2.1 Foundations of Corporate Social Responsibility
Corporate social responsibility can encompass a variety of different activities, which may be described as
good neighborliness or good citizenship. Socially responsive firms actively seek to do no harm, for
example by providing a safe working environment or adopting clean production processes. Corporate
social responsibility also obliges companies to create initiatives for solving broad social problems such as
urban decay, substance abuse, and poverty. There is no consensus on a single definition of corporate
social responsibility. Modern perceptions of corporate social responsibility have evolved from initially
focusing on individual manager responsibility for social consequences of actions in the 1950s to a firm’s
responsibility to multiple stakeholders today. Regardless, a socially responsive firm monitors and
assesses environmental conditions, attends to stakeholder demands, and designs policies to respond to
changing conditions (Ackerman, 1975).
Social Responsibility and Ethics
The premise of corporate social responsibility is the ethical duty of businesses to accept responsibility
for the consequences of their actions beyond financial performance. Howard Bowen’s 1953 book Social
Responsibilities of the Businessman describes social responsibility as “the obligation of businessmen to
pursue those policies, to make those decisions, or to follow those lines of action which are desirable in
terms of the objectives and values of our society” (p. 60). According to DiMaggio and Powell (1983),
companies operate within a social framework of norms, values, and assumptions about what constitutes
acceptable behavior, and they fear losing the freedom to conduct business independently if they are
found to be unresponsive to social pressures for responsible business. If powerful stakeholders in
society do not accept a company’s actions, they may increase regulation or revoke a company’s
legitimacy to conduct business. For example, Canadian mining companies have been under mounting
pressure from African countries to address negative social and environmental impacts and human rights
violations (Campbell, 2008). The companies could lose public support for mining operations within the
region if they do not comply with international standards.
A business’s relationship with societal expectations is a social contract, or a basic agreement that
defines the broad duties of a business required to retain society’s support. Laws and regulations express
the formal part of this contract. The tacit part of the social contract encompasses stakeholders’
expectations based on their values and norms. Through legal or stakeholder action, companies
recognize that violations can seriously harm the reputation and financial well-being of their businesses.
Therefore, one view of social responsibility is primarily a risk management strategy.
Since there is no consensus on how corporate social responsibility guides firm behavior, there are many
terms to describe company initiatives for meeting societal expectations: corporate responsibility,
corporate citizenship, sustainability, strategic philanthropy, and creating shared value. Regardless of the
terminology, companies adopting a responsible approach to business tend to stress ethical behavior and
responsiveness to multiple stakeholders. Three common approaches to corporate social responsibility
are based on obligations, citizenship, and sustainability.
Social Responsibility as Obligation
Many companies view corporate social responsibility as the obligation to meet society’s economic, legal,
ethical, and discretionary expectations for the organization (see Figure 2.1). The economic and legal
components refer to a business’s obligation to produce goods and services at a profit while obeying
laws. Economic and legal obligations are an inherent part of corporate responsibility, as businesses
contribute to social welfare in the form of jobs, products, and innovation. The ethical component refers
to the behaviors and norms that a society expects, and the discretionary component encompasses
voluntary and philanthropic activities of contributions of money, time, and talent. Consensus is lacking
on the degree of responsibility that businesses have for each of the components and often varies
Figure 2.1: Pyramid of social responsibility
The economic, legal, ethical, and philanthropic obligations that a business must meet are viewed as
corporate social responsibility.
Source: Adapted from The Pyramid of Corporate Social Responsibility: Toward the Moral Management
of Organizational Stakeholders, by A. B. Carroll, 1991, Business Horizons, 34(4), p. 42.
A company’s economic responsibilities relate to profits realized in the production of goods and services.
A business needs to be financially viable in order to employ workers, pay taxes, and award dividends to
investors. The fulfillment of economic obligations of a business is the basis for the company’s annual
reports for the shareholders. For example, the annual report for Harley-Davidson Inc. begins with a
letter to shareholders highlighting revenue, sales growth, and market share (Harley-Davidson, 2012).
Economic obligations can focus on internal stakeholders, such as the company’s responsibility to create
shareholder value, or external stakeholders, such as providing products for consumers, creating
employment, and stimulating an industry (Chabowski, Mena, & Gonzalez-Padron, 2011).
Legal responsibilities entail a company’s obligations to obey local, regional, national, or international
laws. Regulations seek to create a fair and competitive environment for businesses, safeguard natural
resources, protect consumers, and ensure safe workplaces. Consequences for not meeting legal
obligations include fines, imprisonment of company executives, and revoking of business permits.
Companies have legal obligations toward many stakeholders. Compliance with regulations includes
protecting employees through a safe workplace free of harassment and fair compensation. Legal
obligations to customers require companies to meet product safety requirements, pricing policies, and
advertising regulations. Regulations enforcing accurate financial records and reporting protect company
investors. Environmental laws protect natural resources.
