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TOPIC OVERVIEW – CORPORATE SOCIAL RESPONSIBILITY AND CSR
STRATEGIES
1.1 Introduction
In general, people in business have yet to see the benefits of corporate social responsibility
(CSR) and therefore have had no incentive to include the philosophy in their strategic
framework or their operational processes. Most still consider CSR activities as a sort of
discretionary favor granted to the community by the business, and that such largesse is only
appropriate after the company is well established, growing, and profitable. CSR of this type
typically results in a one-off direct benefit to the community and very limited benefit to the
company itself. Significantly, the benefits to both the community and the company are not
sustainable.
On the other hand, driven by an ongoing revolution in communications technology, and
underpinned by broader political, economical, and social changes, all businesses within a
country are inevitably becoming part of the wider global market. Over the past 15 years, the
world has also seen significant changes: the collapse of communism, the liberalization of
China, Vietnam, and India, the emerging activities of the nongovernmental organization
(NGO) sector, environmentalism, fundamentalism, consumerism, protectionism, World Social
Forums, and so on. These changes have had a profound effect on not only the attitudes of
governments and businesses but also the people.
Advancements in information technology have also led to the availability of global television
networks and the internet, which easily disseminate information instantaneously. Critics of
business become better informed, helped by the global communication and the internet, while
customers and consumers are better educated and becoming more aware of their rights and
their potential power to influence corporate behavior.
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1.2 Learning Outcomes from the Module Outline
LO.1 Understand how an organisation will implement a CSR Strategy.
LO.2 Review the area of mission statements, and potential issues during the implementation
process.
LO.3 Display an understanding of measuring performance and CSR conflicts within
organisations.
1.3. Introducing corporate social responsibility
Corporate social responsibility (CSR) has been a vital tool for the European Union (EU) in
terms of its pioneering role to foster sustainable development, innovation, and competitiveness
in the EU’s social market economy. In this context, sustainable and responsible European
enterprises are highly promoted by the European Commission (EC) through CSR. Moreover,
CSR is indicated to reinforce the development of new markets and opportunities for growth
and innovation since it requires the enterprises to carefully follow the changing social
expectations and ensure consumer trust through new sustainable business models.
Since the 1990s, the EU has been aware of the importance of CSR as part of its sustainable
development strategy (SDS) and as an attempt to improve companies’ accountability to public
institutions and citizens. In this regard, it strongly encourages the effective implementation of
CSR in European enterprises as a crucial pushing factor that contributes to the EU’s Europe
2020 strategy aiming for sustainable development through smart, sustainable, and inclusive
growth. In 2011, referring to the need for a modern understanding of CSR and a new agenda
for action, the EU updated its definition of CSR by including new elements with a focus on
creating a value-based system and increased impact in this field (Turker et al, 2013).
1.3.1. Corporate Social Responsibility in European Context
Globalization has made the awareness of business responsibility to the society grow and CSR
is widely recognized as a worthy commitment to ensure sustainable benefit for both
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corporations and communities. CSR is becoming an important base of a business to build the
trust and confidence of stakeholders, and this could be the key source of competitive edge.
However, the implementation of CSR activities to give optimum values for business and
community has yet to become well understood. Projects such as a two- or three-day community
environmental fair displaying concepts of energy savings, waste management, and other ideas
concerning care for the environment, are often perceived as part of CSR initiatives. In fact,
one-off activities like this without capacity building, training, empowerment, employment, and
wealth creation will not result in a win-win situation, and consequent sustainability. If a given
company stresses its CSR implementation on issues irrelevant to the local environment, even
the best activities may fail miserably to create the intended benefit for either the community or
the company. The application of CSR principles would therefore directly be influenced by the
business’s understanding of its business strategy, in proportion to the need of the community
(Urip, 2010).
Prominent areas that tend to be the current focus of the corporate responsibility conversation
include: sustainability, sustainable development, environmental management, business ethics,
philanthropy and community investment, worker rights and welfare, human rights, corruption,
corporate governance, legal compliance, and animal rights. Each of these represents a separate
domain that includes issues other than corporate responsibility (Haynes et al, 2013).
Corporate involvement in socially-related engagement normally considers larger economic,
social, and cultural views of the country in which the business is operating. The situation in
developing countries can be quite different than those of the developed countries. Although
basically, the principles of CSR are the same globally, each location calls for different emphasis
in the implementation of CSR. Unlike in developed countries, where most states assume
primary responsibility for the social welfare of the community (after World War II), it is not
the case within developing countries. International companies planning to optimize the
opportunities of the wider global market by establishing its international supply chain or
entering new emerging markets have to implement CSR-related initiatives following the rules
of CSR activities within the developing market. This will ensure successful entrance,
sustainable growth, and profit (Urip, 2010).
