THE MEANING OF CORPORATE SOCIAL
RESPONSIBILITY
INTRODUCTION OF CORPORATE RESPONSIBILITY
Ing. Pavel Adámek, Ph.D.
CORPORATE SOCIAL RESPONSIBILITY/PEM-NACSR
CORPORATE SOCIAL RESPONSIBILITY
What do you expect from the subject
Corporate Social Responsibility (CSR)?
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THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
OUTLINE OF THE LECTURE
1. Definitions of corporate responsibility
2. Carroll’s Pyramid of Corporate Social Responsibility
3. Drivers pushing business towards CSR
4. Triple Bottom Line
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
• The entirety of CSR can be discerned from the three words this
phrase contains: corporate, social, and responsibility.
• CSR covers the relationship between corporations (or other
non-profit organizations) and societies with which they interact.
• CSR provides a framework that helps firms embrace decisions
and adjust the internal strategic planning process to maximize
the long-term viability of the organization.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
• Business and organizations do not operate in a vacuum. Their
relationship to the society and environment in which they
operate is a critical factor in their ability to continue to operate
effectively. It is also increasingly being used as a measure of
their overall performance.
• Organizations around the world, and their stakeholders, are
becoming increasingly aware of the need for, and benefits
of, socially responsible behavior. The objective of social
responsibility is to contribute to sustainable development.
• An organization’s commitment to the welfare of society and the
environment has become a central criterion in measuring its
overall performance and its ability to continue operating
effectively.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
• The history of CSR is strongly intertwined with the emergence
over the past forty years of the environment as a worldwide
concern and the eventual transformation of the term into
“sustainable development” which incorporates social issues
alongside environmental and development ones.
• This is because sustainable development has been translated
into a managerial approach - CSR which integrates the
businesses’ financial performance with their externalities
for human development and the environment.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
• In the interest of enterprises - CSR provides important benefits
to companies in risk management, cost savings, access to capital,
customer relationships, HR management, and their ability to
innovate.
• In the interest of the (EU) economy - CSR makes companies
more sustainable and innovative, which contributes to a more
sustainable economy (circular economy=circularity).
• In the interests of society - CSR offers a set of values on which
we can build a more cohesive society and base the transition to a
sustainable economic system.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
Importance of corporate social responsibility
• CSR can help you improve your business performance, increase
competitive advantage and build trust with customers and
employees.
• It can also help you achieve operational cost savings, by avoiding
costs of wasted energy or unnecessary fees..
• Perhaps most importantly, CSR gives your company and your
brand a positive image of a reputable ethical business.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
WHY CORPORATE RESPONSIBILITY?
Features of Corporate Social Responsibility
The United Nations Industrial Development Organization notes that
the common functions of corporate social responsibility include:
• Responsible sourcing of materials and supplies
• Employee, vendor, customer and community engagement and
relations
• Adherence to labor standards
• Environmental protection and management
• Anti-corruption measures
• Upholding social equity, gender equity and other human rights
goals
• Conservation of resources, like water and energy, in production
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
1. DEFINITIONS OF CORPORATE RESPONSIBILITY
• The lack of commonly agreed definition of CSR.
• The term CSR is often used interchangeably with others,
including corporate responsibility, corporate citizenship,
business in society, social enterprise, sustainability, sustainable
development, triple bottom line, social value-added, strategic
philanthropy, corporate ethics, and in some cases also corporate
governance.
• There are also clear links between these terms and those
relating to socially responsible investments, community
investing, social capital, and collaborative governance…
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
1. DEFINITIONS OF CORPORATE RESPONSIBILITY
• Corporations have a Responsibility to those groups and
individuals that they can affect, i.e. its stakeholders, and to society
at large. Stakeholders are usually defined as customers,
suppliers, employees, communities and shareholders or other
financiers. (Financial Times Lexicon, lexicon.ft.com)
• CSR is a concept whereby companies integrate social and
environmental concerns in their business operations and in their
interactions with their stakeholders on a voluntary basis. (European
Commision)
• CSR is the proposition that companies are Responsible not only
for maximizing profits, but also for recognizing the needs of such
stakeholders as employees, customers, demographic groups and
even the regions they serve. (PricewaterhouseCoopers)
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
1. DEFINITIONS OF CORPORATE RESPONSIBILITY
• Corporate Social Responsibility is the continuing commitment
by business to contribute to economic development while
improving the quality of life of the workforce and their families
as well as of the community and society at large. (World Business
Council for Sustainable Development)
• CSR is a commitment to improve community well-being through
discretionary business practices and contributions of corporate
resources; and „Corporate social initiatives are major activities
undertaken by a corporation to support social causes and to fulfil
commitments to corporate social responsibility”. (Kotler, P., Lee, N. 2005)
– Causes that can be supported through these initiatives are those that
contribute to: (a) community health, safety, education, and employment;
(b) the environment; (c) community and economic development and
other basic human needs.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
1. DEFINITIONS OF CORPORATE RESPONSIBILITY
• Carroll (1979) “The social responsibility of business
encompasses the economic, legal, ethical, and discretionary
expectations that society has of organizations at a given point in
time.”
• Carroll (1983) “In my view, CSR involves the conduct of a
business so that it is economically profitable, law abiding, ethical
and socially supportive. To be socially responsible… then means
that profitability and obedience to the law are foremost
conditions to discussing the firm’s ethics and the extent to which
it supports the society in which it exists with contributions of
money, times and talent. Thus, CSR is composed of four parts:
economic, legal, ethical and voluntary or philanthropic.”
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
1. DEFINITIONS - SUMMARY
• Facts can be summarized in the summary, which is
characterized by the basic facts of corporate social
responsibility:
1. CSR is a voluntary act (adoption of CSR is entirely voluntary,
beyond legislation);
2. the concept is "partially" surrounded by areas of social,
environmental and economic;
3. concept may have implications in improving living, working and
environmental conditions of all stakeholders.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
2. CARROLL’S PYRAMID OF CORPORATE SOCIAL
RESPONSIBILITY
• Carroll (1991) organized different corporate social
responsibilities as a four-layered pyramid model and called it
the pyramid of responsibilities.
• The four different responsibilities - economical, legal, ethical
and philanthropic are the layers of the pyramid.
• The pyramid of responsibilities should be seen as a whole and
the different parts should not be separated.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
2. CARROLL’S PYRAMID OF CORPORATE SOCIAL
RESPONSIBILITY
• To be profitable as a company, minimize cost and maximize
sales or make sensible strategic decisions are at the base of
economic responsibilities. Economic performance is required
by the society.
• The second layer is the legal responsibilities and it is also
required by society. In these responsibilities' companies are
expected to obey the law, because the law mirrors show the
society regards as accepted or unaccepted.
• The difference of the ethical responsibilities from the first two
responsibilities is that the ethical responsibilities are not required
but expected by society.
• The philanthropic responsibilities stand at the top of the
pyramid and to be a good corporate citizen and improve the
quality of life for the society is the aim of these responsibilities.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
2. CARROLL’S PYRAMID OF CORPORATE SOCIAL
RESPONSIBILITY
• A stakeholder model
is represented by
the Pyramid of
CSR where the
different
stakeholders are
affected by the
different
responsibilities.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
3. DRIVERS PUSHING BUSINESS TOWARDS CSR
1. The shrinking role of government - In the past, governments
have relied on legislation and regulation to deliver social and
environmental objectives in the business sector. Shrinking
government resources, coupled with a distrust of regulations,
has led to the exploration of voluntary and non-regulatory
initiatives instead.
2. Demands for greater disclosure - a growing demand for
corporate disclosure from stakeholders, including customers,
suppliers, employees, communities, investors, and activist
organizations.
3. Increased customer interest - evidence that the ethical
conduct of companies exerts a growing influence on the
purchasing decisions of customers.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
3. DRIVERS PUSHING BUSINESS TOWARDS CSR
4. Growing investor pressure - investors are changing the way
they assess companies' performance and are making decisions
based on criteria that include ethical concerns.
5. Competitive labour markets - employees are increasingly
looking beyond paychecks and benefits, and seeking out
employers whose philosophies and operating practices match
their own principles. In order to hire and retain skilled
employees, companies are being forced to improve working
conditions.
6. Supplier relations - as stakeholders are becoming increasingly
interested in business affairs, many companies are taking steps
to ensure that their partners conduct themselves in a socially
responsible manner. Some are introducing codes of conduct for
their suppliers, to ensure that other companies' policies or
practices do not tarnish their reputation.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• The term was coined by John Elkington in 1994 and later used
in his 1997 book "Cannibals With Forks: The Triple Bottom Line
Of 21st Century Business" describing the separate financial,
social and environmental "bottom lines" of companies.
