Download - Liesbet Van Der Smissen - Master Thesis
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Hogeschool-Universiteit Brussel, Warmoesberg 26, 1000 Brussel
Tel: 02-210 12 11, Fax: 02-217 64 64, www.hubrussel.be
Faculty of Economics & Management
Commercial Sciences & Management Field of Study
Master of Science in Business Administration Programme
Internally organised master thesis
The value of Corporate Social Responsibility
for consumers
Master thesis by
Liesbet VAN DER SMISSEN
Submitted for the Degree of
Master of Science in Business Administration
Graduation Subject: International Relations
Supervisor: Christel CLAEYS
Academic Year: 2011 2012
Defended in: September 2012
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Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
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THE VALUE OF CORPORATE SOCIAL RESPONSIBILITY FOR CONSUMERS
Liesbet VAN DER SMISSEN
Degree Programme: Master of Science in Business Administration
Graduation Subject: International Relations
Type of Master Thesis: internally organized master thesis
Confidential: no
Summary
1. Problem definition and research question There are different views on the relationship between corporate social responsibility (CSR) and
business: by operating with a CSR perspective, proponents believe that companies are capable of
making more long term profit and increasing long term success, while the opponents argue that
CSR would only distract firms from the economic role of businesses, namely profit generation (Buhr
& Grafstrm, 2007). Both the proponents as well as the opponents present a list of sound rational
reasons do defend their viewpoint. Despite the ongoing debate as to whether or not social
responsibilities should be the concern of corporate decision makers, it cannot be denied that
corporate social responsibility has been increasingly present in todays world. Research indicates
that consumers care about it and that nowadays most consumers expect companies to have fairly
high levels of CSR (Boulstridge & Carrigan, 2000; Mohr, Webb, & Harris, 2001).
Consumers are very important stakeholders for companies and the success of a companys CSR
policy is to a large extent determined by these consumers. Hence, understanding them is critical.
Part of understanding these customers relates to trying to find out why they buy from companies
which incorporate social responsibilities into their business practices. Green and Peloza (2011)
believe that consumers only support firms that engage in CSR, if they receive some kind of value
from the exchange. Green and Peloza also point out that consumers usually dont view CSR as one
overall impression of a firm, but that they look instead to how each CSR activity can add to their
overall value proposition when making a purchase. This seems to indicate that consumers are still
more motivated by self-interest than by the interest of society, which is exactly what DAstous and
Legendre (2009) mentioned.
Consequently companies try to understand consumers through analyzing what kind of value(s)
these consumers derive from CSR, which brings us to the research question of this thesis:
What is the value of corporate social responsibility for consumers?
Before trying to understand the value consumers derive from CSR, it is important to know what
CSR is. Despite the significant amount of research, literature has not succeeded in providing one
generally accepted definition on CSR. The definitions offered in literature can be confusing and
sometimes even contradicting. Therefore taking a consumers point of view to analyze how they
see CSR and what the value is they derive from it, can be very useful.
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Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
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2. Research method In first instance, a literature study is carried out to gain understanding of the main theoretical
concepts related to the research and to examine to which extent existing literature already covers
the subject. Subsequently, a combination of quantitative and qualitative research is conducted to
investigate the opinions and behaviors of the respondents in relation to CSR and the value that
could be derived from it. Our research approach is mainly deductive as we start from a literature
review to find a problem definition and consequently design a research strategy to try and
formulate an answer to the research question and the separate research objectives (Saunders,
Lewis, & Thornhill, 2003). Our research combines elements of descriptive and explanatory research
to report on what CSR is and the value consumers derive from it (Saunders et al., 2003).
a. Justification of the research method As a result of the limited amount of available data regarding this topic, we felt the collection of
primary data to be useful. We reasoned that for some questions a qualitative approach was more
appropriate, whereas for other questions a quantitative approach was best. Saunders et al. (2003)
stress that it is often beneficial to combine quantitative and qualitative methods. Saunders et al.
(2003) also believe the deductive approach to be the most appropriate when dealing with a topic
on which there is a wealth of literature from which you can define a theoretical framework (p. 90),
which is certainly the case for CSR.
b. Collection and processing of the data Due to the limited time and resources, purposive sampling was used to select the respondents. Our
sample consists of men and women of different ages who shop at Bio-Planet in Ghent. We chose to
work with them because we believe them to be particularly informative for our research purpose.
This method of sample selection, however, limits the generalizability of our research.