CSR is defined as “the responsibility of enterprises for their impacts on society.” It is more
precisely described as follows:
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To fully meet their corporate social responsibility, enterprises should have in place a process
to integrate social, environmental, ethical, human rights, and consumer concerns into their
business operations and core strategy in close collaboration with their stakeholders, with the
aim of ( Turker et al, 2013, p. 44):
maximizing the creation of shared value for their owners/shareholders and for their
other stakeholders and society at large; and
identifying, preventing, and mitigating their possible adverse impacts.
There are five aspects of corporate responsibility. The first concerns issues that have broad
social and environmental implications such as global warming, human rights, economic
growth, and poverty reduction. Here, the corporation is part of a requisite coalition of
government and civil society as well as education and other social institutions. A second
dimension concerns the possible economic benefits related to social and environmental
performance. A third area concerns business attitudes, awareness, and practices as they relate
to the way corporations contemplate their nonfinancial operations. The fourth aspect considers
the implications of corporate actions on nonbusiness stakeholders, and the fifth aspect concerns
how the heightened awareness of corporate responsibility as it grows and evolves affects how
all segments of society think about and practice corporate responsibility (Haynes et al, 2013).
Recognizing the importance of all these aspects of CSR, the aims is to provide a descriptive
analysis of how the EU perceives CSR and how the EU’s policy on CSR is evolving. In this
context, it tries to focus on the divergences and commonalities of CSR practices occurring in
different EU countries within the context of the EU’s attempts to formulate a European
framework on the EU’s CSR policy. It also tries to provide a concise comparison between the
understanding and implementation of CSR in European companies and U.S. companies in
order to demonstrate the different impacts and implications of CSR in different contexts
(Turker et al, 2013).
Benefits of Corporate Social Responsibility
Collective CSR activities amongst various corporations and their stakeholders could contribute
to the microeconomic development of a developing country through sustainable benefit to all.
At the same time, optimum national impact, cooperation, and communication should be
encouraged and socialized.
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Government
Development and acceleration of microeconomic sustainable growth through using
‘‘good corporate governance/value change’’ and ‘‘best practices,’’ resulting in a market
environment conducive to both local and foreign investors (with the availability of good
infrastructure, good education and health facilities, well-trained human resources and
labor, and well-cared-for environment)
Encouraging CSR activities, giving benefit to the community, with meeting certain
development and sustainability criteria possibly being considered for tax incentives
Joint CSR budgets possibly representing an additional source of public revenue
(employment and wealth creation to reduce poverty)
Local community and society
Changed habits, improved quality of life
The capacity building creates employment and wealth
Corporations
Growth, profit, image, and competitive edge
Community acceptance and goodwill
Pride and spiritual values to employees and their families
Genuine dialogue with stakeholders
The world and environment
Waste management
Balanced ecosystem
Green and clean environment
(Urip, 2010)
Despite all the efforts regarding the development of European policy on corporate social
responsibility, there were remaining important challenges against the development of the EU’s
CSR policy and its expected wide impact in member states. Firstly, the rapid transition of new
members of Central and Eastern European countries from a socialist economy to a competitive
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market economy pushed the unplanned growth of many companies and business organizations,
which has created several societal and environmental problems (Turker, and Altuntas, 2012).
Adapting the highly demanding EU framework of economic, environmental, and social
standards was a challenging task for businesses in the enlarged highly competitive Europe.
Thus, the understanding and involvement of businesses in new member states to the CSR
policy of the EU as a part of the EU’s integrated sustainable development principle has been
lagging behind when compared with their counterparts in old member states. This creates huge
gaps between the divergent implementation and understanding of CSR among European
companies, which makes the development of EU policy on CSR slower and difficult (Turker
et al, 2013).
Moving more internal to the corporation, we need to be concerned with how corporations are
implementing corporate responsibility within the organization and how the procedures and
processes can be enhanced and refined. For example, can corporate responsibility be embedded
within the managing structures of the corporation, and if so, how would it be embedded? What
types of management, control, and reporting systems are in place, available, needed? Corporate
responsibility issues seem to be emerging as part of an extended internal audit function. Has
this been effective? What procedural enhancements would it be facilitating? Is there a need to
further extend the internal audit function in the corporate responsibility area, and if so, how
might it be carried out? (Haynes et al, 2013)
Secondly, the global economic crises since 2008 have created serious economic and social
problems in many European countries, which have weakened the effective functioning of the
European welfare systems. In this context, the active participation of businesses is addressed
as crucial to compensate for the lack of resources of the weakened European welfare states.
