Corporate social-responsibility

Contents
Introduction to Corporate Social Responsibility (CSR)
Managing CSR
Corporate culture and CSR
Understanding local values, culture and traditions
Conceptualizing and development debate
CSR and Competiveness
Perspectives on CSR
CSR in global context
Criticisms and concerns
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Introduction
Corporate Social Responsibility (CSR) as an
analytical tool can be used in the field of
Business Management to facilitate different
business practices from both an ethical angle
and a utilitarian perspective. Business
Managers should try to entrench networks of
trust, loyalty and cooperation within and
without their organizations. This also makes
good business sense in terms of rational
choice theory
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CSR key benefits and findings
COPORATE
RESPONSIBILITY
• Good business is also about establishing
customer-friendly images in a manner that
highlights values such as reliability,
trustworthiness, quality, economy and durability.
These values evolve our time and are underpinned
by a sustained relationship of confidence
• Brand equity and positioning so generally depend
upon the successful merchandizing of products
and their images
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CSR key benefits and findings
COPORATE
RESPONSIBILITY
• The problematique of this edited anthology on CSR
is structured around the polemic of civil societal
institutions (networks and embedding) and
democratic governance (including growth and
participating development) among other critical
areas of social scientific research
• The line of theoretical research is expected to
contribute new knowledge and facilitate innovative
research to better understand the interactions and
interplay between in their institutions
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Dynamics of Trust
A perspective analysis of the dynamics
of trust in any business organization
happens to be a most problematique
exercise that has to be carried out over
a period of time and that involves
multiple stakeholders as well
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Dynamics of Trust
Why should one trust his/her peers,
superiors and subordinates?
Is trust a construct of culture
specifics?
Can trust be equated with the given
socio-politico-economic realities of
any spatiotemporal context?
Can trust be learned or emulated?
Can trust be analyzed in terms of
cost-benefit calculations?
These are rather disquieting questions
with no unlinear answers. Business
leaders have to realize that the
pedagogics of trust and resilience of
professional relationships can only be
tested against either hypothetical or real
life situations, where the actual
motivations, aspirations, perceptions,
preferences and culture root paradigms
of individuals or groups, are explicitly
exposed in the given content of their
informed self-interest
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The Relationship
Why should one cooperate with another?
Is it a learnt reflex or is it based on
enlightened self-knowledge and self-
interest? Would cooperation lead to
intense creativity, new images, different
ideas and better emotional and stress
management?
Relationships can be built upon
cooperation, competition and conflict.
Each such mode will explore new models
of interface and would finally lead to an
inchoate world of new possibilities where
men and women in the industry would
steadily learn how best to unlearn past
lessons and deschool themselves from
the cultural baggage handed down the
generations
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Management of choices
The issue of CSR is all about the
management of choices in the social work
place
Why should workers obey the
management?
What are the concerns of the management
that are reflected in its style of leadership?
Is loyalty related to motivation? Or is loyalty
a function of the chain of command?
What are the effective outputs of the
hierarchy?
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The management and workers have to mutually entrench an ethos
of cooperation that would both create and sustain the values of
ownership/trusteeship in their given organization
The very fact that targets have to be achieved and new targets
innovated point to the fact that the organizational health of any
given industry is sound. The point of saturation has to be ably and
creatively transformed into an arena of new possibilities that lead to
new challenges and innovative gestures
Achievement of targets is critically dependent on team
performance, and so the team players have to share different
degrees of responsibilities and have to be burdened with different
measures of failures and successes
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The most important consideration at this point is to determine who
can shoulder what amount of burden. So the question of
authoritative allocation of values has also be pondered upon
actively by the management concerned
The issue of ownership/Trusteeship is also organically related to
the issue of institutions. Each business organization in sociological
terms, is an institution replete with history of evolution, work
culture, trade union ethics and typical management practices. So
the study of business organizations as dynamic institutions of
Power, Authority, Repression, Obedience, Reward and Punishment
may lead to an ulterior understanding of CSR
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Approaches of Corporate Social Responsibility
The most common approach is “Philanthropy”, which includes donations and
aid to local organizations and backward communities. This approach was
not liked by few organizations since there was no development of skills of
the people, whereas community-based development generally leads to more
sustainable development. Another approach to CSR is to incorporate the
CSR strategy directly into the business strategy of an organization. Another
approach is garnering increasing corporate responsibility interest. This is
called Creating Shared Value, or CSV. The shared value model is based on
the idea that corporate success and social welfare are interdependent.
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Benefits of Corporate Social Responsibility
The benefits of CSR in an organization will likely rest on any of the following
HUMAN
RESOURCE
A CSR program
can be an aid to
recruitment and
retention. Poten-
tial recruits often
ask about a firm's
CSR policy during
an interview, and
having a
comprehensive
policy can give
an advantage.
RISK
MANAGE-
MENT
Managing risk is a
central part of
many corporate
strategies.
Reputations can
be ruined in hours
through incidents
such as corruption
scandals or
environmental
accidents.
BRAND
DIFFEREN-
TIATION
CSR can play a
role in building
customer loyalty
based on
distinctive ethical
values.
LICENSE TO
OPERATE
