The paradigm cracks from within, so to speak, and a new model is created to explain things in a new way. In much this manner, the Swedish model cracked, as it could not assimilate the deregulated financial markets and internationalization of the economy. CSR deals with things in a different way. To highlight this, the two paradigms can be compared in various aspects. 1. Range: national or international As mentioned several times in this text, the Swedish model was essentially national. However, CSR has a fundamentally international perspective. Corporate responsibility is defined mainly based on the actions and opportunities of companies in developing countries, where natural resources and inhabitants must be protected from various kinds of

4 6 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

exploitation. CSR highlights responsibility in “The Global Village.” National borders are unimportant when it comes to limiting the responsibility placed on a company. 2. Regulations: law or soft regulation The Swedish model was founded on a combination of laws and contracts arrived at through nationally centralized negotiations. Labour law created a framework and space for negotiation for the parties involved. It was a system based on centralized control and discipline, which also recognized the parties’ need for self-regulation. However, there was always the threat of legislation if they could not agree. Because of its transnational nature, CSR is not based on law. There is no international legislation matching the range of the transnational companies. The current definition of CSR states that it consists of such efforts that go beyond what legislation requires of the parties. Instead, the companies take a cue from a structure made up of general, transnational soft regulation. 3. Decision model: corporatism or corporate The Swedish model was one of balance, requiring roughly equal parties taking heed of a number of agreements, under supervision of the government. This was a decision model based on corporatism, used on the job market, the housing market and for agreements relating to agriculture. You might hesitate in using the word “market.” The agreements between the parties and the state erased much of the mobility of the market. CSR is not a negotiating or decision-making system based on corporatism. Rather, it is “corporate” in the American sense of the word: CSR is based on unilateral decisions within companies. These need not necessarily be strategic decisions from the corporate management. CSR commitments are often managed by other departments, such as HR, information/ communication or legal. But of course, CSR policies decided on at the top level carries more weight. 4. Parties: the unions or NGOs The strong position held by unions in the Swedish model has no equivalent in the CSR context. A transition to CSR therefore meant that the centralized unions lost power, while local organizations still have an influence through co-determination in company boards. The role of the unions has in part been taken over by NGOs as regards raising issues and influencing companies. NGOs do not have formal relationships to companies, as the unions did, so their influence is wholly determined by the support they can mobilize from the public.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 47


American influences had gained ground in business, culture and society in general. The CSR concept was contrary to established interest, which had invested in the Swedish model and its organizational structure. For companies it was strange to imagine stepping into areas they had formerly been freed from taking any interest in. This attitude remained among many economic organizations, which long after the international companies started to understand the meaning of CSR. “Such commitments might be motivated somewhere in the Third World,” asserted the precursor to the Confederation of Swedish Enterprise during the later 1990s. “But not here, where there is a functioning public sector.” For the unions, the internationalization of companies during the 1980s and 1990s had already caused problems. The Swedish order of negotiation did not fit the forms that unions in other places used for influence. Having ties to trade union federations with the European community was seen as a kind of specialist task. The unions were strongly characterized by their identities as part of the Swedish model. Politicians, especially on the left, were hesitant to allow large companies into the monopoly sphere of the public sector, where social matters had been managed. Even from the highest echelons, there was a suspicious tone regarding the mixing of interest in profit and social goals.

CSR broke with the Swedish model The transition from the Swedish model to a CSR model can be described as a paradigm shift in economic policy. The expression, which was first coined to describe changes within the natural sciences, focuses on the funda­mental assumptions upon which science is based. Such transitions can be surprisingly fast, but remains from the old paradigm can linger for a long time. The shift is necessary because of amassing facts which cannot be explained by or reconciled with the old model. The paradigm cracks from within, so to speak, and a new model is created to explain things in a new way. In much this manner, the Swedish model cracked, as it could not assimilate the deregulated financial markets and internationalization of the economy. CSR deals with things in a different way. To highlight this, the two paradigms can be compared in various aspects. 1. Range: national or international As mentioned several times in this text, the Swedish model was essentially national. However, CSR has a fundamentally international perspective. Corporate responsibility is defined mainly based on the actions and opportunities of companies in developing countries, where natural resources and inhabitants must be protected from various kinds of

