Chapter 2: Corporate Social Responsibility: A literature review
2.2. Evolution of CSR
2.2.2. CSR in the 70s and 80s
The 70s and 80s heralded bold advances in the sphere of CSR through further studies and divergent approaches. Ideas were refined as more scholarly attention was paid to the concept of CSR.
Practical experiences by organisations also offered case studies which contributed to robust discussion within the field. Milton Friedman (1970), who had earlier been critical of CSR through his proclamation that an organisation’s sole objective was to maximize profits for its stakeholders, added to his theory by accepting that an organisation could exercise social activities if they were justified within its own self-interest. This gave rise to the instrumental theories of CSR which suggested that organisations should conduct corporate social initiatives as prescribed by law and overtly do what benefits the organisation.
Davis (1967:67) also buttressed his contribution by introducing “The iron law of responsibility”, which suggests that “those who do not take responsibility for their power, ultimately shall lose it”. This means that those who do not utilise power and influence in a way that society deems responsible will ultimately lose it as other groups will move in to accept those duties (Davis 1973:63). This means that the organisation's responsibility to society must be fulfilled for it to maintain credibility, respect and subsequently “business license”. The benefits of this license include ease of operation, improved labour relations and overall stakeholder cordiality.
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Research conducted by Sandra Holmes (1978) found that popular CSR priorities during this period revolved around pollution management, charity, community relations, the recruitment and advancement of minorities and educational support (Carroll, 2008:33). This was influenced by increased environmentalism, active consumerism, trade unionism and social partnerships.
Other notable contributors during this period included Ackerman (The Social Challenge to Business, 1975), Fitch (Achieving Corporate Social Responsibility, 1976) and Sethi (Dimensions of corporate social responsibility, 1975). At this stage, the concept was making convincing changes and these authors delved on society's increasing expectations on issues that affected them. Ackerman (1973), for example, looked at societal challenges of the time such as consumer safety, the recruitment of minorities, and women empowerment in the workplace, and demonstrated the need for organisations to adopt to the new social environment.
It is also important to highlight the contribution that may have elevated the field to new heights.
Carroll (2008:29) describes the contribution made by the Committee for Economic Development (CED) in the USA as ground-breaking. He states that the CED noted that the business operates by public consensus and its primary objective is to positively contribute towards societal needs; to the satisfaction of society (Carroll, 2008:29). This argument means that businesses need to acknowledge that they have a wider responsibility towards society which should be reflective and commensurate to the changing relationship between society and themselves. The CED declared that “business is being asked to assume broader responsibilities to society than ever before and to serve a wide range of human values. Inasmuch as business exists to serve society, its future will depend on the quality of management’s response to the changing expectations of the public”
(Committee for Economic Development, 1971:16). The CED, in its 1971 publication entitled “Social responsibilities of business corporations”, argued that businesses should play a larger role and that this should embrace or be reflective of the societal changes and expectations.
Carroll combined various thoughts and formulated a framework which was encapsulated into a four- part definition. He proposed that “the social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of an organisation at a given time”
(Carroll, 1979:50). A summation of this definition denotes that stakeholders expect the organisation to manufacture and sell their goods profitably and within the strict confines of the law whilst also behaving ethically and contributing to the welfare of society. To illustrate his work, Carroll developed a pyramid (Figure 2.1) to demonstrate a hieraical approach to social responsibility.
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Figure 2.1. Pyramid of Corporate Social Responsibility introduced by Carroll Source: Carroll (1991:32)
During the 80s, business and social interests came closer as organisations became more receptive to their stakeholders as discussed by Moura-Leite and Padgett (2011:532). In Carroll and Shabana's (2010:88) analysis of CSR during this period, more empirical research on topics such as corporate public policy was conducted than the refinement of definitions of CSR. This resulted in the development of alternate themes such as corporate social performance (CSP). An organisation's corporate social performance is viewed as an assessment of its CSR and corporate citizenship over time in comparison to its competitors. CSP provides a framework for organisations to assess whether their social responsibility and corporate citizenship efforts are effective in satisfying stakeholders.
Research was also conducted to find out how CSR impacts the financial performance of organisations. Arguments were made to the fact that CSR may help to improve the financial performance of organisations as attested by Drucker (1984). Profit maximisation, he concluded, is positively linked to economic responsibilities because CSR encourages companies to strike a balance between the expense and effect of meeting the expectations of stakeholders at an acceptable cost while also meeting financial obligations (Drucker, 1984).
Cochran and Wood (1984) were significant contributors to this school of thought and weighed in through their research that found a positive link between social responsibility and accounting performance. Moreover, Waddock and Graves (1997:18) suggest that financial success is also determined by strong social performance. Waddock and Graves (1997:18) hypothesised that CSP predicts as well as correlates with organisational financial performance and suggests the impact may either be positive or negative. In other words, improved financial performance may result in superior CSP whilst the converse that enhanced CSP may result in improved financial performance is also true.
29 2.2.3. CSR in the 90s
The evolution of CSR continued well into the 90s with the acceleration of globalisation and the information technology revolution. Frederick (2000:527) described this period as the era of global corporate citizenship. The proliferation of globalisation in light of the growing call for CSR meant that organisations had a growing obligation to ensure that their activities across the world were morally, socially and ethically sound. Carroll and Shabana (2010:88) observed that the “quest for the business case for CSR certainly became a dominant theme during this period, especially as the business community was seeking to rationalize and legitimise the activities it had begun and were continuing”.
The 90s also saw greater involvement from governments and other important non-governmental institutions. During this period, the United Nations (UN) emerged as one of the most prominent advocates of the ideals of CSR (Moura-Leite & Padgett, 2011:533). At the behest of the then UN Secretary General Kofi Annan, the global body encouraged greater engagement between governments and the private sector to achieve better and more coordinated effort in tackling societal challenges. The UN convened various important global conferences to discuss and to develop measures to promote sustainable development. This culminated in the adoption of important frameworks such as the Rio Declaration on Environment and Development in 1992, the Copenhagen Declaration to Promote Social Development and Social Justice in 1995 as well as the 1998 International Labour Organisation Declaration on Fundamental Principles and Rights at Work.
Furthermore, the UN launched the Global Compact in January 1999. This initiative, which shall be discussed in detail further on, was developed to promote CSR and to encourage private sector players to commit to the implementation of universal sustainability principles.
Large organisations and MNCs embraced CSR during this era of globalisation as research shows that their behaviour and attitude changed as illustrated by their reporting on corporate social initiatives. Research conducted between 1977 and 1990 by Fortune magazine, revealed that of the 500 companies investigated in 1977, fewer than half considered CSR as an integral part of their annual reports. Nevertheless, by the end of 1990, the magazine noted that approximately 90% of the Fortune 500 organisations acknowledged reporting on their CSR initiatives as one of the most important aspects of their organisational goals (Lee, 2008:53).
Some of the larger organisations whose CSR related reputations improved during the 90s included Coca Cola, Nike, Nestlé, UPS, McDonalds, TESCO, Toyota and Johnson & Johnson. These organisations proactively managed their reputation through strategic risk management which allowed them to perform increasingly well and to maintain goodwill across the globe. An organisation's reputation confirms its character and is an essential determinant on stakeholder perception and subsequently its success. Eccles et al. (2007:1) argue that organisations with strong
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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.