CORPORATE SOCIAL

RESPONSIBILITY
(CSR)

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 Introduction
 No universal definition of CSR.
 Some see CSR as simply philanthropy by
a different name.
 It can be defined as the efforts
corporations make above & beyond
regulation to balance the needs of
stakeholders with the need to make a
profit.

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 Introduction
 CSR generally refers to transparent
business practices that are based on
ethical values, compliance with legal
requirements & respect for people,
communities, & the environment.
 Thus, beyond making profits, companies
are responsible for the totality of their
impact on people & the planet.

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 Introduction
 “People” here refers to company’s
stakeholders: its employees, customers,
business partners, investors, suppliers &
vendors, the govt & the community.
 Increasingly, stakeholders expect that
companies should be more
environmentally & socially responsible in
conducting their business.

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 Introduction
 In the business community, CSR is
alternatively referred to as “corporate
citizenship” which means that a co. should
be a good neighbour within its host
community.

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 Introduction
 Thus, CSR is about how companies
manage the business processes to
produce an overall positive impact on
society.
 CSR describes a company’s commitment
to be accountable to the expectations &
needs of its stakeholder.

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 What is CSR?
 CSR defined as the obligation companies
have to develop & implement courses of
action that aid in social issues that impact
society.
 It signifies legal responsibility, fiduciary
duty, legitimacy & charitable contributions.

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 What is CSR?
 CSR is a concept whereby organisations
consider the interests of society by taking
responsibility for the impact of their
activities on stakeholders.

This obligation extends beyond the statutory
obligation to comply with legislation;

The organisations will voluntarily take further
steps to improve the quality of life for
employees & their families as well as the local
community & society at large.
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 What is CSR?
 Other definitions:

Holme & Watts: “CSR is the continuing
commitment by business to behave ethically &
contribute to economic development while
improving the quality of life of the workforce &
their families as well as of the local community &
society at large.”


Phillipines: “CSR is about business giving back
to society.”
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 CSR…
 Also called:

Corporate responsibility;

Corporate citizenship; and

Responsible business.
 Key CSR issues:

Governance;

Environmental management;

Stakeholder engagement;

Labour standards;

Employee & community relations;

Social equity;

Human rights.

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Illustration of CSR

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 Illustration of CSR
 Companies need to answer to 2 aspects of
their operations:
 (1) the quality of their management – both
in terms of people & processes (the inner
circle)
 (2) the nature of, the quantity of their
impact on society in the various areas
(outer circle)

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 Illustration of CSR
 Outside stakeholder has interest in the
activities of the company – most look to the
outer circle:

what the co has actually done, good or bad, in
terms of its products & services;

its impacts on the environment & on local
communities;

how it treats/develops its workforce.

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 Illustration of CSR
 Financial analysts – focus on quality of
management as an indicator of likely future
performance.

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 Responsibilities of Corporation
 (1) Economic responsibility

ER – to produce goods & services, to provide
jobs & good wages, seek out supplies for raw
materials, discover new resources &
technological improvements, develop new
products, etc.

This will increase economic well-being &
stability of society & to ensure the survival &
growth of the corporation.

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 Responsibilities of Corporation
 (2) Legal responsibility

LR – to act as a fiduciary to manage assets of
the co. in the interests of the shareholders &
distributing profits to them, etc.

Legal responsibility of a corporation to
employees, customers, suppliers, & other
parties.

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 Theories of CSR
 (1) The Classical Model

The most influential theory of the past century.

On this view, the role of business
management is to maximise profits within the
law.

This management role flows from the function
assigned to business institutions within free
market economies.

The social responsibility of managers is “to
make as much money for their stockholders as
possible”.
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 Theories of CSR
 (2) The Moral Minimum

The pursuit of profit is constrained by an
obligation to obey a moral minimum, that is,
business managers must first meet certain
moral obligations which, once met, open the
door to the pursuit of profit.

As managers are the stokeholder’s agent, they
have a duty to further the interests of the
stockholders.