4 6 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

exploitation. CSR highlights responsibility in “The Global Village.” National borders are unimportant when it comes to limiting the responsibility placed on a company. 2. Regulations: law or soft regulation The Swedish model was founded on a combination of laws and contracts arrived at through nationally centralized negotiations. Labour law created a framework and space for negotiation for the parties involved. It was a system based on centralized control and discipline, which also recognized the parties’ need for self-regulation. However, there was always the threat of legislation if they could not agree. Because of its transnational nature, CSR is not based on law. There is no international legislation matching the range of the transnational companies. The current definition of CSR states that it consists of such efforts that go beyond what legislation requires of the parties. Instead, the companies take a cue from a structure made up of general, transnational soft regulation. 3. Decision model: corporatism or corporate The Swedish model was one of balance, requiring roughly equal parties taking heed of a number of agreements, under supervision of the government. This was a decision model based on corporatism, used on the job market, the housing market and for agreements relating to agriculture. You might hesitate in using the word “market.” The agreements between the parties and the state erased much of the mobility of the market. CSR is not a negotiating or decision-making system based on corporatism. Rather, it is “corporate” in the American sense of the word: CSR is based on unilateral decisions within companies. These need not necessarily be strategic decisions from the corporate management. CSR commitments are often managed by other departments, such as HR, information/ communication or legal. But of course, CSR policies decided on at the top level carries more weight. 4. Parties: the unions or NGOs The strong position held by unions in the Swedish model has no equivalent in the CSR context. A transition to CSR therefore meant that the centralized unions lost power, while local organizations still have an influence through co-determination in company boards. The role of the unions has in part been taken over by NGOs as regards raising issues and influencing companies. NGOs do not have formal relationships to companies, as the unions did, so their influence is wholly determined by the support they can mobilize from the public.

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 47


A dramatic change in the relationships between large companies and NGOs has occurred during the past five or six years. Where confrontations used to be a matter of course − with Greenpeace challenging large corporations by scaling smokestacks, interrupting transportation with speedboats and similar actions, collaboration has become more normalized. Many NGOs choose to work with large companies rather than arguing with them. NGOs are moving from being the opposing party in a negotiation (a role the unions never abandoned) to being partners in joint CSR projects. 5. Transparency: negotiating culture or media logic The Swedish model was a result of a negotiating culture, which could not endure very much supervision. This does not necessarily mean that anything untoward happened, but the roleplaying and drama of negotiations would not be possible out in the open. CSR has gained ground thanks to being well-suited for the conditions of a mass media society. One starting point is the requirement of transparency and the impossibility of hiding or concealing what is being done. Companies are exposed to general supervision through the media and adapt their actions accordingly. Transparency as a method of control creates pressure on companies to live up to their promises. 6. Lifestyle anchorage: product- or consumer-orienting The Swedish model on the job market was highly production-oriented: the individual was connected to the negotiations through his or her role in production. You were what you did. The salaried employee was classified based on the tools and raw material he or she worked with and the hierarchical level in the organization at which he or she worked. Such approaches remain, but there is a shift toward consumption being the determining factor: you are also what you consume. Lifestyle and identity is determined more by what you do with your money than by how you earn it. It is from this context that CSR evolved. Unlike the traditional union, NGOs are, in many ways, consumer-oriented and gather a heterogeneous group of members and sympathizers. Con­ sump­tion is also their organizational weapon − boycotts are a greater threat to many companies than strikes. Consumer power belongs more within CSR than within the Swedish model. 7. Field of responsibility: inside or outside the operations The requirements placed on companies by the Swedish model related to the conditions within their operations. These pertained to improving work or production conditions at company workplaces in various ways.

4 8 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

Already in the definition of CSR lies the concept of a wider responsibility. This is most obvious in the approach to the supply chain (see further Chapter 7). Each company has a responsibility in regards to the suppliers used and the production processes earlier in the supply chain. The supply chain goes all the way to the original producer of raw materials. Matters of responsibility often arise even in regard to small sub-contractors in foreign countries through supply contracts with large buyers. The possibility of taking responsibility forward in the chain has also been tried. This is harder in principle, as it would require guaranteeing what will happen in the future. In some aspects, this does exist − for instance a producer must be prepared to take responsibility for scrapping old products − or not selling certain products, such as defence materials, expect under certain conditions and to certain customers. The debate on responsibility in the value chain proves that CSR responsibilities do not end at the factory gates. 8. Initiative: imposed or elective responsibility The responsibilities placed upon companies by the Swedish model were clear from legislation, ordinances or centralized agreements. They were general and the same for everyone. The CSR world works in a different way. Companies can choose their responsibilities. There is a connection between the responsibility taken and your business model, between the object of responsibility and your field of operations, between professional competence and your CSR commitments. Companies should do something that is an extension of their production or business concept. They should allocate resources for purposes where they have a comparative advantage. In this way, the CSR activities can eventually contribute to business development, without decreasing the value of the CSR efforts per se. The responsibilities of a company are not dictated by an authority, but are defined by the company itself, as a way to keep its licence to operate, in an ongoing dialogue with the company’s stakeholders.