Besides, it seems that the slow recovery process of the economic stagnation period will result
in long-range tightly controlled solutions, which indeed leave the new members states to
perform more by themselves to close the gap of their economic development with the old
member states and satisfy the economic criteria and standards of the EU. This eventually
increases the pressure on business communities in Europe to develop and implement more
innovative and growth-oriented strategies in a competitive market without expecting strong
economic support from the EU. Moreover, the EU’s growth model on the principle of
sustainable development puts another pressure on the fırms that they should perform their
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economic growth as integrated with the EU’s sustainable growth strategy against the indicated
seven key challenges: climate change and clean energy, sustainable transport, sustainable
consumption and production, conservation and management of natural resources, public health,
social inclusion, demography and migration, and global poverty (Turker et al, 2013).
The mantra of business people has also evolved from ‘‘profit’’ alone into ‘‘profit, people, and
the planet.’’ This new concept includes concern for several issues, those relating to people, to
social issues, and the environment:
People issues range from workers’ health and safety and employee morale,
engagement, and development to corporate culture and good corporate governance.
Social issues embrace community building, education and issues such as entrenched
poverty.
Environmental issues include concern for global warming, pollution, and disturbance
of ecosystems.
All these factors are no longer considered incidental, so CSR has come to the fore as a core
business issue. One of the first organizations that got businesses to involve and respond to
sustainability concerns is the World Business Council for Sustainable Development (WBCSD)
(Urip, 2010).
Thirdly, the economic crises and its social consequences have also diverted the focus of citizens
to the social and ethical performance of enterprises as a result of the loss of trust and consumer
confidence in businesses. The increasing environmental and societal concern of people put the
firms under the pressure of satisfying the expectations of its consumers concerning the
companies’ contributions in solving ethical, social, and environmental problems. On the other
hand, many European companies have not yet integrated social and environmental concerns
into their operations and core strategy. Besides, failure to respect core labour standards and
human rights harm has been persisting on a small scale in European enterprises (Turker et al,
2013).
1.3.2 Managing, monitoring, and reporting
In comparison to other areas of the world, along with its history in fact the European
corporations have been traditionally more aware and consistent with CSR values, norms, and
perceptions (Mullerat, 2013). However, eventually, it is observed that the conceptualization,
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understandings, and practices on CSR differ among EU member states as the scope and content
of CSR changes with time and context. Referring to these divergent implementations on CSR
activities, the EU attempts to provide an overall European framework aiming at promoting
quality and coherence of corporate social responsibility practices. In this context, it tries to
develop broad principles, approaches, and tools, and promote best practice.
The development of a European framework on CSR actions seems more progressive since the
strong initiatives of the EC contribute to the institutionalization of the CSR policy at the EU
level by putting its emphasis on voluntary measures for business. On the other hand, European
Parliament, NGOs, and trade unions push for mandatory regulation and seek for the legislative
initiatives in promoting CSR. However, the contribution of various sectors to build a
collaborative context has not seemed to achieve a satisfactory level yet. As one of the
challenges, although the European firms are relatively addressed to perform better in terms of
their increasing awareness and actions on CSR practices, in particular when compared to U.S.
companies, the main problem remains in disclosing information and reporting of the companies
of their environmental and social impact. The EU has several mandatory instruments for all
member states, such as the Modernisation Directive, the European Pollutant Release and
Transfer Register, the EU Emission Trading Scheme, and the Integrated Pollution Prevention
and Control Directive. However, there is no consensus on the common format and content for
reporting on non-financial information. The implementation of a harmonized CSR policy
within a European framework might increase the consistency and comparability of reporting
between member nations and having an EU standard practice could have a positive impact
(Turker et al, 2013).
World Business Council for Sustainable Development (WBCSD) has advanced three concepts
delineating the boundaries of CSR with the intention of suggesting to companies the most
appropriate boundary of control and influence:
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Figure 1: Spheres of influence adopted from World Business Council for Sustained Development (WBCSD) to
accommodate the unique environment in Indonesia
1. Spheres of influence
To illustrate the decision and control inter-relationship between a company and its
stakeholders, the WBCSD defines the CSR role of a company in spheres of influence.
