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CSR Corporate Social Responsibility

CSR (Corporate Social Responsibility) is the culture and policy of a company with regards its commitments to aiding and improving the community and environment within which it operates, and from which it draws its resources.

CSR is the culture and policy of a company with regards its commitments to aiding and improving the community and environment within which it operates, and from which it draws its resources. The theory being that by voluntarily giving back, beyond the requirements of legal requirements, it will have a richer set of resources from which to draw in the future, including goodwill and consumer support. Other benefits include avoidance of legal and regulatory interference, and pre-empting costly changes to laws and circumstances, such as changes to pollution limits and related insurance liabilities.

Typical areas involving corporate responsibility include being perceived as a 'good citizen' (ethical marketing), systematic waste and pollution curtailment, and engagement with the community through education and social programmes. The returns for the company are reputation, leading to CSR being integrated into corporate strategy.

The trend of CSR today goes against the seminal 1970 Milton Friedman (New York Times) position, which states that the primary responsibility of a corporation is not to its community but to its shareholders (the "agency problem"). The significant shift in view can be exemplified by the McWilliams and Siegel 2001 paper, which redefines CSR as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.” Despite CSR having no formal universal definition, on the whole it seems to be agreed that consumers will be more likely to opt to purchase the services and goods of a company perceived to be utilising its influence and means beyond a narrow desire for financial profit. However, there is doubt as to whether this applies in all cases, and whether cynicism from the public may cause a strategic use of CSR to backfire. Ethical marketing implies a moral highground, which many multicorporates can insufficiently support by their historical behaviour.

The culturally-contextualised presumption of a universal understanding of what "doing the right thing" entails leads to fundamental disagreements, such as the UN attempts to establish international standards for child labour, much opposed by traditional emerging and developing nations, whose history and traditions, and circumstances, are so variant to those of the west. "Doing the right thing" in these matters was interpreted more as cultural projections than universal standards.

CSR Approaches

  • Value creation
  • CSR can lead to firms adopting more innovative approaches, with long-term vision resulting in a more sustainable business model.

  • Risk management
  • Responsible behaviour beyond immediate legal requirements may well ensure future compliance, as standards and attitudes change.

  • Corporate philanthropy
  • Image building through the provision of funding to charities and NGOs, as well as the development of skills within the labour resource community.

  • Creating Shared Value (CSV)
  • CSV is the principle of indivisibility of corporate success and social welfare.

  • Business Case
  • The so-called triple bottom line: people, planet, profit. The approach identifies that engagement with CSR issues can lead to improvements in areas such as human resources, risk management, brand differentiation, reduction in scrutiny (government, NGO and standards organisations), and supplier relations (particularly when suppliers or customers are subject to more stringent standards requirements, such as EMAS and ISO 9000).

Criticism expresses concerns about the motives for which a business will engage in CSR, and the conflicts it may have with the purpose of business. e.g. An oil company investing in renewable energy while they explore for mineral oil in vulnerable environments. Philanthropy by black goods industries (tobacco, alcohol and munitions) is hypocrisy, and CSR is a blatant attempt to confuse public perceptions.

Greenwashing: Often environmental policies are seen as ingenuine and hypocritical. Corporations may be claiming high local standards in the areas of their main consumer market, but be guilty of exploiting legal loop-holes by exporting activities, such as manufacturing, to developing countries, where lower standards apply.

Competitor Imitation: A successful CSR strategy is likely to be imitated by competitors, annulling short-term gains.

An alternative to voluntary private SR is government regulations. This leads to concerns about the imposition of external criteria on local affairs with unknowable consequences. The business model complains that blanket legislation can lead to distortions in the allocation of resources, with resulting inefficiencies, in particular with regards international competitiveness.

ISO 26000 is the International Standards Organization's guideline for granting recognition to an organisation or company for its overall performance with regards integrating social responsibility into its actions and management system.

The objective of social responsibility is to contribute to sustainable development. There are many benefits for organizations which behave in a socially responsible manner, and many disadvantages for those who place social responsibility in the category of 'idealisms', and rank it far below return on investment.

In addition, how an organization recognises and minimises its impacts on society and the environment has become a criterion for measuring overall performance. Companies are finding that not respecting their staff and public's desire for a healthy and safe environment will lead to impediments in their ability to carry out their core activities. With insurance liabilities growing, and new movements such as decarbonising investment, undermining stakeholder participation, organisations are learning to reassess how they should view their internal and external responsibilities. Not only to avoid penalties, but to be seen as a leader in the transition to a social and ecologically sounder world.

ISO lists the benefits to an organization for implementing ISO 26000 as including, among other things:

  • Competitive advantage
  • Reputation
  • The ability to attract and retain workers or members, customers, clients and users
  • The maintenance of employee morale, commitment and productivity
  • The perception of investors, owners, donors, sponsors and the financial community
  • Relationships with companies, governments, the media, suppliers, peers, customers and the community in which it operates

The seven core subjects of ISO 26000 within an holistic approach are:

  • Clause 6.2: Organizational governance, which links together:
    • Clause 6.3: Human rights
    • Clause 6.4: Labour practices
    • Clause 6.5: The environment
    • Clause 6.6: Fair operating practices
    • Clause 6.7: Comsumer issues
    • Clause 6.8: Community involvement and development