Chapter 2: Corporate Social Responsibility: A literature review
2.2. Evolution of CSR
2.2.4. CSR in the 21 st Century
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positive reputations are bound to attract the best employees, are perceived to provide better value and quality thereby enhancing customer loyalty and a greater stakeholder value.
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The Venn diagram shows four overlapping categories from the three core domains that were introduced by Caroll. The economic domain focuses on the activities that inherently produced positive financial benefits to the organisation; that is the maximisation of profits or the maximisation of shareholder value. The legal domain of the Venn diagram tends to the manner in which the organisation responds or conforms to its legal obligations. The organisation has a responsibility to comply with set laws within its jurisdiction and to avoid any litigation. The ethical domain pertains to the organisation's responsiveness to the ethics and standards presented to it within its domestic proximity as well as those on the global stage.
There are four overlapping domains, namely, economic ethical, legal ethical, economic illegal and economic/legal/ethical. Pure economical includes those activities that are undertaken purely for economic reasons and may, or may not, include illegal or unethical actions all in the best interest of the organisation. Examples of such activities include price fixing by British Airways in 2007, the collusion by construction companies in SA for the construction of six 2010 World Cup stadiums and the masking of diesel emissions data by VW in 2017. The pure economic approach is seen as a radical undertaking which attracts much criticism, reputational damage and massive litigation if discovered.
Pure ethical activities are those which, although ethical and morally correct, are neither economically beneficial to the organisation nor legally appropriate. These activities may be ethical but disregard the law and may also be financially detrimental to the organisation. Schwartz and Carroll (2003:515) cite American restaurant chain, Chick-fil-A as an example of an organisation that falls within the purely ethical domain. According to the authors, Chick-fil-A does not operate on Sunday due to religious beliefs. In so doing the organisation loses potential revenue from 52 Sundays annually but maintains its religious ground.
Purely legal activities are those which are considered to have no ethical or economic significance to the organisation. Schartz and Carroll (2003:515) cite organisations that reluctantly print cautions on their goods (for example tobacco product manufacturers), or shop owners who abide by holiday shopping regulations regardless of the losses they may incur as a result as falling within this domain.
Legal liability, according to Geva (2008:8), is determined by the absence of lawsuits and claims of impropriety, meaning that any legal obligation are limited to the "letter" of the law whereas the “spirit”
of the law is left for the ethical domain.
Economic/ethical activities include those that are motivated by both ethics and profits. It is assumed that ethical behaviour is an important part of achieving economic value. These activities are initiated by an organisation due to moral reasons but also hold significant financial dimensions.
Economic/legal in its strictest sense, is difficult to find. Legal considerations are usually ethical, so activities within the economic/legal domain are difficult to come by. Schwartz and Carroll (2003:517), however, give examples of opportunistic activities which are often considered unethical such as filing
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for bankruptcy in an attempt to avoid drastic action from creditors. These actions, according to Carroll and Buchholtz (2003:249), are considered profitable and legal but their ethical standing may be seen as unclear. Some MNCs fall within this category as their operations in developing countries pursue profit and the adherence to the lax legal framework in those nations whilst disregarding ethical considerations such as child labour and environmental degradation.
Economic/legal/ethical activities are those which take all three elements into consideration. Carroll and Buchholtz (2003:249) argue that this is the most desirable segment to trade in as it meets all three categories of responsibility. An analysis of Wal-Mart Canada’s decision to stop selling tobacco products in 1994 seems to fall well into this category. Wal-Mart (Saxton, 1994: par. 1) noted that it was voluntarily stopping the sale of tobacco products not only to conform to emerging regulations (legal) but also because the move was good for the organisation’s public image (economic) and also because it was failing to control purchases from minors (ethical).
Figure 2.3 below highlights examples of organisations that would fall into the different categories that have been discussed above. The model introduced by Schwartz and Carroll provided a more interlinked approach to understanding CSR, eliminating the hierarchal relationship that had previously been presented by Carroll in 1991.
Figure 2.3. Schwartz and Carroll’s Three-Domain Model of Corporate Social Responsibility with Corporate Examples
Source: Schwartz and Carroll (2003:519)
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The 21st century has been clouded by corporate scandals that have had a momentous bearing on corporate governance and ethics and subsequently shaped CSR thinking. For example, the 2001 Enron case, the American Insurance Group (AIG) scandal of 2005 and the 2008 Lehman Brothers financial crisis not only impacted the American financial landscape but had a significant impact on global business. Moon (2005, cited in Carroll and Shabana 2010:88) notes that although CSR and its strive for legitimacy continued, the emergence and focus on business ethics hampered the ongoing expansion and advancement of the social responsibility theme. Ultimately, the CSR concept created a different path to conducting business that incorporated achievements and value generation with proactively respecting organisational stakeholders (Perrini, 2005:92).
Moura-Leite and Padgett (2011:536) argue that CSR has irrefutably transformed into a valuable strategic question for organisations in the 2000s, since organisational changes have forced social and environmental worthiness towards a significant source of legitimacy. As a result, organisations are recognised as having social and legal obligations. This brief overview of the evolution of CSR should help with the appreciation of the concept as a business tool and help generate a wider comprehension of the theories and definitions that have been developed over the years. The evolution of CSR, as presented above, gives an overview of how the concept has developed, as well as the improvements that have emerged as a result of historical events and situations. Scholars and business practitioners have been instrumental in articulating the actions of different individuals and organisations over the years, documenting important milestones and initiatives to attract a more solid approach to social responsibility. This has generated interest from multiple stakeholders including governments, business, investors, consumers, non-governmental organisations and even institutions such as the UN. This brief overview of the evolution of CSR, therefore, helps to construct a solid conceptual foundation that builds up to an understanding of how its definition has evolved over the years.