Chapter 2: Corporate Social Responsibility: A literature review
2.6. CSR Theories
2.6.4. Ethical theories
2.6.4.3. Sustainable development and Triple Bottom-line
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The universal rights approach highlights the need for organisations to respect the global economic, social and environmental standards and expectations. This approach illustrates organisations’
impact on society and confirms the ethical expectations placed on them by different custodians of human rights. Although governments bear the primary role of enforcing global human rights, there is an increasing expectation and recognition that organisations ought to play a role as well.
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Figure 2.9. Triple Bottom-line: Trinity of sustainable development Source: (Elkington 1998:70)
The economic element pertains to the impact of the organisation’s operations on the economy and its ability to contribute towards growth, development and sustainability. The social dimension refers to conducting beneficial and fair business practices to labour, human capital and to the community (Elkington, 1998). The environmental element of TBL urges organisations to make sure that their operations do not negatively impact the environment. It is concerned with the efficient usage of non- renewable resources, reduction of greenhouse gas emissions and minimising the environmental impact of operations (Goel, 2010).
Paramount to sustainable development and TBL is the social accounting reporting which informs all stakeholders on the accomplishment of an organisation’s CSR goals on environmental, social and economic issues. An example of an organisation that has embraced sustainable development and TBL as a strategic part of its operations is The Body Shop. The natural cosmetics retailer is in the forefront of sustainable actions such as sustainable water usage, reduced energy consumption, responsible waste management as well as involvement of local communities in the sourcing of inputs. Its growing reputation attracts conscientious consumers, investors and job seekers who are attracted to organisations that place sustainability at the centre of their operations.
This approach builds confidence and benchmarks performance. Ultimately, stakeholders are able to digest essential reports of an organisation’s performance. With this in mind, any organisation that recognises the importance of sustainable development and TBL is set to reap considerable benefits such as improved financial performance, reduced cost, enhanced reputation as well as loyalty from customers and other stakeholders.
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The common good approach to CSR maintains that organisations, as members of society, must contribute towards the common good as they are a part of it (Garriga & Mele, 2004:62). It considers what is good for all members of society simultaneously and cannot be determined by what is acceptable for a few or even for just the majority.
Argandoña (1998:1095) argues that common good is not simply the sum of interests and “cannot be defined in statistical terms, or in terms of a country’s wealth, or the volume of public and private goods and services available to its citizens, or the level of consumption”. It is a societal condition which results from a collective or unifying principle. Zamagni (2020:55) argues that within the common good approach, the benefit an individual derives from being a member of a given community cannot be separated from that which other people benefit. As such, any organisation that utilises the common good approach to CSR ought to ensure that those actions benefit all members of society.
Although this approach resembles the stakeholder approach and sustainable development, its philosophical base is different, as argued by Garriga and Mele (2004:62). It is derived from classic Western philosophy as well as Christian social doctrine and is seen as a positive contributor to society. Some scholars argue that even though the notion is grounded in Western philosophy, it may be likened to the Japanese ideology of Kyosei and the Southern African concept of Ubuntu or Unhu.
These ideologies can best be defined as the spirit of togetherness, living and working together for the common good.
An organisation that accepts to be guided by the common good approach must practice fairness, avoid both repression and mistreatment, as well as consider the motivational structure of each member of a given community. An example of a common good initiative would be the universal provision of water to the communities.
Although ethical theories may be regarded as rigid, they are seen as purposeful and influential in determining and guiding CSR practices. They deal with duties that govern the behaviour of organisations and upon which CSR practices may be used as an engagement tool. From a global perspective, ethical theories provide uniformity and structure in the manner which organisations interact with society across the world.
These theories or approaches are grounded in mandatory and moral compliance. In this respect, MNCs operating in a developing country may be committed to a rigid adherence to obligation, duties and rights. Any actions beyond this will be guided by moral discretion as asserted by Windsor (2006:99) who further states that society still expects the MNC to operate ethically beyond mandatory legal compliance. It is therefore important for the MNC to appreciate all the legal requirements set
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by the host country as well as understand both international, and local moral standards, patterns or expectations.
