Chapter 2: Corporate Social Responsibility: A literature review
2.3. Definition of CSR
33
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.
34
Business Culture (2005:23) as well as from other renowned global institutions such as the World Bank, the European Commission and scholars such as Smith (2002), Drucker (1984) and Davis (1960) are listed below. These definitions are listed in chronological order thereby giving a view of how the concept has evolved and has been understood over time.
Bowen (1953)
“It refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”.
Davis (1960:70)
Social responsibility – “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest”.
Frederick (1960:60)
“Social responsibility in the final analysis implies a public posture toward society’s economic and human resources and a willingness to see that those resources are used for broad social ends and not simply for the narrowly circumscribed interests of private persons and firms”.
Committee for Economic Development (1971:11)
In Social Responsibilities of Business Corporations report: “…business functions by public consent and its basic purpose is to serve constructively the needs of society – to the satisfaction of society”.
Steiner (1971:164)
“Business is and must remain fundamentally an economic institution, but … it does have responsibilities to help society achieve its basic goals and does, therefore, have social responsibilities”.
Davis (1973:312)
“…refers to the firm’s consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm”.
“It is the firm’s obligation to evaluate in its decision-making processes the effects of its decisions on the external social system in a manner that will accomplish social benefits along with the traditional economic gains which the firm seeks” (1973:313).
Sethi (1975:62)
“…social responsibility implies bringing corporate behaviour up to a level where it is congruent with the prevailing social norms, values, and expectations of performance”.
35 Carroll (1979:500)
“The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organisations at a given point in time”.
Drucker (1984:62)
“But the proper ‘social responsibility’ of business is to tame the dragon that is to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth”.
Carroll (1991:43)
“The CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen”.
Smith (2002:42)
“CSR is the integration of business operations and values whereby the interests of all stakeholders, including customer, employees, investors, and the environment are reflected in the organisation’s policies and actions”.
World Bank (cited in Doane, 2005:217)
“Corporate Social Responsibility is a term describing a company’s obligations to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment”.
European Commission (2011)
“CSR is the process whereby enterprises integrate social, environmental, ethical and human rights concerns into their core strategy, operations and integrated performance, in close collaboration with their stakeholders, with the aim of maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large”.
The definitions given above point to a synonymous theme about what CSR is seen to be. That is that, over and above their own economic interest and those prescribed by law, organisations must acknowledge the need to participate in the development of society. According to Wood (1991:695),
“the basic idea of CSR is that business and society are interwoven rather than distinct and separate entities”. No business is an island, and this relationship exemplifies the co-reliance that exists between the two. As such, organisations are becoming open to the opportunities and challenges of social responsibility and attempt to redefine how they do business (Falkenberg, 2006:7).
CSR has been a difficult concept to define mainly because of its evolving nature. Godfrey and Hatch (2007:70) suggest that the continuous infusion of new ideas has resulted in debate and the overlapping of ideas without enhancing conceptual clarity. Rowley and Berman (2000:398) further
36
suggest that because CSR strategies may be industry and context specific, this makes the operationalisation of the concept rather difficult. According to the findings by O’Connor and Shumate (2010:530) CSR activities vary depending on the industry’s position in the value chain. Workers' safety, ethical business practices, and the protection of the environment are the key concerns in mining and other industries which are farther up the value chain. Industries that are closer to consumers on the other hand, tend to concentrate more on philanthropic and educational CSR practices.
Furthermore, as business practices and performances have improved over time, so too have social standards and expectations and this too has had an impact on CSR practices and consequently, its definition. As communities have evolved, so too have their understanding of their rights. Their values, attitudes, expectations and interests have changed, and this has led to a different approach as regards their engagement with business. Steiner (1972:18) agrees, stating that organisations exist to serve a certain social purpose, and that as that society matures, so too should the organisations' activities. Evolving stakeholder engagement means that organisations face increasing pressure to play a role in the social welfare of the communities in which they operate. The advent of globalisation and technology has helped to spread social and environmental consciousness. Tanimoto (2004:153) asserts that this has led to communities demanding more socially responsible actions from organisations in the form of safer products, better employment practices, increased environmental management awareness as well fairer engagement with developing nations. It is expected that society's expectations will evolve due to underlying forces such as changing social values and global movements.
Despite this, it is important to understand that organisations have a responsibility beyond their economic mandate and that business needs a well-operating community so as to function and succeed. Inevitably, the relationship between business and the community becomes intertwined and co-reliant. Consequently, the most appropriate definition of CSR for the purpose of this research is presented by McWilliams and Siegel (2001:117) who identify CSR as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law”. This definition demonstrates the importance of appealing to the organisation's investors whilst recognising its legal and social responsibilities. Morris (2015:2) adds that social good is an intentional action undertaken with the purpose of benefiting society's environmental, social, and economic well-being. Put simply, the organisation needs to establish shareholder value, fulfil legal obligations such as paying tax as well as cater for the welfare of the community in which it operates. From this, CSR is identified as a beneficial practice for both business and society.