Corporations are
keen to avoid
interference in their
business through
taxation or
regulations. By
taking substantive
voluntary steps,
they can persuade
governments and
the wider public
that they are taking
issues such as
health and safety.
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History of Corporate Social Responsibility (CSR)
Though the roots of the concept that we know today
as Corporate Social Responsibility have a long and
wide-ranging history, it is most a product of the 20th
century. Inspite of its recent growth and popularity,
one can trace for centuries evidence of the business
community’s concern for society. Though it is possible
to see evidence of CSR throughout the world, mostly
in developed countries, most early writings have been
most obvious in the U.S.
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Social initiatives and practices
In the mid-to-late 1800s, it is apparent that emerging businesses were
especially concerned with employees and how to make them more
productive. Now, it is difficult to find out what the organization is doing for
business reasons and what the organization is doing for social reasons. In
addition to concern for ‘employees philanthropy’ was appearing on the
scene in late 1800s, but it was difficult to analyze whether it was ‘individual
philanthropy’ or ‘business philanthropy’. During the period 1918-29,
Heald has suggested that the ‘community chest movement’ also helped
to shape business views of philanthropy, one of the earliest forms of CSR.
As business executives came into contact with social workers, new views of
corporate responsibility began to emerge.
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CSR takes shape in the 1950s
Patrick Murphy, University of Michigan, classified as 4 CSR eras. Murphy argued
that the period up to the 1950s was the ‘Philanthropy era’ in which
organizations donated to charities. From 1953 to 1967, it is ‘awareness era’, in
which there became more recognition of the overall responsibility of business and
its involvement in community affairs. The period 1968-73 was termed as ‘issue
era’ where companies began focusing on specific issues such as urban decay,
racial discrimination and pollution problems. Finally, in the ‘responsiveness
era’, 1974-8, and continuing beyond, companies began taking serious
management and organizational actions to address CSR issues. The decade of
the 1950s was of more ‘talk’ than ‘action’ with respect to CSR. It was a period of
changing attitudes, with business executives learning to get confortable with CSR
talk. There was very few corporate actions, beyond philanthropy, to report that
stood out in terms of accommodating this new theme.
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Refinement
By the 2000s, the emphasis on “theoretical” contribution to the concept
and meaning of CSR had given way to empirical research on the topic
and a splintering of interest away from CSR and into related topics such
as stakeholder theory, business ethics, sustainability and corporate
citizenship. Some development and empirical research continued on the
CSR construct.
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Drivers
It is important to address the central question of
what makes CSR in developing countries different
from its typical manifestation in the developed
world, as defined by America and Europe. One
powerful way to do this is by examining the various
drivers for CSR in developing countries. Although
they are not all unique to developing countries,
together they build up a distinctive picture of how
CSR is conceived, incentivized, and practiced in
emerging economies.
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Corporate Social Responsibility Theories
Corporate Social Performance (CSP)
CSP theory has evolved from several
previous notions and approaches. CSP is
understood as ‘the configuration in the
business organization of principles of social
responsibility, processes of response to
social requirements, and policies, programs
and tangible results the company’s
relations with society. This theory
maintains that business, apart from wealth
creations, also has responsibilities for
social problems created by business or by
other causes beyond its economic and
legal responsibility.
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Shareholder Value Theory (SVT)
This approach, which currently is
presented as ‘shareholder value-
oriented’, usually takes shareholder
value maximization as the supreme
reference for corporate governance
and business management. Generally
‘share holder value-oriented’ goes
along with the Agency theory, which
has been dominant in many schools.
In the theory, owners are the principal
and managers are the agents.
This theory holds that only social
responsibility of business is making
profits and, as the supreme goal,
increasing the economic value of the
company for its shareholders. Other
social activities that companies could
engage in would only be acceptable if
there are prescribed by law or if they
contribute to the maximization of
shareholders value. This theory
underlies neoclassical economic
theory, primarily concerned with
shareholders utility maximization.
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Stakeholder Theory
In contrast to the ‘shareholder theory’ the ‘stakeholder theory’
takes into account the individual or groups with a stake in or
claim on the company.
In general sense, stakeholders are groups and individuals
who benefit from or are harmed by corporate actions.
Stakeholder theory was first presented as managerial theory.
‘The stakeholder concept’ provides a new way of thinking
about strategic management – that is, how a corporation can
and should set and implement direction.
By paying attention to strategic management, executives can
begin to put a corporation back on the road to success.
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Corporate citizenship
The term “Corporate Citizenship” was introduced
in the 1980s into the business and society
relationship mainly through practitioners.
This has been understood as an expression of
good corporate citizenship.
For decades, business leaders have been involving
their companies in philanthropic activities and
donations to the community where business
operated.
According to Carroll, ‘be a good corporate citizen’
includes ‘actively engaging in acts or programs to
promote human welfare or goodwill and ‘be a good
global corporate citizen’ is related to philanthropic
responsibility which reflects society’s expectations
that business will engage in social activities that are
not mandated by law nor generally expected of
business in an ethical sense.
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Definition
Corporate Social Responsibility (CSR) is a concept whereby
organizations consider the interests of society by taking
responsibility for the impact of their activities on customers,