Ethically sound organisations are more likely to attract like-minded investors, customers and employees, who are determined to drive global sustainability and human rights. Nicolaides (2018:290) argues that an organisation that operates “ethically is differentiated from others by the public at large well and is able to gain a strategic competitive advantage in the marketplace by not only communicating its values to its stakeholders but also by its actual behaviour”.
Ethical theories are conscious of the responsibility of an organisation in the attainment of social justice. As such, by attracting the right employees, an MNC operating in a country that has enacted an economic empowerment policy, is able to play a meaningful role in the transformation agenda.
For the MNC to maintain an ethical perspective, it needs to ensure that all its operations adhere to local and international standards as already mentioned. In addition, employees, investors and suppliers need to be conscious that, by virtue of being intrinsically connected with the organisation, they too remain under considerable CSR scrutiny. This puts pressure on stakeholders to maintain high ethical standards. This may also present a challenge to the organisation and its stakeholders as the latter may not be able to maintain the standards expected by the MNC which, as an international player, is already held to strict global standards. It, however, presents these stakeholders the opportunity to improve their standards and operations. This pressure that is placed on stakeholders may therefore have a positive impact on the development of the country if these CSR initiatives are implemented successfully.
A comparison of these theories illustrates the differences in opinions in the meaning of CSR.
Organisations, scholars and practitioners understand the concept from different perspectives and from different contexts. As demonstrated, CSR may mean the legal obligation to society; ethical social behaviour; opportunity to influence social, economic and political issues; or the altruistic desire to assist in the development of communities. These theories are concepts which guide CSR strategy.
They form the framework upon which organisations develop this strategy. According to Garriga and Mele (2004:52) these CSR theories maybe summarised as the “adoption to the environment (related to resources and economics), goal attainment (related to politics) social integration and pattern maintenance or latency (related to culture and values)”.
It may be difficult to accurately identify the theory that defines an MNC’s actions because most CSR efforts are organised around a specific circumstance, national environment or context; nonetheless, a pattern may be established over a lengthy period, exposing the organisation's real nature and interests. In the mining industry, for instance, the actions of an organisation that continues to handle its waste management recklessly, are more rooted in instrumental theory. Brin and Nehme (2019:22) argue that these organisations typically enforce CSR in a way that reflects only their shareholders' interests and ignores their community's interests.
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Vogel (2005:5) asserts that organisations do not always practise consistent moral behaviour and may behave better in some countries than in others depending on the local situation and expectations. Accordingly, Parson (1961) asserts that in a host country, an MNC may accept a particular theoretical position but make variations according to changing circumstances within the parameters of the fundamental structure. A juxtaposition of MNCs’ strategies at home and abroad is therefore important for a study such as this.
The contextualisation of theory into strategy offers guidance and meaning to CSR implementation.
These theories provide ideas and inspiration to CSR practitioners. The selected theory should resonate with the organisation’s vision and be responsible for its values and behaviour. The different approaches from these theories offer valuable arguments to explain and evaluate CSR strategy.
From these, an organisation is thus able to formulate and implement CSR strategies that are clear, focused and consistent. It is, however, difficult to validate the success of a particular theory in its entirety, but practitioners may find relevance in certain aspects of it. Regardless, these CSR theories strengthen the concept and outline the need for organisations to pay attention to extramural obligations.
Arguably, CSR theories share certain similar features and characteristics. These theories have similar objectives that is, to improve understanding and innovate approaches that will contribute to the better economic performance, environmental sustainability and social cohesion with all stakeholders. Importantly, only through an in-depth understanding of the available theories can an organisation fully appreciate its role within society and set up strategies that nurture the CSR activity to be implement.