CSR in context The example of Sweden shows that the ideas regarding what social responsibilities a company should be considered to have − and how it should live up to the demands of its surroundings − are not a given. In the Western world, there have been − and continue to be − many different ideas regarding how the relationship between enterprises and society should be shaped. It is not necessary for CSR to take on the same form throughout the entire world. The concept of CSR can be seen as an expression for hegemony of economic policy based on the Anglo-Saxon

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 49


A dramatic change in the relationships between large companies and NGOs has occurred during the past five or six years. Where confrontations used to be a matter of course − with Greenpeace challenging large corporations by scaling smokestacks, interrupting transportation with speedboats and similar actions, collaboration has become more normalized. Many NGOs choose to work with large companies rather than arguing with them. NGOs are moving from being the opposing party in a negotiation (a role the unions never abandoned) to being partners in joint CSR projects. 5. Transparency: negotiating culture or media logic The Swedish model was a result of a negotiating culture, which could not endure very much supervision. This does not necessarily mean that anything untoward happened, but the roleplaying and drama of negotiations would not be possible out in the open. CSR has gained ground thanks to being well-suited for the conditions of a mass media society. One starting point is the requirement of transparency and the impossibility of hiding or concealing what is being done. Companies are exposed to general supervision through the media and adapt their actions accordingly. Transparency as a method of control creates pressure on companies to live up to their promises. 6. Lifestyle anchorage: product- or consumer-orienting The Swedish model on the job market was highly production-oriented: the individual was connected to the negotiations through his or her role in production. You were what you did. The salaried employee was classified based on the tools and raw material he or she worked with and the hierarchical level in the organization at which he or she worked. Such approaches remain, but there is a shift toward consumption being the determining factor: you are also what you consume. Lifestyle and identity is determined more by what you do with your money than by how you earn it. It is from this context that CSR evolved. Unlike the traditional union, NGOs are, in many ways, consumer-oriented and gather a heterogeneous group of members and sympathizers. Con­ sump­tion is also their organizational weapon − boycotts are a greater threat to many companies than strikes. Consumer power belongs more within CSR than within the Swedish model. 7. Field of responsibility: inside or outside the operations The requirements placed on companies by the Swedish model related to the conditions within their operations. These pertained to improving work or production conditions at company workplaces in various ways.

4 8 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

Already in the definition of CSR lies the concept of a wider responsibility. This is most obvious in the approach to the supply chain (see further Chapter 7). Each company has a responsibility in regards to the suppliers used and the production processes earlier in the supply chain. The supply chain goes all the way to the original producer of raw materials. Matters of responsibility often arise even in regard to small sub-contractors in foreign countries through supply contracts with large buyers. The possibility of taking responsibility forward in the chain has also been tried. This is harder in principle, as it would require guaranteeing what will happen in the future. In some aspects, this does exist − for instance a producer must be prepared to take responsibility for scrapping old products − or not selling certain products, such as defence materials, expect under certain conditions and to certain customers. The debate on responsibility in the value chain proves that CSR responsibilities do not end at the factory gates. 8. Initiative: imposed or elective responsibility The responsibilities placed upon companies by the Swedish model were clear from legislation, ordinances or centralized agreements. They were general and the same for everyone. The CSR world works in a different way. Companies can choose their responsibilities. There is a connection between the responsibility taken and your business model, between the object of responsibility and your field of operations, between professional competence and your CSR commitments. Companies should do something that is an extension of their production or business concept. They should allocate resources for purposes where they have a comparative advantage. In this way, the CSR activities can eventually contribute to business development, without decreasing the value of the CSR efforts per se. The responsibilities of a company are not dictated by an authority, but are defined by the company itself, as a way to keep its licence to operate, in an ongoing dialogue with the company’s stakeholders.