employees, shareholders, communities and the
environment in all aspects of their operations
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Accountability
Does the case for Corporate Social
Responsibility apply to all kinds of company?
Companies have to be accountable for
Can benefits aggregate across an economy
or is it a zero-sum game?
Does it introduce inefficiency when scales up to
the level of the economy as a whole, as
classical economics would argue?
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What does it ask for?
Corporations are human endeavors, and all
human endeavors should benefit our society
and reflect our morals. They should provide
more than just investor return
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What does it ask for?
There are many ways that Corporations do benefit to society
They provide jobs They produce goods and
services that people want
They provide return to
investors
But . . .
Corporations in addition meet a higher moral standard:
• To minimize activities that harm life or the environment
• To be truthful
• To bring joy to life and reduce suffering, even if in very small and mundane ways
• To stop encouraging people’s craving and addiction
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Five maturity stages of CSR
5 MATURITY
STAGESOF
CSR
STRATEGIC MANAGERIAL
COMPLIANCE
DEFENSIVE
CIVIL
Deny practices, outcomes
or responsibilities
“It’s not our job to fix that”
Adopt a policy-based
compliance approach as a
cost of doing business
“We’ll do just as much as
we have to”
Embed the societal issue
into core management
processes.
“It’s the business”
Integrate the societal
issue into core
businesses processes
“It gives us a
competitive edge”
Promote broad industry
participation in
Corporate
Responsibility
“We need to make sure
everybody does it”
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Why to study?
• Study reveals Corporate Responsibility
is growing in decision-making. After the
accounting scandals, governments
have introduced new legislation new
codes of conduct have been developed
and corporate boards have been ‘re-
balanced’ to include more independent
members
• The over-riding goal in every case have
been to restore investor confidence.
However, these changes have also
brought with them the realization that
good governance is a key topic not only
for shareholders but also for a much
broader set of stakeholders, including
customers, employees, suppliers and
the wider community
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Why to study?
• That in turn made the term Corporate
Responsibility (CR) much more familiar
than ever before in board rooms across
the globe. The line is far from solid, but
CR can be seen as the extension of
governance beyond simple compliance
to embrace broader social values
• A recent survey from the economist
intelligence unit, produced in
cooperation with Oracle Corporation,
rveals that more business executives
and corporate investors are factoring
corporate responsibility into their
decision-making
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Factors responsible for CSR-development relationships
Awareness of uneven spread of the benefits
and costs of globalization reinvigorated the
debate about the role of MNCs, in
developing countries for sustainable
development. The debate as highlighted
above has often been acerbic and an
emotionally charged, and tends to be driven
by and concentrate on sensational and high
profile cases with limited analysis of common
themes and possible solutions
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Factors responsible for CSR-development relationships
A careful review of the literature reveals that there are at least three inter-related factors
that have been responsible for this situation
The complexity and absence
of con-sensual definitions for
the concepts of ‘CSR’ and
‘development’
The-over
emphasis
of corporate
responsibility
to the detriment
of reciprocal
responsibility
and the
importance
of context
Limited
analytical focus
in the research
agenda
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The complexity and absence of consensual definition
The concepts of “CSR’ and
‘Development’ are both complex and
difficult to concensually define, and are,
therefore, open to different
interpretations. The inability to secure a
common definition of CSR is said to
restrict its usefulness as an analytical
tool and a guide to decision makers
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Over-emphasis on Corporate Responsibility
Emphasis on whether CSR does or does not contribute
to development has led to a lack of reflexity in the
analysis of CSR-development nexus. Analyses very
often fail to problematize adequately the specific
contect of developing countries and ascertain how this
affects what constitutes corporate responsibilities and
the impact of Corporate CSR initiatives on development
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Limited analytical focus in the research agenda
Another shortcoming of existing
analyses has been the tendency to
focus too much an ‘outcome’ almost
to the detriment of ‘processes’ and
impact.
It is as if in their rush to findout
whether or not CSR meets its
advertised objectives, academics
feel they can afford to treat as
insignificant the question of how
business tries to neet these
objectives
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The foregoing analytical short comings
are by no means be only challenges
confronting the discourse on CSR
development linkage. The issues are
highlighted here largely because they are
crucial for the advancement of theoritical
development on the field of Corporate
Social Responsibility. It is important
because the most serious problem with
Social Responsibility doctrine is still at
the level of theory rathen than practice
Strengthening the critical perspective of the CSR-
development cycle
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Managing the problem of conceptual complexity
While the lack of common CSR
definition contraints the conceptual
usefulness of CSR as an analytical
concepts this should not be
exaggerated. Few will deny that
conceptual specificity and clarity will
facilitate intellectual thought and
communication. A number of
frequently used conceots are
intrinsically abstract and, therefire,
inevitably subject to diverse
interpretation
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The need of focus on reciprocal responsibility
CSR practices do not take place in vacuum.
Such initiatives are often under taken within
certain social, economic and cultural context
with diverse actors seeking to leverage their
interest. There is, therefore, the need for this
complexity to be appreciated not only during
data collection in the field but also in the
analysis of CSR-development linkage
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A change research focus in analyzing the CSR-development