• The Triple Bottom Line (TBL), in congruence with ustainable
development and corporate social responsibility, incorporates
three dimensions, often referred to as the three Ps, people,
planet and profit.
• Triple Bottom Line works on the assumption that the corporation
is a member of the moral community, and this gives it social
responsibilities.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• This theory focuses on sustainability, and requires that any
company weigh its actions on three independent scales:
economic sustainability, social sustainability, and environmental
sustainability.
• The triple bottom line is a form of corporate social
responsibility dictating that corporate leaders tabulate bottomline
results not only in economic terms (costs versus revenue)
but also in terms of company effects in the social realm, and with
respect to the environment.
• Many organizations have adopted the TBL framework to
evaluate their performance in a broader perspective to create
greater business value.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• Economic sustainability must focus on the long term because
this is the nature of a persistent company. A decision which
creates an economic boon in the short-term, but causes longterm
harm, would likely reduce this bottom line to such a degree
that the action would be untenable.
• Social sustainability gives precedence on the balance of
economic power in the society. Competition in the business
arena is common, and encouraged, behavior, but maximizing
the bottom line in social terms requires that a business foster an
environment in which all can succeed.
• The requirement of environmental sustainability stems from
the recognition that resources are not infinite, and leads to the
reasoning that too much degradation will worsen the lives of
ourselves, our children and so on.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• The challenges of putting the TBL into practice relate to the
measurement of social and ecological categories. Despite
this, the TBL framework enables organizations to take a longerterm
perspective and thus evaluate the future consequences of
decisions.
Calculating the TBL
• The 3Ps do not have a common unit of measure. Profits are
measured in euros, dollars… What is social capital measured
in? What about environmental or ecological health? Finding a
common unit of measurement is one challenge.
• Some advocate monetizing all the dimensions of the TBL,
including social welfare or environmental damage.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
Calculating the TBL
• Another solution would be to calculate the TBL in terms of an
index.
• In this way, one eliminates the incompatible units issue and, as
long as there is a universally accepted accounting method,
allows for comparisons between entities, e.g., comparing
performance between companies, cities, development
projects or some other benchmark.
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• Economic Measures - economic variables ought to be
variables that deal with the bottom line and the flow of money. It
could look at income or expenditures, taxes, business climate
factors, employment, and business diversity factors. Specific
examples include:
– Personal income
– Cost of underemployment
– Establishment churn
– Establishment sizes
– Job growth
– Employment distribution by sector
– Percentage of firms in each sector
– Revenue by sector contributing to gross state product
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• Environmental Measures - environmental variables should
represent measurements of natural resources and reflect
potential influences to its viability. It could incorporate air and
water quality, energy consumption, natural resources, solid and
toxic waste, and land use/land cover. Ideally, having long-range
trends available for each of the environmental variables would
help organizations identify the impacts a project or policy would
have on the area. Specific examples include:
– Sulfur dioxide concentration
– Concentration of nitrogen oxides
– Selected priority pollutants
– Excessive nutrients
– Electricity consumption
– Fossil fuel consumption
– Solid waste management
– Hazardous waste management
– Change in land use/land cover
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
4. TRIPLE BOTTOM LINE
• Social Measures - social variables refer to social dimensions of
a community or region and could include measurements of
education, equity and access to social resources, health and
well-being, quality of life, and social capital. The examples listed
below are a small snippet of potential variables:
– Unemployment rate
– Female labor force participation rate
– Median household income
– Relative poverty
– Percentage of population with a post-secondary degree or certificate
– Average commute time
– Violent crimes per capita
– Health-adjusted life expectancy
THE MEANING OF CORPORATE SOCIAL RESPONSIBILITY
SUMMARY OF THE LECTURE
• Businesses worldwide are increasingly worried about the impact
of their business activities on society.
• By its very nature CSR is a complex, multiform phenomenon
emerging as the interface between enterprises and society.
• Social and environmental consequences have started to being
weighed against economic gains and short-term profit against
long-term prosperity by the businesses in order to maintain
long-term sustainable growth and development.
We can share our
thoughts and ask
questions
☺
Pavel Adámek
adamek@opf.slu.cz