Companies have ethical obligations beyond those required by law. Ethical responsibilities include
concern for employees by creating a fair and equitable work culture. Ethical norms that guide the
business’s responsibility for ethical behavior can change as new issues emerge. Shifting political and
economic environments can also influence a business’s ethical obligations. For example, Chinese
executives consider ethical obligations to include safeguarding social order and creating a harmonious
society; these obligations come from the Chinese government’s emphasis on socially responsible
businesses (Gonzalez-Padron, Fan, & Zhou, 2014).
Discretionary responsibilities often include voluntary and charitable activities that benefit others and
derive from society’s expectations to contribute to the well-being of the community. Voluntary
programs such as on-site child care, fitness and wellness services, and company picnics improve the
quality of employees’ work-life balance. Some companies refer to discretionary activities toward
external stakeholders as philanthropic responsibilities. Philanthropic activities include donations of
money or talents to charities, employee volunteer programs for community projects, cause-related
marketing, and collaborations with nonprofit organizations to address social issues.
Social Responsibility as Corporate Citizenship
Corporate citizenship refers to a managerial approach to commit to responsible business policies and
practices with a strategic focus on serving communities. Business managers use the term corporate
citizenship interchangeably with corporate social responsibility with two distinctions. First, corporate
citizenship primarily describes organizational initiatives that are not required by law, which support local
communities (Gardberg & Fombrun, 2006). These activities often relate to philanthropic initiatives such
as corporate volunteerism, charitable contributions, support for community education and healthcare
initiatives, and programs to improve the environment.
These ideals are often reflected in corporate citizenship statements, such as that of The Boeing
Company: “The enduring strength of our business depends on healthy and vibrant communities. Giving
back to communities is important to our employees and a core value of The Boeing Company” (Boeing,
2012, p. 2); and Microsoft: “Our citizenship mission is to serve globally the needs of communities and
fulfill our responsibilities to the public” (Microsoft, 2013, p. 4).
Second, many company statements of corporate citizenship refer to business conduct, ethical standards,
and responsible business practices (Matten & Crane, 2005).
Headquartered in Geneva, Switzerland, the World Economic Forum is an international institution that
strives to improve the state of the world by engaging business, political, academic, and other leaders of
society to address responses to economic, social, and political changes (World Economic Forum, 2014a).
It offers the Framework for Action for organizations that strive to exemplify global corporate citizenship:
PROVIDE LEADERSHIP: Set the strategic direction for corporate citizenship in your company and engage
in the wider debate on globalization and the role of business in development.
Articulate purpose, principles, and values internally and externally
Promote the business case internally
Engage the financial sector
Enter the debate on globalization and the role of business in development
DEFINE WHAT IT MEANS FOR YOUR COMPANY: Define the key issues, stakeholders and spheres of
influence that are relevant for corporate citizenship in your company and industry.
Define the issues
Agree on company’s spheres of influence
Identify key stakeholders
MAKE IT HAPPEN: Establish and implement appropriate policies and procedures, and engage in dialogue
and partnership with key stakeholders to embed corporate citizenship into the company’s strategy and
Put corporate citizenship on the board agenda
Establish internal performance, communication, incentive and measurement systems
Engage in dialogue and partnership
Encourage innovation and creativity
Build the next generation of business leaders
BE TRANSPARENT ABOUT IT: Build confidence by communicating consistently with different
stakeholders about the company’s principles, policies and practices in a transparent manner, within the
bounds of commercial confidentiality.
Agree what and how to measure
Develop a graduated programme for external reporting
Be realistic about what is possible in a given timeframe and when building expectations
(World Economic Forum, 2002/2013, p. 6)
The Center for Corporate Citizenship at Boston College publishes a Corporate Social Responsibility Index
that ranks companies based on public perceptions of their citizenship, governance, and workplace
culture (Boston College Center for Corporate Citizenship, 2011). The citizenship dimension relates to
how the company contributes positively to its surrounding community in a socially and environmentally
responsible fashion. Governance refers to the degree that the company manages its business fairly and
transparently with high ethical business standards. The workplace dimension focuses on fair treatment
of employees through wages and training. Table 2.1 lists the top 20 companies ranked by Boston
College’s Corporate Social Responsibility Index in 2011.
Table 2.1: Boston College Center for Corporate Citizenship’s Top 20 Ranked Companies
Corporate Social Responsibility Index (CSRI)
Publix Super Markets Inc.
Campbell Soup Company
Johnson & Johnson
The Walt Disney Company
Corporate Social Responsibility Index (CSRI)
Green Mountain Coffee Roasters
Source: Boston College Center for Corporate Citizenship, 2014, retrieved from
Social Responsibility as Sustainability
In recent decades, it has become increasingly common for businesses to frame their social
responsibilities in terms of sustainability. The concept of sustainability reflects the recognition of the
finite limits of nature, propagating the need for businesses to optimize the economic, environmental,
and social components of society. Because of environmental issues of the 1980s, such as the 1984
Bhopal chemical release and droughts in Africa, the United Nations formed the Brundtland Commission
to recommend solutions to the decline in global natural resources. Their report, “Our Common Future,”
highlights that “economic and ecology can interact destructively” and calls for businesses, governments,
and nonprofits to consider sustainable development, or “meeting the needs of the present generation
without compromising the ability of future generations to meet their own needs” (World Commission
on Environment and Development, 1987, p. 43). In response, companies have begun adopting
sustainable business practices to look beyond financial profit and consider its impact on social,
economic, and ecological resources of the community. Read Business Best: Blue Star Recyclers for an
example of a company with a strategic focus on sustainable business.