IMPACT ON SOCIETY
Corporate
Social
Responsibility
So far emphasis on whether CSR contributes to
development says little about the impact of CSR
on society. Besides the issue of analytical
oversight, business impact on development is
difficult to measure. If the impacts of corporate
activity are difficult to assess at local level, then
these difficulties are compounded at larger
scales of analysis
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The implications of emerging issues and conclusions
The first is how to identify the appropriate balance of responsibilities
between the different actors and how they could beat the combined to
maximize the different actors and how they could best be combined to
maximize the contribution of business to sustainable development
There are two main emerging issues with regard to the critical
challenges facing CSR-development relationships
1
Similarly, by distinguishing between negative injunction and affirmative
duties, the business case argument ceases to be the corner stone of
the argument that drives CSR practices, especially as it relates to
negative injunction duties
2
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Abstract
Cultural values, traditions and local
knowledge are always have been central
to development, but frequently
overlooked. To some extent the role of
cultures in development is already
centralized, but there is a dilemma over
proclaiming what is appropriate and
inappropriate culture for responsible
development objectives
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Quote
“. . . unless economic development
has a cultural basis it can never lead
to truly lasting development. Culture
is ‘not’ something ‘to be taken into
consideration’. It is fundamental . . .
– UNESCO 1995:1
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The synergy
Cultural values,
traditions and
knowledge
Rural livelihoods
Synergy
Exploring synergy between cultures, traditional values and livelihoods
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Conceptualizing culture and livelihoods – analytical framework
Cultural norms, customs, behaviors and
attitudes are as they are elusive and
dynamic. Therefore, conceptualizing culture
has proven notoriously a difficult task
”Everything should be made as simple as
possible, but not simpler”
Albert Einstein
“Culture consists of patterns, explicit and implicit, of
and for behavior acquired and transmitted by
symbols, constituting the distinctive achievements of
human groups, including their embodiments in
artefacts; the essential core of culture of ‘traditional’
ideas and especially their attached values; culture
systems may, on the one hand, be considered as
products of action, on the other hand as conditioning
elements of further action”
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Conceptualizing culture and livelihoods – analytical framework
As a concept, livelihood has been
particularly useful in the field of
development, both analytically and
practically. Like culture, livelihood is also a
complex and all-encompassing concept that
is not restricted to the ecological, economic
or productive aspects of life
”Everything should be made as simple as
possible, but not simpler”
Albert Einstein
“Livelihood is never just a matter of finding or
making shelter, transacting money, getting food to
put on the family table or to exchange in the market
place. It is equally a matter of ownership and
circulation of information, the management of skills
and relationships”
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The pyramid of CSR
ECONOMIC RESPONSIBILITY
Be profitable
LEGAL RESPONSIBILITY
Obey the law
ETHICAL RESPONSIBILITY
Be Ethical. Do what is right.
Avoid harm
PHILANTHROPIC
RESPONSIBILITIES
Be a good corporate citizen
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CSR five areas
CSR
Human
rights
Workforce
Sustainability
and
environment
Corporate
governance and
accountability
Community
involvement
The company is accountable to shareholders,
government, employees, customers and community.
The hard part: setting targets that would make it
accountable to all these stakeholders
This takes in a huge area including
greenhouse gas emissions, water, paper,
degradation, supply chain impact, green
investment, salinity and agricultural
practices and cultural heritage
This covers areas like fair pay
and conditions, women and
minorities in management roles,
maternity leave and re-entry,
people with disabilities, mature
aged workers, disadvantaged
youth, long term unemployed
and indigenous communities. It
also includes occupational
health and safety, training and
work-life balance
Takes in supply chain
issues, fair trading,
alliances and partnerships
with certain governments
and the impact of products
This covers all sorts of
areas including meaningful
volunteering programs,
staff lending their skills to
the boards of non-profit
organizations and
philanthropy
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Five key issues that need to be addressed
Companies need to demonstrate CSR as a value
proposition to the board
They need to find ways of getting support from
shareholders and consumers
It is absolutely critical for the organization to
develop CSR audit tools so that they can place a
dollar value and conduct a cost-benefit analysis
of all their CSR expenditure
They need to approach it in a business-like way.
Good CSR should be good business
The CSR programs need to be run at a senior
level. There is no point fobbing it off on to the
corporate affairs or marketing departments
because all that does is create silos and prevent
any impact on the corporate culture
If organizations fail to do all of these, it becomes a meaningless exercise
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Demonstrates a commitment to society’s value and contribute to
society’s social, environmental, and economic goals through action
Insulate society from the negative impacts of company operations,
products and services
Share benefits of company activities with key stakeholders as well as
with shareholders
Demonstrate that the company can make more money by doing the
right thing
CSR business responsibilities
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Corporate Social Responsibility – Arguments For
Arguments For
• Addresses social issues business caused and
allows business to be part of the solution
• Protects business self-interest
• Limits future government intervention
• Addresses issues by using business resources
and expertise
• Addresses issues by being proactive
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Corporate Social Responsibility – Arguments Against
Arguments
Against
• Restricts the free market goal of profit
maximization
• Business is not equipped to handle social
activities
• Dilutes the primary aim of business
• Limits the ability to compete in a global market
place
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Corporate Governance and CSR
The wave of corporate scandals that ushered in the 21st century represented a complete
failure of the checks and balances that good corporate governance is intended to
provide. This failure of corporate governance affected more than the shareholders of
the companies involved.
Employees not only in the firms involved, but of others in the value chains found that
their work was either curtailed or disappeared. Charities that relied or corporate
philanthropy had their budgets reduced dramatically and local governments founds their
tax bases eroded, leadership to deep cuts in the services upon which community
residents depend. The Board of Directors is charged with the ultimate responsibility for
corporate governance.
They are tasked with designing mechanisms that protect shareholder interests and
putting those mechanisms into the place. Board composition is an area of corporate
governance that receives attention for the role of composition in providing governance
guidelines, as well for its role in firm financial and social performance.
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Corporate Democracy
Despite their heterogeneity in expectation, shareholders have much in
common. They are the owners of the company, and, as such, they
have ultimate control over the corporations. This control carries with
it the right to select the Board of Directors and to voice concerns over
corporate governance. The board then is charged with the response
for ascertaining that managers act in the best interest of the
shareholders.
Boards are charged with being accountable to
shareholders. Accountability is the answerability for one’s
actions or behaviors and it involves both process and
outcome accountability. The recent rash of corporate
scandals involved not only lack of transparency, which
would be bad enough, but also a conscious decisions to
deceive.
Another obstacle on the road to corporate
democracy is the issue of classified boards.
With a classified board, only a fraction of board
members are elected in any given years.
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Responsibility in the Supply Chain
Firms have consistently
sought to reduce costs
and increase strategic
flexibility by outsourcing
non-core activities
replacing hierarchies with
networks.
At the same time supply
networks have been
substituted for markets as
much of the world trade in
labor-intensive products.
The substitution of supply
networks for markets and
hierarchies has profound
implications for Corporate
Social Responsibility.
While companies are able to
maintain and extend their
economic control over supply
chains, outsourcing devolves the
legal obligations for social and
environmental impacts from the
lead company to suppliers.
On the other hand the
substitution of supply network
for market provides lead
companies with opportunities
for control and influence which
would not have been present
within market relationship.
Such governance structures
may become essential as
buyers become increasingly
involved in product
specification in the supplier.
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What is Globalization?
“Globalization” refers to the
relationship of culture, people
and economic activity in a
global scenario. Globalization
may contribute to economic
growth in developed and
developing countries through
increased specialization.
Globalization is a process of
interaction and integration among the
people, companies, and governments
of different nations. This process is
driven by inter-national trade and
investment. Globalization has impact
on economic development, culture,
environment, political systems and
human physical well being in
societies.
This current wave of
globalization has been driven by
policies that have opened
economies domestically and
internationally. Technology has
been the other principal driver of
globalization. Advances in
information technology, in
particular, have dramatically
transformed economic life.
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Traditional paradigm of Corporate Social Responsibility
COPORATE
RESPONSI-
BILITY
In 1993, Shell was confronted with a massive but non-violent
protest by the Ogoni people in Nigeria. Led by the writer Ken Saro
Wiwa, the Ogoni protested against the fact that the money for oil
extracted from their land disappeared into the pockets of corrupt
Nigerian Military junta while for them there was nothing left but a
wasted and highly polluted region.
When Saro Wiwa was arrested as a rebellion leader, human rights
groups urged Shell to use its influence on the Nigerian government
to prevent them from executing him. At that time, Shell Group
chairman Henkstroten argued that the corporation as an economic
actor had no license to interfere with political processes and Shell
preferred to remain politically neutral.
Whatever the scope of corporate responsibility in management
theory and practice, it implicitly builds upon the neoclassical
concept of a strict division of labor between political and economic
actors and domains. The corporation as a private sector should
focus on profit seeking and public problems should be dealt with by
state and its institutions.
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Towards a new paradigm
We have seen, in a globalized world the capacity of the state to regulate economic behavior
and to set the conditions for market exchange is in decline.
Therefore we have to consider the new form of political regulation above and beyond the
nation-state in order to re-establish the political order and circumscribe economic rationality by
new means of democratic institutions and procedures.
The stakeholder management approach as well as widely accepted attempt to justify CSR
with an empirical argument that social performance contributes to financial performance.
We see failures by state apparatus of all sorts. In addition, due to the individualization and
pluralization of values in social communities, the moral standards get fuzzy and lose their
power.
Current theories in CSR is still dominated by economic view of the firm and an instrumental
view of CSR projects.
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CSR in developing countries
The rationale for focusing on CSR in developing countries
as distinct from CSR in the developed world is fourfold:
Developing countries represent the
most rapidly expanding economies,
and hence the most lucrative growth
markets for business.
Developing countries are where
globalization, economic growth,
investment, and business activity
are likely to have the most dramatic
social and environmental impacts.
Developing countries are where the
social and environmental crises are
usually most acutely felt in the
world.
Developing countries present a
distinctive set of CSR agenda
challenges which are collectively
quite different to those faced in the
developed world.
Copyright © 2008 - 2012