The research is executed with the help of interview-administered questionnaires. Our research
consists of three parts. For parts one and three, the participants are given a written survey they
have to fill out, while part two consists of some oral questions, which Saunders et al. (2003) label
structured interviews. The questionnaire mainly consists of closed questions, but also includes a
few open questions. The closed questions consist of a variety of multiple choice questions and
some scale questions related to all of our research objectives.
The processing of the data is done using the statistical program SPSS and some of the tables are
constructed using Excel. We mainly use descriptive statistics, but we also execute a factor analysis
to analyze the different types of value consumers derive from CSR.
3. Findings and conclusions The results of this study show that consumers associate CSR most often with the environment. This
is not in line with Dahlsruds (2008) study which actually found that the environmental dimension
is the one the least present in all the existing definitions in literature. The fact that literature and
the view of the consumers are not in line, only adds to the confusion companies are already
experiencing.
We also discovered that consumers dont always recognize the CSR activities of companies as CSR
activities. The CSR activities in the product-related activities category seem to be the ones that the
respondents most often recognize, while the activities of the philanthropy category are recognized
the least. Consumers indirectly indicate that they find CSR important as the activities they perceive
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Hogeschool - Universiteit Brussel
Facu l te i t Economie & Management
Master Thesis - Summary
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as most important for companies to engage in, are also the ones they indicate as being an
expression of CSR. We felt that the level of awareness among respondents regarding the different
CSR activities of Bio-Planet was rather low.
We believe there to be five distinct types of value consumers can derive from CSR, being: social
value, emotional value, functional value, supply value and egocentric behavior value. The results
regarding the two latter types of value are rather weak, so further research will be necessary in
this area. We came to the conclusion that demographics are not a good predictor of the type of
value consumers derive from CSR. Also the level of knowledge people have of CSR and the
frequency of their shopping at Bio-Planet do not seem to have a significant impact on the value
they derive from CSR. Nevertheless, the results indicate that the higher the influence the CSR
policy has on a consumers decision to shop at Bio-Planet, the higher the social, emotional and
functional value they derive from it. The same goes for the importance of CSR: the more important
the consumer finds CSR, the higher the emotional, functional and social value they derive from it
and the lower the supply value. We have to be careful with these conclusions though because there
was no significant difference found between all the different groups.
Another important question which we also focused on in one of our research objectives is the
question whether the CSR policy of a company really has an influence on a consumers purchase
decision and behavior. The results regarding this issue are inconsistent and contradictory to a
certain extent. Whereas 82.7% of the respondents indicate indirectly that they consider CSR to be
their main motivator to shop at Bio-Planet, we question this result as it seems that a lot of
consumers indicated an offer of organic products as their main motivator to shop at Bio-Planet,
but they dont really seem to be aware that organic products are a form of CSR. Hence it is
arguable whether the CSR policy really influenced their decision.
We believe our research to contribute to a better understanding of the complex consumer
regarding the value they derive from CSR.
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Preface
Writing my master thesis was a very challenging and enriching experience. I would like
to thank a few people who helped me during the process. First of all I would like to thank
my supervisor, Christel Claeys, for her advice and support throughout the whole master
thesis process. Secondly I would like to express my gratitude to Philip Sterck, Ruth
Evenepoel and all the other people at Bio-Planet who made it possible for me to execute
my research at Bio-Planet in Ghent. I would like to thank them for the nice welcome, the
smooth cooperation and the sponsoring such that all respondents were offered a drink
while participating in my research. I would also like to thank my boyfriend, Maxime
Vandenbussche, and my mom, Marijke Gyns, who helped me with the collection of my
data. Without their help it would have taken a much longer time to collect the necessary
data for my research. Finally I would like to thank my family and friends for all the
support they have given me throughout the whole process of writing my master thesis.