The diagram shown in figure 1 depicts the boundaries as nested circles of responsibility:
The inner core contains matters that are within the company’s control, such as labor
standards, health and safety, and waste management.
The outermost circle in which decisions and relationships contained are subject to the
least amount of corporate scrutiny or influence.
2. The value chain
To map issues and dilemmas along a value chain or a product lifecycle.
3. Questions for the board
To identify corporate values and issues
To analyze the impact on the value chain
To communicate, do outreach, and influence
(Urip, 2010)
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Another problem with the current state of corporate responsibility is the inability to access
actual outcomes that follow from responsible practices. For example, companies may have in
place environmental policies or be committed to international standards on corruption, but the
actual outcome of these actions is often not known. As noted earlier, environmental issues tend
to be more readily applicable to modeling and measurement. However, there is no clear
consensus as to acceptable performance levels or how to appropriately access local, regional,
and biospheric implications especially when multi-entities are involved. Critics suggest that
because of the problems with acquiring timely, relevant and accurate information, corporate
responsibility does not represent a viable means for ameliorating the adverse social and
environmental consequences of modern business. As a result, pressure is growing for
corporations to develop more rigorous social and environmental management practices and to
develop the measurement and evaluation systems to implement and manage these extended
practices (Haynes et al, 2013).
With corporate social responsibility (CSR) activities becoming an important part of business
strategy, it is necessary to monitor and control the budget allocated to CSR, and measure the
result accordingly. Good corporate governance requires that reporting of CSR activities should
not only comply with accepted business accounting principles but must also be objectively
monitored and be transparently available to the public. Only CSR activities, directly linked
with the establishment and operation of the value chain and with a clear direct benefit for both
the company and the community, monitoring could be done through the company’s system and
the reporting of results are included in the company’s financial reporting system (including
internal and external audit and risk management control). While for all other CSR activities, a
separate social accounting report is required (supported by social auditing done by a fully
qualified independent social auditor) and usually is included in the annual report as appendices
(Turker et al, 2013).
CSR is becoming an increasingly prominent and important issue for the following reasons.
Concerns over the globalization of corporate activities: Some non-governmental
organizations (NGOs) and developing countries claim that globalization is widening
the gap between the rich and poor and hurting the global environment.
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Greater social awareness among consumers: Consumers are pushing harder for
companies to protect the environment, respect human rights, and abide by fair labor
standards.
Corporate behavior judged by investors—socially responsible investment (SRI): When
deciding where to place their money, investors are increasingly making choices after
considering companies’ commitment to social responsibilities.
A more conscious workforce: People looking for employment are increasingly likely
to examine a company’s CSR record before applying.
Legislative changes, primarily in Europe: Governments have enacted legislation
promoting greater CSR and SRI.
Different efforts are also being initiated by world organizations, forums, and NGOs to define
a global standard for CSR boundaries, monitoring, measurement, and evaluation. Although
reporting is not yet mandatory, it is a very important tool to help the company to convey to the
public how effectively their business is being managed, and at the same time alert, the
employees to the company’s performance. CSR reports also indicate to the managers and
employees that the company takes its social values policies seriously. The global professional
accountant body, the Association of Chartered Certified Accountants also promotes social
accounting within its own.
1.4 Summary
In this introductory week of the module, we have set the basis for corporate social responsibility
and CSR strategies. In the following week, we will examine Human rights and greenwashing.
References
Haynes, K., Murray, A., Dillard, J., (2013), Corporate Social Responsibility : A Research
Handbook, Routledge.
Mullerat, R., (2013), Corporate social responsibility: A European perspective, The Jean Monnet/Robert Schuman Paper Series, 13(6), 1–22. www.as.miami.edu/eucenter/papers/
Mullerat_CSR%20Europa.pdf, accessed.
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Turker, D., and Altuntas, C., (2012), Corporate social responsibility: A framework for the
sustainable future of enlarged, Mustafa Kemal Universitesi Sosyal Bilimler Enstitusu Dergisi,
9 (18), 459–477.
Turker, D., Jonker, J., Toker, H., Altuntas, C., Borgmann, L., Burke, A., Carvalho, M.S. J.,
Dentchev, A. N., Elving, L. J. W., and Jablonkai, R., (2013), Contemporary Issues in
Corporate Social Responsibility, Lexington books.
URIP, S., (2010), CSR Strategies: Corporate Social Responsibility for a Competitive Edge in
Emerging Markets, John Wiley and Sons.