CSR in context The example of Sweden shows that the ideas regarding what social responsibilities a company should be considered to have − and how it should live up to the demands of its surroundings − are not a given. In the Western world, there have been − and continue to be − many different ideas regarding how the relationship between enterprises and society should be shaped. It is not necessary for CSR to take on the same form throughout the entire world. The concept of CSR can be seen as an expression for hegemony of economic policy based on the Anglo-Saxon

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 49


industry. Still, there are cultural differences and deviations in traditions and social structures, meaning that CSR will take on different forms. The relationship between industry and society or economy and politics shapes CSR, which will be discussed in several of the chapters in this book. CSR will change, but the need to provide for long-term sustainability in economics, and preserve the trust capital of companies, will remain important.

Topics for discussion 1. Discuss different views of what an enterprise is, whose interests it serves and how it can be connected to a common social interest. 2. Does the “licence to operate” model give a reasonable idea of the powers that shape the conditions for the operations of an enter­prise? Test this against your own experience. Give examples of parties from the different influential groups and how they act in different cases. 3. Give examples of and discuss how an enterprise could improve the market’s confidence in it through the four paths to trustworthiness presented in this chapter. 4. Discuss similarities and differences between the enterprises of the preindustrial society and the idealized image of a global company with a developed CSR strategy.

Reading suggestions De Geer, H. (2009) ”Den svenska historien, modellen och förståelsen för CSR”, in 125 år med Corporate Social Responsibility. The Centre for Business History Johansson, I.; Jönsson, S.; Solli, R. (2006) Värdet av förtroende. Studentlitteratur Williamson, O. & Winter, S.G. (1991) The Nature of the Firm: Origins, Evolution, and Development. Oxford University Press

5 0 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 5 1


industry. Still, there are cultural differences and deviations in traditions and social structures, meaning that CSR will take on different forms. The relationship between industry and society or economy and politics shapes CSR, which will be discussed in several of the chapters in this book. CSR will change, but the need to provide for long-term sustainability in economics, and preserve the trust capital of companies, will remain important.

Topics for discussion 1. Discuss different views of what an enterprise is, whose interests it serves and how it can be connected to a common social interest. 2. Does the “licence to operate” model give a reasonable idea of the powers that shape the conditions for the operations of an enter­prise? Test this against your own experience. Give examples of parties from the different influential groups and how they act in different cases. 3. Give examples of and discuss how an enterprise could improve the market’s confidence in it through the four paths to trustworthiness presented in this chapter. 4. Discuss similarities and differences between the enterprises of the preindustrial society and the idealized image of a global company with a developed CSR strategy.

Reading suggestions De Geer, H. (2009) ”Den svenska historien, modellen och förståelsen för CSR”, in 125 år med Corporate Social Responsibility. The Centre for Business History Johansson, I.; Jönsson, S.; Solli, R. (2006) Värdet av förtroende. Studentlitteratur Williamson, O. & Winter, S.G. (1991) The Nature of the Firm: Origins, Evolution, and Development. Oxford University Press

5 0 | PA R T 1 – CO M PA N I E S , R E S P O N S I B I L I T Y A N D S US TA I N A B I L I T Y

C H A P T E R 1 – T H E S O C I E TA L RO L E O F E N T E R P R I S E S | 5 1


CSR and sustainable business introduces many perspectives on corporate social responsibility and sustainable business, as well as how the different perspectives are connected. The discussion is based on real examples and cases. The development within CSR has been fast. New phenomena, like social entrepreneurism, sustainable business strategies and new financial models relating to sustainability, have grown stronger. This book gives an overview of the most important concepts and theories, as well as offering a depth of historical perspectives and connections to business ethics. Theoretical aspects are combined with examples from a large number of companies and organizations. The text is divided into three parts. The first part provides an overview of the topic, its history and growth. The second part covers practices at companies and business operations. In the third part, the focus is on control and strategies for responsible, sustainable business. This first edition in English features some of the most influential experts in the field. The original Swedish edition published in 2012 has been used extensively in leading universities and management training courses in both Sweden and Finland for years. CSR and sustainable business is written by Hans De Geer, Tommy Borglund, Susanne Sweet, with Magnus Frostenson, Lin Lerpold, Sara Nordbrand, Emma Sjรถstrรถm and Karolina Windell. The authors have long experience of academic research in the fields of CSR and sustainability.

ISBN 978-91-523-5046-1

Profile for Smakprov Media AB

9789152350461  

9789152350461  

Profile for smakprov