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Table of contents
Overview of tables and figures ................................................................................ 3
List of appendices ................................................................................................. 3
List of abbreviations .............................................................................................. 3
Introduction ......................................................................................................... 5
PART I: LITERATURE REVIEW ............................................................................ 7
Chapter 1: Defining CSR ..................................................................................... 7
1.1 Introduction ............................................................................................. 7
1.2 The history of corporate social responsibility ................................................ 7
1.2.1 Prior to 1950 ...................................................................................... 7
1.2.2 The 1950s .......................................................................................... 8
1.2.3 The 1960s .......................................................................................... 8
1.2.4 The 1970s .......................................................................................... 9
1.2.5 The 1980s .......................................................................................... 9
1.2.6 The 1990s ........................................................................................ 10
1.2.7 The 21st century ............................................................................... 11
1.3 To whom is an organization expected to have responsibility? ........................ 12
1.4 Definitional clarity of CSR ......................................................................... 13
1.5 Synonyms .............................................................................................. 15
1.5.1 Business ethics ................................................................................. 16
1.5.2 Corporate citizenship ......................................................................... 17
1.5.3 Corporate accountability .................................................................... 17
1.5.4 (Corporate) sustainability................................................................... 17
1.6 Conclusion ............................................................................................. 18
Chapter 2: Different views on CSR ................................................................... 19
2.1 Introduction ........................................................................................... 19
2.2 Different views on CSR ............................................................................ 19
2.3 Proponents ............................................................................................. 19
2.3.1 Arguments in favor of CSR ................................................................. 20
2.4 Opponents ............................................................................................. 22
2.4.1 Arguments against CSR ..................................................................... 24
2.5 The link between corporate social performance and corporate financial
performance ........................................................................................... 25
2.6 The emergence of a new view .................................................................. 27
2.7 Conclusion ............................................................................................. 27
Chapter 3: CSR from a companys point of view ............................................... 29
3.1 Introduction ........................................................................................... 29
3.2 Importance of, and motivation for incorporating CSR ................................... 29
3.3 Return on CSR ........................................................................................ 30
3.4 Different types of CSR activities ................................................................ 32
3.5 Conclusion ............................................................................................. 33
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Chapter 4: CSR from a consumers point of view .............................................. 35
4.1 Introduction ........................................................................................... 35
4.2 Importance of CSR for consumers ............................................................. 35
4.3 The value of CSR for consumers ............................................................... 36
4.4 Conclusion ............................................................................................. 40
Chapter 5: Identifying and targeting the ethical consumer .............................. 41
5.1 Introduction ........................................................................................... 41
5.2 Identifying and targeting the ethical consumer ........................................... 41
5.3 Conclusion ............................................................................................. 43
PART II: RESEARCH.......................................................................................... 45
Chapter 6: Research design .............................................................................. 45
6.1 Introduction ........................................................................................... 45
6.2 Development of the research question ....................................................... 45
6.3 The concretization of the research question through research objectives ........ 46
6.4 The research design ................................................................................ 48
6.4.1 What will be observed? ...................................................................... 48
6.4.2 Who will be observed? ....................................................................... 48
6.4.3 How will the observation take place? ................................................... 50
6.4.4 Where will the data collection take place? ............................................ 51
6.4.5 When will the data collection take place? ............................................. 51
6.4.6 Data processing ................................................................................ 52
6.5 Expressing the research objectives in operational terms .............................. 52
6.6 Conclusion ............................................................................................. 55
Chapter 7: Analysis of the research results ...................................................... 57
7.1 Introduction ........................................................................................... 57
7.2 Description of the respondents ................................................................. 57
7.3 Analysis of the research results ................................................................ 59
7.4 Conclusion ............................................................................................. 67
Chapter 8: Discussion of the research results .................................................. 69
8.1 Introduction ........................................................................................... 69
8.2 Discussion of the research results ............................................................. 69
8.3 Contribution to science and practice .......................................................... 77
8.4 Limitations and future research ................................................................ 77
8.5 Conclusion ............................................................................................. 79
General conclusion .............................................................................................. 81
Reference list ..................................................................................................... 83
Appendices ......................................................................................................... 93
A. Questionnaire ......................................................................................... 93
B. Tables concerning the description of the respondents ................................ 103
C. Tables concerning the analysis of the research results ............................... 104
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Overview of tables and figures
Table 1: The multi-faceted customer value of CSR activities ..................................... 39
Table 2: frequency table of the different age groups in our sample ............................ 57
Table 3: frequency table presenting how often the respondents shop at Bio-Planet ...... 58
Table 4: frequency table presenting to which extent these activities are considered
to be an expression of CSR ...................................................................... 60
List of appendices
Appendix A: Questionnaire
Appendix B: Tables concerning the description of the respondents
Appendix C: Tables concerning the analysis of the research results
List of abbreviations
BSR Business for Social Responsibility
CED Committee for Economic Development
CFP Corporate Financial Performance
CS corporate sustainability
CSP Corporate Social Performance
CSR Corporate Social Responsibility
CSV Creating Shared Value
ICSD Interdepartmental Commission for Sustainable Development
SR Social Responsibility
WCED World Commission on Environment and Development
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Introduction
The fact that corporate social responsibility has been increasingly present in todays
society cannot be denied (Carroll, 2008). Despite the continuous debate as to whether or
not firms should have social responsibilities, research indicates that consumers seem to
care about CSR and therefore it is in the best interest of the company to do so as well
(Boulstridge & Carrigan, 2000; DAstous & Legendre, 2009) We say seem to care
because the concept of CSR is characterized by a significant attitude-behavior gap
(Roberts, 1996; Simon, 1995). Nevertheless, studies indicate that nowadays most
consumers expect companies to have fairly high levels of CSR (Mohr, Webb, & Harris,
2001).
