The belief that business has a social responsibility is not new. In the early decades of the twentieth century a few large industrialists, including Ford and Carnegie, engaged in corporate charity and took measures (in education, health care and housing) to improve the conditions of workers and communities in which their factories were located (Utting, 2000). Corporate social response broadened slightly in the 1950s when social democracy and welfare legislation took root, and then, in the 1960s and 1970s, CSR emerged briefly as a high-ranking management concern in the United States and Europe, in response to high-profile international boycotts, including that against Nestlé’s aggressive marketing of baby formula in the South as a ‘safer’ alternative to breast feeding (Klein, 2000).
Since then, CSR has emerged as a form of voluntary self-regulation for firms for managing their engagement with society in the face of increasing pressure from organised civil society and the general public to address the negative environmental and social impacts of companies, particularly transnational ones. From a political economy point of view the ascendancy of contemporary CSR is traceable to the deepening of economic globalisation under neoliberalism, and the emergence of its political counterpart, ‘the good governance agenda’ (Hoogvelt, 2001).
CSR broadly acknowledges that firms are more than just producers and sellers, with legal and moral obligations in terms to the people they employ, their customers, neighbours, future generations and thus to society at large. CSR initiatives frequently focus on the conception, implementation and monitoring of internal charters steering internal decisions on social responsibility. Operationally, CSR embraces issues which range from reducing negative environmental impacts on production sites and of products, respecting workers’ rights, implementing racial and social antidiscrimination policies and ensuring financial and managerial transparency. Among the cornerstones of CSR mechanics are the monitoring and reporting processes.
The enormous success of CSR initiatives today has a great deal to do with their internationalisation and standardisation through transnational institutions and networks, such as the Global Compact of the United Nations. The Global Compact asks that signatories commit to principles of transparency, implementation of external monitoring and to proactively implement partnerships – or at least some form of engagement – with civil society. The Global Reporting Initiative (GRI) is a standard set of monitoring and reporting processes and indicators. CSR initiatives, however, are mainly driven by the need for corporate risk management, and often geared towards buying ‘social license to operate’.
As such, much CSR activity is still situated in corporate governance and risk-management departments. This is reflected in the increasing role of CSR in intra-firm business mechanisms, with transnational corporations requiring their manufacturers to adopt CSR policies in order to protect themselves from liabilities that might be incurred down their manufacturing lines and/or supply chains. Adopting a CSR policy has also become a prerequisite in some countries or sectors for participation in public procurement processes.
A very large and lucrative industry of private consultancy has evolved around CSR processes. Structurally, the very existence of the CSR industry encourages the de facto outsourcing of the bulk of CSR activities, which ironically jeopardises the internalisation of the CSR ethos by business models and throughout all levels and departments of firms, including accountancy. The environmental liabilities of firms are not included in their balances and ‘bottom lines’, unless they become due through court cases or social agitation.
A major concern with CSR is that corporations can quite easily implement apparently robust policies without having to change actual behaviours or reduce impacts on the environment or on people (Clapp and Utting, 2008). CSR is implemented as an add-on to ‘business as usual’ and initiatives often boil down to a series of statements, overarching policies, charters and monitoring programmes which are concluded with an annual set of social partnerships and social sponsoring programmes, with little effect. While some proponents sincerely believe that CSR means fundamentally changing business practices with respect to social/environmental responsibility, others feel that CSR at best leads to green-washing.
Accordingly, CSR policies have attracted the attention of NGOs that have emerged to scrutinise CSR reports and compare them with actual corporate behaviour. NGOs use CSR policies and reports as leverage with which to expose and influence companies’ that violate their own codes of conduct, but this work can be challenging, because it is not in the interest of companies to render their functioning entirely transparent, and because the accurate and detailed monitoring and follow-up of CSR claims is very time and resource consuming. For these reasons, some NGOs accept funding indirectly, for instance via business councils to which the firms in question are members losing their independence and ultimately becoming co-opted.
There is also the scientific challenge of assessing the interactions and causalities between corporate CSR performance and financial performance. Whether a robust CSR policy improves business performance is highly questionable. While some early evidence points to the existence of some relationships between both strands of performance, their direction and prescription is far from having been ascertained (Scholtens, 2008). The lack of evidence to this effect means that in hard financial times, CSR programmes are the first to be cut under corporate belt-tightening measures.
Clapp, J., Utting, P. (eds) (2008) Corporate Accountability and Sustainable Development, Delhi: Oxford University Press.
Hoogvelt, A. (2001) Globalization and the Postcolonial World: The New Political Economy of Development , 2nd ed, Baltimore: John Hopkins University Press.
Klein , N. (2000) No Logo: Taking Aim at the Brand Bullies, London: Flamingo.
Scholtens, B. (2008) ‘A note on the interaction between corporate social responsibility and financial performance’ , Ecological Economics , 68 ( 1–2 ): 46 – 55.
Utting , P. (2000) ‘Business responsibility for sustainable development’ , Occasional paper No. 2 , UNRISD , Geneva.
Global Reporting Initiative [https://www.globalreporting.org/Pages/default.aspx]
This glossary entry is based on a contribution by Tom Bauler
EJOLT glossary editor: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos