MGT20006 Business and Society

Week 2
From Corporate Social Responsibility to Corporate
Citizenship

CRICOS 00111D, TOID 3059

Last Week

Introduced the changing

Business/Society
Relationship
Business boundaries shifting
beyond the organisation
itself and the desire for profit
Increased consideration of
sustainability and the triple-
bottom line.
Discussed the role and
importance of stakeholders
Discuss the role and power
of big business
This week

Introduce Corporate
Citizenship (CC) and
Corporate Social
Responsibility (CSR)
Explore development in
business ethics and the
culture of sustainability
Corporate Citizenship (CC) or
Corporate Social Responsibility(CSR)

The issues around increasing Corporate Social Responsibility

of business have been prevalent for decades.
– More recently the term “corporate citizenship” has extended debates
around the roles and responsibilities of business in society to include and
integrate Corporate Social Responsibility, Corporate Social Responsiveness
and Corporate Social Performance.

These terms are often used interchangeably, but

understanding the evolution of practice sheds light on why
society sees their importance.
Corporate Citizenship (CC) or Corporate
Social Responsibility(CSR)

Business responsibility or concern for the macro-environment in

which it operates in is under increasing scrutiny.

Community expectations regarding the responsibilities of

business now include consideration of complex issues such as:

 Global poverty
 Human rights
 Equality
 Climate change
 Etc…
From Corporate Social Responsibility
(CSR) to Corporate Citizenship

Over the last 50 years interest in CSR has increased significantly

In the US the notion of CSR aligned strongly with Adam Smith’s

traditional or classical economic thinking that the market is the
best means of determining society’s wants and needs
– “ …the invisible hand transforms self –interest into societal
interest”.

As society became more complex a legal model emerged,

followed by a social model and ultimately a stakeholder model
Important to understand the nature of
modification of the CSR model
Early engagement of business people with CSR
involved: Philanthropy and voluntary community Carnegie Library
obligations or contributions (e.g. contribute to
roads, railways, schools)
Washington DC.
From the late 19th century onwards business also
embraced community well-being through what
Carroll and Buchholtz call paternalism.

– What does this imply?

For example, Carnegie’s program of library

building in the US. (Over 2,500 libraries, mostly in
the United States)

Other forces were gradually changing attitudes to

business ethics and responsibilities in
increasingly complex business environments
including the role of government in regulation
The increasing role of government
By the 1930s there was a shift from laissez-faire economy with
minimal government intervention, to a more mixed economy,
with greater government involvement. This was due to various
factors:
– World depression (1930s)
• Mass unemployment
• Community demands for government to intervene to stimulate the economy
• Focus on increasing poverty and social impact

Similar situation occurred during the recent Global Financial

Crisis (2007-2009)
– Governments around the world were forced to act.
– Australian government offered $1000 cash handouts to stimulate
economy
Broadening of the CSR agenda

From the 1950s shift in thinking from broad

awareness of CSR to specific issues relevant to
social well-being, seen as an area of responsibility
for business.

Carroll suggests issues included issues such as:

corporate governance, product safety, employee
well-being and rights, advertising ethics, and global
CSR
Challenges of Globalisation:

It can be very difficult when corporations operate across various

countries and regions, all with different cultures and norms of
behaviour. Indeed many MNCs have operations in both developed
and developing nations, with different legal and cultural expectations
of business, causing governance challenges for organisations.

How has this been reflected by ANZ recently in relation to

financing sugar cane plantations in Cambodia?

See: Age/SMH Article

Broadening definitions of CSR: Carroll and
Buchholtz

CSR is seriously considering the impact of the company’s actions on

society
Social responsibility is the obligation of decision makers to take
actions which protect and improve the welfare of society as a whole
along with its own interests
The idea of social responsibility supposes that the corporation has not
only economic and legal obligations , but also certain responsibilities to
society which extend beyond these obligations

CRICOS 00111D
TOID 3059
Carroll and Buccholtz’s 4 part model of CSR
They suggest a pyramid that includes Economic, Legal, Ethical and
Philanthropic Responsibilities.

– Do you agree with the pyramid structure as a means of conceptualising corporate

social responsibility? Why?
So what is CSR? A recap …across ethics,
risk and business

University of St Gallen, Centre for Business Ethics

summarises What is Corporate Social Responsibility
(CSR)?

VIDEO (10 mins)

Key issues raised:

– Why is CSR described as a form of risk management?
– Why is CSR more than philanthropy?
– Is business ethics part of CSR? Explain.
 How has the academic and business world
responded?

Lydenberg (2005) notes that until the late 1970’s CSR was
not taken seriously by the investment and business
community, partly because Milton Friedman’s fierce
argument (1973) that CSR imposed inappropriate costs on
shareholders:

AND THAT SHAREHOLDERS WERE THE

PRIMARY STAKEHOLDERS IN A BUSINESS

Those with such a view still oppose the implementation

of CSR and argue it is not the responsibility of business.
So is there a case against CSR

Carroll and Buchholtz note that the case against CSR suggests managers
should not be concerned with CSR because:

Management is not equipped to understand social benefits of business. They

should focus on their areas of expertise …on finance and operations

Concerns that CSR will dilute the business purpose

Business already has enough power (remember last weeks information)

Asking business to assume social responsibility for their operations and the costs
they previously passed on to society could affect their profitability

Are these arguments valid?

Outlining the case for CSR

Vogel (2005) and Lee (2008) suggest that this thinking was
changing by the 1990s, because it was becoming apparent
that there was evidence of very good business advantage
and outcomes from adopting CSR.

Porter and Kramer (2011) were very influential in

identifying that new opportunities for business, stating in
the Harvard Business Review that the majority of business
will require taking account of the social needs and impacts
of its operations besides its economic and environmental
impact.

Continued on next slide..

The case for CSR (Carroll and Buchholtz 2015)
If business does not respond to Business has significant
society’s concerns about its impact resources including its
on the broader society, action will
management of talent to
be taken through consumer
spending, and through the ballot solve general societal
box. problems - many of these
broad social issues arise in
Significant shifts in public opinion the workplace
about businesses not only Proactivity is required to
focussing on profits for engage with others to find
shareholders, but also their
responsibilities for the well-being of
solutions. This is part of the
their workers and their business role and its
communities, as well as the engagement with
environment stakeholders.
The notion of Corporate Social Responsiveness
identifies the need for business pro-activity

Identifies the shift for business Think about BP oil spill as a form of

response and compare to TOM’s approach

from a passive form of
to CSR, or Marks and Spencer introducing
responsibility to more active
their Plan A
responsiveness
– Plan A is a strategic response, amongst other
Focus on motivation…active things, to support their customers become

willingness to take responsibility sustainable consumers, their research

suggesting their customers are increasingly
and contribute to society rather
concerned with this
than just respond when society
Much more dynamic and active
raises issues of concern. approach…working very well for many
organisations in terms of business growth
and profitability
Corporate Social Performance (CSP)
Many debates as to how we can measure corporate
social performance
For example, how to companies include
environmental and social performance measures?
The importance and challenge of monetising
broader business impact, by considering social and
environmental costs and benefits.
Evidence of a move to more conscious capitalism…?
Rethinking Sustainability
Source: Financial Times
Social Performance Evaluation and
Measurement
Benn and Bolton (2011) suggest that evaluating and measuring CSR can be
thought of as:
– “assessing how the firm’s impacts on its stakeholders lead to value creation or
destruction”

Weber 2008) that potential positive outcomes of CSR that can be measured
by the organisation are:
– monetary brand value
– customer attraction and retention
– reputation
– employer attractiveness
– employee motivation and retention.

Do you agree?
Would you choose an employer based on their reputation?
Corporate Citizenry: Embraces CSR, CSR and CSP

Matten and Crane (2005) suggest that the term Corporate Citizenry was
introduced by business players because it takes the notion of pro-active
social involvement by business to a dimension in which they can better
understand the advantages to business

Again the notion of “stakeholder responsiveness” is used as a critical

indicator of good or otherwise corporate citizenry (nationally and
globally).

Goddard (2005) suggests that businesses are now having such an impact
on communities that soon their profile as a corporate citizen will be very
important to their “licence to operate”.

What does this mean?

Corporate citizenry (CC) also being seen in
terms of corporate accountability
In the 1990s the term “triple
bottom line helped popularise
an understanding of the need
for business to account to a
constituency broader than
shareholders
Basic understanding that
business should consider
economic, social and
environmental capitals.
The Triple Bottom Line (TBL) and
corporate accountability
The TBL framework improves clarity around the
interface between business and society
Captures the whole set of values that a company
should address to minimise harm and create value
across all these sectors to create long term
shareholder value.
Consider recent and more sophisticated
developments around corporate accountability
building on the TBL that you looked at last week
with the Integrated Reporting initiative.
ESG Reporting

More recently ESG

Reporting has become a
popular approach to more
holistic sustainability
reporting
– This approach focuses on
Environmental, Social and
Governance matters.
Dunphy, Griffiths and Benn (2007)
provide a different perspective on
sustainability cultures
Their research suggests there are 5 stages that are
reflected in an organisation’s strategic approach to
sustainability culture and these are reflected in
terms of Human and Ecological Sustainability:

– See diagram on next slide…

  

Development stage alignment: Human and Ecological Sustainability

(adapted from Benn et al 2006)
We have considered:
Definitions of:
– Corporate Social Rersponsibility CSR
– Corporate Citizenship (CC),
– Corporate Social Responsiveness and
– Corporate Social Performance
The development of business attitudes towards social responsibility
The case for and against CSR
Approaches to evaluating corporate social performance
Sustainability cultures
Tutorial

What skills do this broader understanding of CSR

require from a manager?
Social capital building?
Choose initial groups of 4 to 5 for Group
Assignment.
Review the Documentary options
Read Westpac Sustainability Strategy document
Discuss where you would place Westpac in relation
to the table on slide 21?