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27 Seiten, Note: 1,7
2 Theoretical Background of Corporate Social Responsibility
2.1 Concept of Corporate Social Responsibility
2.2 Reasons and Objectives
2.3 Measures and Activities
3 Effects of Corporate Social Responsibility on an Organization’s Core Business
3.1 The Strategic Context of Corporate Social Responsibility
3.2 Corporate Social Initiatives
3.3 Standards of Corporate Social Responsibility
3.4 Impact of Corporate Social Responsibility on Companies from Diverse Industries
4 Competitive Advantage and Corporate Social Responsibility
4.1 Corporate Social Responsibility as a Competitive Advantage
4.2 Good Company Ranking
4.3 Corporate Social Responsibility and Profitability
5 Criticism of Corporate Social Responsibility
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In recent years, a great concern about the broad impacts of business on society has evolved.1 As a result, this concern has transformed into the responsibility business has to society.2 Accordingly, companies see their actions more and more monitored by the public, on both national and international level.3 Thus, their role within society is gaining importance, being considered a creative and institutional one, instead of only existential.4
Apart from that, this results in a growing interaction between the government, business and the stakeholder. In the past, business’ primary concern was the economic situation, whereas today, business has to consider the legal, ethical, moral and social impact of its decisions as well.5 This leads to the assumption that in the near future, it will not be possible to conduct business without acting socially responsible.6 This development is closely connected to the concept of Corporate Social Responsibility, which is the subject of this paper. Concerning the selection of secondary literature, apart from both English and German books, several articles from business magazines have been included in the research.
At first, this paper will provide an overview of the current emergence of CSR as an essential part of daily business.
However, the focus lies on the effects of CSR on an organization’s core business. In Germany, for instance, while acknowledging their social responsibility, companies are still far away from making CSR part of their core business strategy.7 This paper will discuss the possibility of how embedding CSR in a firm’s strategy can lead to business success. In addition, a potential link between competitive advantage and CSR will be outlined, before some major arguments of critics will be illustrated. Finally, as a conclusion, the main arguments and results of the research will be summarized and a short outlook will be provided.
Corporate Social Responsibility is defined in many different ways. In the following, a few general approaches will be outlined and summarized in order to constitute the way CSR is to be understood for the purpose of this paper.
At first, CSR is a concept that responds to the general belief that modern businesses have responsibilities to society, which extend beyond their obligations to stakeholders and investors.8
According to this trend towards the consideration of stakeholders’ interests, CSR can be defined as the duty to combine the company’s actions with the norms which were set by the stakeholders.9 This is also referred to as the multi-stakeholder approach, simply stating that all stakeholders matter and have to be considered in the company’s decisions.10
Another commonly used approach is the management philosophy giving back to society, referring to the fact that today, no business will be able to survive without acting in accordance with its environment.11
It can be summarized that those definitions both stipulate that CSR comprises practices that improve the workplace and benefit society in a way that goes beyond what enterprises are legally required to do.12
Those who withdraw from this responsibility, run into danger of losing their so-called license to operate or right to exist, which they have to earn anew, every day.13 One of the more recently developed definitions includes the separation of Explicit and Implicit CSR.
While Explicit CSR refers to certain corporate policies involving voluntary programmes to adress issues perceived by the company or its stakeholders, Implicit CSR focuses on values, norms and rules, rather than concrete activities.14
Apart from that, CSR has to be differentiated from the term Corporate Citizenship, which does not only incorporate CSR as a main issue, but collectively embraces the essential concepts related to it:
- Corporate Social Responsiveness: emphasizing action and activity
- Corporate Social Performance: emphasizing outcomes and results15
CSP describes an organization’s configuration of principles, processes and outcomes of social responsibility and their links to the firm’s human relationships, whereas to be socially responsive, a firm must link its actions with its core values and overall strategy.16 This approach will be discussed in chapter three of this paper.17
Finally, the four-parts definition as the one most commonly stated in contemporary literature on CSR has to be taken into account.18 It was developed by Archie Carroll in 1993, encompassing economic, legal, ethical and philantrophic dimensions:
- Economic responsibilities
Businesses are set up in order to function properly as an economic unit and to be profitable. All subsequent dimensions are based on this layer of CSR.
- Legal responsibilities
Companies simply should obey the law. The satisfaction of legal responsibilities is requiered of all corporations seeking to be socially responsible.
- Ethical responsibilities
Obliging enterprises to do what is right, just and fair is the purpose of this responsibility, which states what is generally expected by society beyond economic and legal expectations.
- Philantrophic responsibilities
Due to this dimension, corporations should contribute resources to the community and improve the quality of life with the ultimate goal of being a good corporate citizen.19
As a conclusion, bearing in mind this clear and detailed four-parts approach, in this paper CSR is understood as an organization’s obligation to meet the interests of its stakeholders and to consider both social and environmental consequences of its business activities within the global economy.
In order to achieve all that, it has to be profitable, obey the law, be ethical and above all, be a good corporate citizen.
According to a study recently conducted by the CCCD, the Centre for Corporate Citizenship Germany, 96 percent of all companies questioned engage in CSR activities.20 But what are the reasons they do so?
In the following, a short overview about the most important arguments for CSR and the objectives companies seek to achieve by implementing CSR activities will be provided.
In one of their recent publications on sustainable development within the EU, the European Commission points out the symbiotic relationship between enterprises and society.
With special regard to macroeconomic effects, this relationship manifests itself in the way CSR can create an atmosphere of trust within companies, leading to stronger sense of commitment amongst employees while additionally fostering consumer confidence and thereby generating economic growth. Thus, the whole economy profits from companies acting socially responsible.21
Business for Social Responsibility is a non-profit association providing businesses with information and research data on CSR.22 In one of their studies, BSR discovered that companies, as a consequence of their CSR activities, experienced a range of benefits including:
- Increased sales and market share Strengthened brand positioning Enhanced corporate image
-Increased ability to attract, motivate and retain employees Increased appeal to investors and analysts23
A more general argument is the marketing orientated principle of good conscience, good reputation, good business, which summarizes the findings of BSR above in one simple phrase.24
As an opposite, the so-called defensive approach suggests that companies pursue CSR in order to avoid pressures that might create costs for them.25 In 2002, PWC conducted a study among leading American corporations and published the Top 10 Reasons companies are becoming more socially responsible, which include competitive advantages, cost savings, customer demand, as well as shareholder demand. As one of the reasons already mentioned above, the enhanced reputation gained by CSR was named by 90 percent of respondents.26
Furthermore, the significance of this reputation, which should be consolidated and improved by CSR, will increase the standing of a company’s brand. Consequently, the creation of a good reputation is to be understood as a long-term investment.27 This opinion is supported by Porter and Kramer, who state that CSR should be seen as a source of opportunity, innovation and competitive advantage, rather than a cost.28
As a result, on the one hand, companies may begin to implement CSR only because customers and other stakeholders demand for responsible business practices. Nonetheless, on the other hand, enterprises implicitly seek to stabilize or improve their corporate image by CSR as well as to remain competitive in the marketplace, which, in the long run, results in profits.
In the following, some measures and activities are presented, in order to provide a small insight on how to implement CSR within a business organization. Within its global focus, the concept of CSR includes a wide spectrum of potential topics, such as human rights, corruption, child labour, employment rights, as well as the relationship to suppliers and customers.29
A popular approach is to separate activities into different scopes. For instance, CSR measures can be differentiated by subdivision into the following five scopes:
- People and Workplace
This group includes Codes of Conduct, which state main principles defining standards for specific company behaviour.30
- Environmental Protection
Making use of renewable resources and implementing environmental measures is one important part of acting socially responsible.
- Economic Development
Separated into regional categories, this dimension contains projects in developing countries as well as local activities (e.g. social sponsoring).31
- Corporate Governance
The governance of a company carrying on a business is named Corporate Governance. It is a manner of directing and controlling the company’s actions and affairs.32
-Business Ethics and Vision
Finally, this last dimension comprises a company’s vision and values, usually statet in a special Code of Ethics, which also includes the organization’s point of view concerning current issues such as bribery and corruption.33
Theoretical Background of Corporate Social Responsibility 7
Another way of putting CSR into practice is the following project-driven approach, which consists of four steps:
(0) Pre-Project Phase
Before the project actually stars, the basic data have to be verified and strategic decisions about the subsequent project phases have to be made by the management.
(1) Responsibility Assessment
This phase includes, among other things, the gathering of relevant documents such as the Code of Conduct or Code of Ethics and the so-called Responsibility Mapping, which means the determination of firm-specific topics that will be relevant for the ongoing process.
(2) Responsibility Reporting
As the second step in the process, Responsibility Reporting includes the creation of a CSR-Policy on which the engagement is founded. Apart from that, first evaluations and the results are communicated to stakeholders.
(3) Corporate Social Responsibility Management
This last phase comprises the final realisation of the CSR-Policy and the training program for the employees. Additionally, CSR is implemented and communicated on all management levels.
As a last step, a system of continous improvement is established and the results of the successful CSR-Project are published.34
Companies that have never heard of CSR before, may find this approach very useful and following these phases they may find it easy to profit from the advantages of CSR by integrating it into their business practice.
1 Quintin, 2004, p. 5
2 Buchholtz, Carroll, 2006, p. 29
3 Keller-Kern, 2007, p. 36
4 Wieser, 2005, p. 18
5 Anderson, 1989, p. 1
6 Hopkins, 2003, p. 12
7 Peymani, 2007, p. 13
8 Matten, Pohl, Tolhurst, Visser, 2007, pp.122-123
9 Maucher, 2007, p. 16
10 Wieland, 2006, p. 7
11 Köppl, Neureiter, 2004, p. 16
12 Vogel, 2005, p. 2
13 Peymani, 2007, p.13
14 Habisch, Jonker, Schmidpeter, Wegner, 2005, pp. 341-342
15 Buchholtz, Carroll, 2006, p. 30
16 Matten, Pohl, Tolhurst, Visser, 2007, pp. 120, 132
17 See section 3.1
18 See Appendix (1), Carroll’s CSR Pyramid
19 Buchholtz, Carroll, 2006, pp. 35-39
20 Peymani, 2007, p. 13
21 European Commission, 2002, p. 9
22 Matten, Pohl, Tolhurst, Visser, 2007, p. 60
23 Kotler, Lee, 2005, pp. 10-17
24 Peymani, 2007, p. 15
25 Matten, Pohl, Tolhurst, Visser, 2007, pp. 127-128
26 Buchholtz, Carroll, 2006, pp. 42-45
27 Gadzdar, Habisch, Kirchhoff, Vaseghi, 2006, p. 15
28 Kramer, Porter, 2006, p. 80
29 Alisch, Arentzen, Winter, 2004, pp. 624-625
30 Quintin, 2004, p. 7
31 Wieser, 2005, pp. 91 ff.
32 Matten, Pohl, Tolhurst, Visser, 2007, pp. 109 ff.
33 Wieser, 2005, pp. 95-96
34 Köppl, Neureiter, 2004, pp. 296-300
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