Business Best: Blue Star Recyclers
Blue Star Recyclers of Colorado Springs competes in an electronics recycling industry that reclaims
components or usable materials from used electronic products. In the United States, the electronics
recycling industry generates more than $5 billion in revenue and employs approximately 30,000 to
45,000 people (2010 estimates) (Daoud, 2011). Electronic recyclers prevent the toxic substances in
televisions, computers, computer peripherals, facsimile machines, DVD players, and videocassette
recorders from contaminating landfills.
Blue Star Recyclers provides electronic waste (e-waste) pickup and hard drive/data destruction services
to over 400 businesses, organizations, and government entities in Colorado. It collects nearly 40% of ewaste from residential sources, which is much higher than the industry average of 25% (Daoud, 2011).
To encourage residents to recycle, Blue Star Recyclers has established seven drop-off locations in
southern Colorado where residents can recycle their e-waste conveniently. The business claims to have
ethically recycled over 5 million pounds of e-waste since 2009.
The company’s mission is to recycle electronics and other materials and create local jobs for people with
autism and other disabilities. Blue Star Recyclers has 17 employees: six in management and office
positions, and 11 workers with disabilities. The company has reported zero turnover, zero accidents,
zero theft, and minimal employee absences amongst its workforce with disabilities. Prior to finding
employment at Blue Star Recyclers, all of the workers with developmental disabilities were unemployed
and spent their time participating in day programs paid for by the state. By creating a vocational path for
people with developmental disabilities, the company saves taxpayers and the government
approximately $100,000 per year in Social Security benefits.
Blue Star Recyclers donates hundreds of hours of service to supporting the community, advocating for
their workforce, and creating government relations to help support both their recycling and job creation
effort. The Colorado Association for Recycling recognized Blue Star Recyclers with the Outstanding
Outreach Award for 2012. As a result, the company continues to grow.
Questions to Consider
How does the business model of Blue Star Recyclers incorporate economic, environmental, and social
dimensions of a sustainable business?
How might the employees with disabilities benefit from these employment opportunities?
How do you think the company has been able to achieve such exceptional outcomes?
Evaluate Blue Star Recyclers against the five elements of a responsible company established by
Patagonia’s leadership. Would Blue Star Recyclers be considered a responsible company?
Sustainable companies view their responsibilities through a triple bottom line, which incorporates
economic, environmental, and social dimensions in reporting performance (see Figure 2.2) (Elkington,
1998). Each of the dimensions includes responsibilities to company stakeholders. The economic
dimension represents the financial impact of the organization in the economic viability of the
surrounding community through the sales of products and services, profits paid to investors or
reinvested into the firm, and taxes paid. The environmental dimension centers on the company
stewardship of natural resources and includes reducing waste that ends up in landfills and pollutes
waterways, reducing energy use and carbon emissions, and complying with environmental regulations.
Finally, the social dimension focuses on the influence the company has on people and includes
encouraging an inclusive approach to employees, customers, and suppliers; respecting the human
dignity of the workforce; and supporting community projects for addressing social issues.
Figure 2.2: Triple bottom line dimensions
Economic, environmental, and social dimensions make up the triple bottom line of sustainable
companies; companies can achieve the greatest competitive advantage at the points where the
Companies can achieve the greatest competitive advantage in the areas where the dimensions overlap
(Gonzalez-Padron, 2013). Companies that meet responsibilities in the economic and social dimensions
create wealth for communities and meet its responsibilities to employees and customers. Activities that
contribute to solutions of social issues include creating jobs, employee development programs, and
marketing campaigns. Companies collaborate with nonprofit organizations to address social issues for
which they have no special competence. For example, Procter and Gamble Co. partners with UNICEF to
combat fatal maternal and neonatal tetanus by donating the cost of one tetanus vaccine for every
purchase of specially-marked Pampers diapers and wipes. The program also offers employees a threemonth paid sabbatical to volunteer with UNICEF, increasing employee commitment and retention while
providing valuable knowledge to a nonprofit organization.
At the intersection of the environmental and economic dimensions of the triple bottom line,
organizations realize savings from greater resource efficiency, lower regulatory costs, and revenue from
innovative energy efficient products. Programs may involve changes that are as simple as turning off
computers nightly and using motion detectors to turn off lights in offices. The chemical company Ecolab
reduced material and waste disposal costs by $320,000 annually by reusing product scraps and saved
$260,000 annually by better controlling chemical use in production. Hewlett-Packard developed an
innovative soldering process that eliminated lead well before a 2006 European Union’s Restriction of
Hazardous Substances Directive regulating the use of lead in electronics products. Procter and Gamble
offers cold-water specialty detergents to address the energy costs of heating water for laundry
(Nidumolu, Prahalad, & Rangaswami, 2009).
Finally, at the intersection of social ...
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