Drivers of CSR in developing countries
INTERNAL
DRIVERS
EXTERNAL
DRIVERS
Political
reform
Cultural
tradition
Socio-economic
priorities
Governance
gaps
Crisis
response
Market
access
International
standardization
Supply chain
Investment
incentives
Stakeholder
activism
Copyright © 2008 - 2012

CSR in developing countries cannot be divorced from the socio-
political reform process, which often drives business behavior
towards integrating social and ethical issues.
POLITICAL
REFORM
There is a powerful argument that CSR in developing countries is
most directly shaped by the socio-economic environment in which
firms operate and the development priorities this creates.
SOCIO-
ECONOMIC
PRIORITIES
A particular relevance for developing countries is the fact that CSR
is often seen as a way to plug the ‘governance gaps’ left by weak,
corrupt, or under-resourced governments that fail to adequately
provide various social services
GOVER-
NANCE GAPS
Copyright © 2008 - 2012

Various kinds of crises associated with developing countries often
have the effect of catalyzing CSR responses. These crises can be
economic, social, environmental, health-related, or industrial.
CRISIS
RESPONSE
The flipside of the socio-economic priorities driver is to see these
unfulfilled human needs as an untapped market. CSR may also be
seen as an enabler for companies in developing countries trying
to access markets in the developed world.
MARKET
ACCESS
Despite the debate about the Western imposition of CSR
approaches on the global South, there is ample evidence that
CSR codes and standards are a key driver for CSR in developing
countries. Often, CSR is driven by standardization imposed by
multinationals striving to achieve global consistency among its
subsidiaries and operations in developing countries.
INTER-
NATIONAL
STANDARDI-
ZATION
Copyright © 2008 - 2012