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 Theories of CSR

While it is ethically good for managers to
prevent harm or to do some good, their duty to
stockholders overrides these concerns.

As long as managers comply with the moral
minimum & cause no harm, they have a
responsibility to maximise profits.

This is a revised version of the classical
model.

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 Theories of CSR
 (3) The Stakeholder Theory

It begins with the insight that every business
decision affects a wide variety of people,
benefiting some & imposing costs on others.

This theory rejects the privileged position for
stockholders, that once minimum legal &
moral constraints are met, stockholders ought
to be the primary beneficiaries of business
decisions.

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 Theories of CSR

While it is true that previously management
had an overriding obligation to stockholders,
the law now recognises a wide range of
managerial obligations to such stakeholders
as consumers, employees, competitors,
environment, etc.

As a matter of law, it is false to claim that
management can ignore duties to everyone
but stockholders.

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 Corporate activities that show
social responsibility:
 Choosing to operate on an ethical level
that is higher than what the law requires;
 Making contribution to civic & charitable
organisations & non-profit institutions;
 Providing benefits for employees &
improve the quality of life in the workplace
beyond economic & legal requirements;
 Using corporate resources to operate
program that addresses social problem.
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 Approaches of CSR
 Among the approaches:

Community- based development projects;

Establishment of educational
facilities/programs;

The giving of aid to local organisations &
impoverished communities in developing
countries.

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 Approaches of CSR
 Examples:

Shell Foundation – involve in the Flower
Valley, South Africa by setting up an Early
Learning Centre to help educate the
community’s children & develop new skills for
adults;

Mark & Spencer – building of a trade network
with the community.

Starbucks – CSR in terms of products,
society, environment, workplace & diversity.
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 Drivers to CSR
 Corporation is influenced to adopt CSR by
several drivers such as:

 (1) ethical consumerism

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 Drivers to CSR
 (2) Globalisation & market forces

Globalisation makes the corporation to
encounter new challenges – govt regulations,
tariffs, environmental restrictions, etc. CSR is
one of the strategic tactics to gain public
support for their presence in the global
markets, helping them sustain a competitive
advantage by using their social contributions.

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 …Drivers to CSR
 (3) Social awareness & education

Shareholders, investors & NGOs are exerting
pressure on corporations to behave
responsibly.
 (4) Ethics training

The rise of ethics training inside corporations
has credited to the changing of behaviour &
culture of corporations.

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 …Drivers to CSR
 (5) Govt laws & regulations

Role of govt in ensuring corporations are
prevented from harming the broader social
good.
 (6) Crisis & their consequences

Crisis may precipitate attention to CSR. Eg.:
• Exxon Valdez in Alaska in 1989;
• Mattel – lead poisoning paint caused a recall of
millions of toys globally;
• Magellan Metals – lead contamination killing
thousands of birds – the company had to cease
business & execute a cleanup.
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 Why CSR?
 The benefits:
 (1) increased profit

Academic studies have shown direct
correlation between CSR & positive financial
performance
 (2) Reduce operating cost/ increase
operational efficiency

Improve operational efficiency by reducing
waste production & water usage, increase
energy efficiency, selling recycled materials.
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 Why CSR?
 (3) enhance brand image & reputation

Co’s reputation results from ‘trust’ by
stakeholders. A strong reputation in
environmental & social responsibility can help
co to build trust.
 (4) increase sales & customer loyalty

Research shows that customers not only want
good & safe products but want to know that
what they buy was produced in a socially &
environmentally responsible way.

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 Why CSR?
 (5) increase productivity & quality

Efforts of co to improve working conditions,
lessen environmental impacts or increase
employee involvement in decision-making often
lead to increased productivity & reduced error
rate.
 (6) potentially reduce regulatory oversight

The more commitment to CSR, the more lenient
govt & regulators with the co. & the more the co
is committed to CSR, the less they expose to
business risk.
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 Why CSR?
 (7) increase ability to attract & retain
employees

Dedication to CSR can help to attract & retain
employees.

Eg. Novo Nordisk launched their “Values in
Action” programme which aligns their business
objectives with sustainable development have
seen a 5% drop in staff turnover.

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 Why CSR?
 (8) keeping up with competitors & where the
market is

Embracing CSR makes good business sense.

Govt, investors, local communities & suppliers
are all putting pressure on companies to live up
to their expectations of a company in society &
in the environment.

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 Arguments against CSR
 (1) Business are owned by shareholders

Any money they spend on CSR is theft from
shareholders who can, after all, decide for
themselves if they want to give charity.

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 Arguments against CSR
 (2) The leading co.s who report on their
CSR are basket cases

The most effective business leaders don’t
waste time with CSR. Eg. Bill Gates of
Microsoft – one of the highest profile cases of
bullying market dominance.

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 Arguments against CSR
 (3) the co is too busy surviving hard times
to do CSR.

The co has to focus on core business.
 (4) It’s the responsibility of the politicians to
deal with this stuff.

It’s not the role of the co to get involved.
 (5) Co. has no time for CSR & got to get
out & sell more to make profit line.

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 Additional readings
 www.mallenbaker.net
 www.scu.edu/ethics
 www.csrnetwork.com

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 Discuss
 Do you think that corporation shall be
made socially responsible in their
business? Give your reasons.
 How to counter the arguments against
CSR?
 CSR may benefit the corporations as well
as the stakeholders. Do you agree with
this statement? Give your reasons.

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 Case Study: Merck & Co.
 Microfilaria caused lesions and intense
itching that sometimes the victims commit
suicide. Eventually, microfilaria invade the
eyes and blind the victim.
 In 1979, Dr William Campbell, scientist of
Merck & Co., discovered that animal drug
called ‘Ivermectin’ might kill the parasite.

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 Merck & Co.
 The medical research and large scale clinical
testing required to develop a drug for human
would cost over $100 million, where the Co.
unable to recover the cost.
 Even if it is affordable, the areas are too remote,
no access to doctors.
 Some managers also worried that if the drug had
bad side effect to human, it affect the sale of the
drug for animal.
 Merck had worldwide sales of $2 billion a year.
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 …Merck & Co
 For the co, altho’ had worldwide sales of $2b a
year, its net income was in decline due to the
rising cost of developing new drugs. After
earnest discussion, they concluded that the
potential human benefits of a drug for river
blindness were too significant to ignore.
Because of the human benefits, the co was
morally obligated to proceed despite the costs &
the slim chance of economic reward.

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 Merck & Co.
 In late 1980, Merck decided to approve the
budget. After 7 years, Merck succeeded to
develop human version of Ivermectin
called ‘Mectizan’.
 A single pill of Mectizan could eradicate
from the human body all traces of the
parasites of river blindness and new
infections.

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 Merck & Co.
 Unfortunately, as expected, no one buy
the new pill.
 Merck pleaded to WHO, US government,
government of the nations afflicted with
the disease, but no respond.
 Merck decided then, to distribute the pill
FREELY to potential victim i.e at about 85
million people.
 However, the next problem – distribution.

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 Merck & Co.
 Merck finance a committee working with WHO to
distribute the pill.
 Over the years, Merck learned that they have
gained long term advantages. Merck had
developed streptomycin to Japan to cure
tuberculosis among Japanese 15 years ago.
 Dr. Roy Vagelos of Merck said that, it is because
of ethics that made him decided to develop the
drug and only hope that the people ‘will
remember’ it in future.

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 Merck & Co.
 By 2004, the committee had distributed
the pill to 40 million people a year.
 Now, Merck is the largest American
pharmaceutical company in Japan.
 A coincidence?

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 Discussion
 Do you think that Merck & Co is socially
responsible to develop the drug/pill to the
victim?
 What about their responsibility towards
their shareholders when they decided to
proceed with the highly-cost experiments
whereas they had the expectation that no
one would buy the drugs?

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