13 Corporate Social Responsibility
• Corporate social responsibility (CSR): activities when companies go beyond the
requirements of running an economically viable business within the constraints of the law
to protect the environment and enhance the well-being of their stakeholders.
A Brief History of Corporate Responsibility
• Invisible hand: the control by market forces where competition favors those who
produce the best products at the best prices as consumers also seek their own self interest
in buying those products or services.
• Four essential responsibilities of a business:
o Economic responsibility: The role of a business to produce goods or services that
people need and to make an acceptable profit in the process.
• License to operate: the social contract between businesses and society that allows them
to operate.
• Milton Friedman: a critic of CSR who wrote the now famous article in the New York
o Limited view of a good corporate citizen is a company that gives back to the
community as a voluntary action. The focus is on the close environment of the
firm such as supporting local sports teams.
Strategic CSR
• Strategic CSR: corporations attend to their stakeholders because managers believe it is
in the best interest of the company
• Benefits of strategic CSR:
o Positive consumer responses and growth in market share.
CSR is Here and Going to Stay
• Two reasons why many companies have not been as productive as they should be:
o First, there has been a tendency to pit business against society when it is more
productive to realize that the two are interdependent.
• Suggestions to overcome these problems:
o Find ways to use CSR to do things differently than competitors.
• Seven exemplary strategic CSR principles:
o Cultivate needed talents.
o Develop new markets.
Reporting Corporate Social Responsibility
• Social performance reports: Similar to annual reports on economic performance, they
report on CSR performance.
• Benefits of issuing social performance reports:
o Differentiation.
o A license to operate.
• Integrated reports are those that are built into the annual reports, which traditionally
have focused only on financial performance.
What is in a CSR Report?
• Global Reporting Initiative (GRI): Provides principles and indicators that companies
can use to identify and measure economic, environmental, and social performance.
• The UN’s Global Compact’s ten principles:
Human Rights
o Principle 1: Businesses should support and respect the protection of
Labor
o Principle 3: Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining.
Environment
o Principle 7: Businesses should support a precautionary approach to environmental
challenges.
Anti-Corruption
o Principle 10: Businesses should work against corruption in all its forms, including
extortion and bribery
• The reasons organizations need such CSR measurement and tracking include:
o Measuring CSR performance allows organizations to identify opportunities to
improve operations and avoid risks to the long-term value of the organization.
• Assurance: The auditing function to validate the accuracy of a company’s CSR report.