The belief that multinational investment is inextricably linked with
the social welfare of developing countries is not a new
phenomenon. However, increasingly these investments are being
screened for CSR performance. Hence, socially responsible
investment (SRI) is becoming another driver for CSR in
developing countries.
INVESTMENT
INCENTIVES
In the absence of strong governmental controls over the social, ethical,
and environmental performance of companies in developing countries,
activism by stakeholder groups has become another critical driver for
CSR. In developing countries, four stakeholder groups emerge as the
most powerful activists for CSR, namely development agencies, trade
unions, international NGOs, and business associations.
STAKE-
HOLDER
ACTIVISM
Another significant driver for CSR in developing countries, especially
among small and medium-sized companies, is the requirements that
are being imposed by multinationals on their supply chains. This
trend began with various ethical trading initiatives, which led to the
growth of fair trade auditing and labeling schemes for agricultural
products sourced in developing countries
SUPPLY
CHAIN
Copyright © 2008 - 2012

While many believe CSR is a Western invention (and this may be
largely true in its modern conception), there is ample evidence that
CSR in developing countries draws strongly on deep-rooted
indigenous cultural traditions of philanthropy, business ethics, and
community embeddedness. Indeed, some of these traditions
go back to ancient times.
CULTURAL
TRADITION
Copyright © 2008 - 2012

CSR pyramid for developing countries
ETHICAL
RESPONSI-
BILITIES
Adopt voluntary codes of
governance and ethics
LEGAL
RESPONSIBILITIES
Ensure good relations
with government officials
PHILANTHROPIC
RESPONSIBILITIES
Set aside funds for corporate
social/community projects
ECONOMIC
RESPONSIBILITIES
Private investment, create
jobs and pay taxes
Copyright © 2008 - 2012

An ideal CSR pyramid
If we work towards an ideal CSR
Pyramid for CSR in developing
countries, improved ethical
responsibilities, incorporating good
governance, should be assigned the
highest CSR priority in developing
countries. Governance reform holds
the key to improvements in all the
other dimensions, including
economic development, rule of law,
and voluntary action.
Hence, embracing more transparent,
ethical governance practices should
form the foundation of CSR practice
in developing countries, which in
turn will provide the enabling
environment for more widespread
responsible business.
Copyright © 2008 - 2012

CSR in various regions – Asia
In a survey of CSR reporting in Asia, nearly three quarters of large
companies in India present themselves as having CSR policies and
practices versus only a quarter in Indonesia. Falling somewhere
between these two extremes are Thailand (42%), Malaysia (32%), and
the Philippines (30%). They also infer from the research that the
evolution of CSR in Asia tends to occur in three waves, with
community involvement being the most established form of CSR,
following by successive second and third waves of socially responsible
production processes and employee relations.
Copyright © 2008 - 2012

CSR in various regions – Africa
The literature on CSR in Africa is heavily dominated by South Africa
while other pockets of research exist for Côte D’Ivoire (e.g. Schrage
and Kenya, Tanzania, and Mali and Zambia. The other themes, such
as stakeholder engagement, social responsibility, and health (including
HIV/AIDS) will move up the agenda as CSR increasingly addresses
these issues in an African context. In practice, however, it is likely that
the economic and philanthropic aspects of CSR (rather than the legal
and ethical responsibilities) will continue to dominate CSR
conceptualization and practice in Africa.
Copyright © 2008 - 2012

CSR in various regions – Latin America
CSR in Latin America is the least covered of the developing country
regions, with the focus mainly on Argentina, Brazil and Mexico,
although Nicaragua and Venezuela also feature. The trend towards
increasing CSR in the region has been generally upward. De Oliveira
(2006) notes that the CSR agenda in Latin America has been heavily
shaped by socio-economic and political conditions, which have tended
to aggravate many environmental and social problems such as
deforestation, unemployment, inequality, and crime. Schmidheiny
(2006) frames this in a constructive way, claiming that CSR is seen by
many Latin Americans as the hope for positive change in the
face of persistent poverty, environmental degradation, corruption, and
economic stagnation. Araya’s (2006) survey of CSR reporting among
the top 250 companies in Latin America also gives some indication of
practices in the region. Overall, 34% of the top companies publish
sustainability information in a separate report, the annual report, or
both, mostly from the energy and natural resources sectors.
Copyright © 2008 - 2012

Nature of business
Critics of CSR debate a number of concerns related to it. These include CSR's relationship to the
fundamental purpose and nature of business and questionable motives for engaging in CSR, including
concerns about insincerity and hypocrisy. The objective of a corporation is to maximize their returns to
the shareholders. Miton Friedman had argued that since people can have social responsibilities,
corporations are only responsible to shareholders. Although there is an acceptance that the
corporations should obey the laws of the country whether they operate, they assert that they have no
other obligation to society. Some people perceive CSR as in-congruent with the very nature and
purpose of business, and indeed a hindrance to free trade. Critics of this argument perceive the free
market as opposed to the well-being of society and a hindrance to human freedom. They ascertain that
the type of capitalism practiced in many countries is a form of economic and cultural imperialism. A
wide variety of individuals and organizations operate in between these poles. CSR proponents point
out that CSR can significantly improve long-term corporate profitability because it reduces risks and
inefficiencies while offering a host of potential benefits such as enhanced brand reputation and
employee engagement.
Copyright © 2008 - 2012

Motives
Some companies like British Petroleum, McDonald's and British American Tobacco started CSR
programs. They argue that the main objective of starting these programs for commercial benefit by
building a good rapport with the government and public. They suggest that corporations which exist
solely to maximize profits are unable to advance the interests of society as a whole.
Another concern is that sometimes companies claim to promote CSR but simultaneously engage in
harmful business practices. For example, since the 1970s, the McDonald's Corporation's association
with Ronald McDonald House has been viewed as CSR and relationship marketing. More recently, as
CSR has become mainstream, the company has beefed up its CSR programs related to its labor,
environmental and other practices.
Similarly, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill, May and Keane ruled that it
was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and
conditions and true that if one eats enough McDonald's food, one's diet may well become high in fat
etc., with the very real risk of heart disease. According to critics, better governmental and international
regulation is necessary to make the companies behave in socially responsible manner.
Copyright © 2008 - 2012

Ethical consumerism
The rise of CSR is because of the popularity of Ethical
consumerism. When the global population increase the
demand for natural resources also increases
proportionately. Because of improvement in technology and
globalization, industrialization is also booming. Consumers
are also becoming more aware of the social and
environmental implications and they make purchasing
decisions related to ethical concerns.
Copyright © 2008 - 2012

Globalization and market forces
Whenever corporations grow through the process of globalization, they
have to deal with various problems and challenges that limits their growth
and profits. Government regulations, political influence, tariffs, and
environmental restrictions are various barriers which cost the corporations
million of dollars. The ethical issues are simply a costly hindrance, while
some companies use CSR methodologies as a strategic tactic to gain
public support for their presence in global markets, helping them sustain a
competitive advantage by using their social contributions to provide a
subconscious level of advertising.
Copyright © 2008 - 2012

Social awareness and education
Shareholders and investors themselves, through investing are
exerting pressure on corporations to behave responsibly.
Non-governmental organizations are also taking an increasing
role, leveraging the power of the media and the Internet to
increase their scrutiny and collective activism around corporate
behavior.
Copyright © 2008 - 2012

Ethics training
The need for ethics training in the
organization, required by the govern-
ment regulations, is an important driver
for changing the company’s behavior
and culture of the organizations.
It helps the employees to take ethical
decisions when the answer is unclear.
The important advantage is reducing
the likelihood of "dirty hands", fines
and damaged reputations for
breaching laws or moral norms.
Organizations also see secondary
benefit in increasing employee loyalty
and pride in the organization.
Caterpillar and Best Buy are
examples of organizations that have
taken such steps.
Copyright © 2008 - 2012

Laws and regulations
The government and other mediators have to ensure that the corporations
do not harm the economy as a whole. There are several issues surrounding
government regulation. Regulation in itself is unable to cover every aspect
in detail of a corporation's operations. Another issue is the financial burden
that regulation can place on a nation's economy.
Australian federal government's actions to avoid compliance with the Kyoto
Protocol in 1997, on the concerns of economic loss and national interest.
The Australian government took the position that signing the Kyoto Pact
would have caused more significant economic losses for Australia than for
any other OECD nation.
Copyright © 2008 - 2012

Crisis and their consequences
• Often it takes a crisis to precipitate attention to CSR.
• One of the most active stands against environmental management is the CERES
Principles that resulted after the Exxon Valdez incident in Alaska in 1989).
• Other examples include the lead poisoning paint used by toy giant Mattel, which
required a recall of millions of toys globally and caused the company to initiate new
risk management and quality control processes.
• In another example, Magellan Metals in the West Australian town of Esperance was
responsible for lead contamination killing thousands of birds in the area.
• The company had to cease business immediately and work with independent
regulatory bodies to execute a cleanup.
Copyright © 2008 - 2012

Stakeholder priorities
The stakeholders expect the corporation to address the social
and community issues which are related to them. The first
priority is interrelated business benefits that can be derived
from increased employee engagement (i.e. more loyalty,
improved recruitment, increased retention, higher productivity,
and so on). Key external stakeholders include customers,
consumers, investors (particularly institutional investors),
communities in the areas where the corporation operates its
facilities, regulators, academics, and the media.
Copyright © 2008 - 2012

Corporate social-responsibility

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