Even though consumers indicate they expect fairly high levels of CSR, this does not
clarify what exactly they expect from companies as the concept of CSR is not clearly
defined in literature. Despite the significant amount of research, literature has not
succeeded in providing one generally accepted definition on CSR (Clarkson, 1995). The
lack of a general definition leads to confusion, but also hinders academic debate and
corporate implementation. This makes it harder for companies to create effective and
efficient CSR programs (McWilliams, Siegel & Wright, 2006). Mohr et al. (2001) and
Riddleberger and Hittner (2009) dont believe this to be the only problem. They also
point out that there has been little research on what the public expects. As a result
those who run corporations lack a clear understanding of what the public wants from
them and how far they are expected to go toward helping their communities (Mohr et
al., 2001, p. 45).
Understanding consumers is crucial for companies as they are considered major
stakeholders for the company. The question today is also no longer whether companies
should incorporate CSR into their activities, but rather how they should do this.
Marketers try to target the consumers who take into account CSR in their purchase
decisions and purchase behavior. If companies go through the lengths of incorporating
CSR, they want to make sure that the right consumers, the ones that care, are made
aware of this and know about it. But to be able to target these consumers they need to
understand why consumers buy from companies which engage in CSR. Green and Peloza
(2011) believe that consumers only support firms that engage in CSR, if they receive
some kind of value from the exchange. This seems to indicate that consumers are still
more motivated by self-interest than by the interest of society (DAstous & Legendre,
2009).
With this thesis we want to contribute to a better understanding of the complex
consumer. We want to take the consumers point of view and increase understanding of
on the one hand, what CSR actually means to them, given the definition in literature is
unclear, and on the other hand the value they derive from CSR. We will use a
combination of a literature review and research, in which we collect primary data, to
formulate an answer to the research question What is the value of corporate social
responsibility for consumers? and to the research objectives we will stipulate
throughout this thesis.
In first instance, a literature study is carried out to gain understanding of the main
theoretical concepts related to the research and to examine to which extent existing
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literature already covers the subject. Our literature review consists of five chapters. A
first chapter focusses on defining CSR. We provide a short history on CSR, talk about to
whom an organization is expected to have responsibility, talk about the definition(s) of
CSR and point out some synonyms which are often used. In a second chapter we deal
with the different views on CSR. We list some proponents and opponents and discuss the
arguments which both groups use to defend their viewpoint. We also briefly discuss the
link between social performance and corporate financial performance and talk about the
emergence of a new view. In the third chapter we look at CSR from a companys point of
view, whereas we do the same in chapter four, but then from a consumers point of
view. In both chapters we will analyze the importance of CSR for the company/consumer
and we will talk about the value both companies and consumers derive from it. A last
chapter briefly deals with identifying and targeting the ethical consumer.
Chapters six, seven and eight deal with our research. In chapter six we will outline the
research design, in chapter seven we analyze the research results, and chapter eight
focuses on the discussion of these results.
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PART I: LITERATURE REVIEW
Chapter 1: Defining CSR
1.1 Introduction
In this first chapter we try to understand what corporate social responsibility is and
where it comes from. We will start off with some history of CSR. In a next section we will
discuss the different views on to whom an organization is expected to have
responsibility. Afterwards we will devote some time to the definitional aspect of CSR and
then at the end of the chapter we will shortly look at some concepts which are often
used interchangeably to talk about corporate social responsibility.
1.2 The history of corporate social responsibility
Corporate social responsibility is a popular topic nowadays. Its phenomenal rise to
prominence in the 1990s and 2000s suggests that it is a relatively new area of academic
research (Crane, McWilliams, Matten, Moon, & Siegel, 2008, p. 3). Although it is true
that CSR is mainly a product of the second half of the twentieth century, the roots of the
concept, as we know it today, have a long and wide-ranging history (Carroll, 2008). The
business communitys concern for society is certainly not a new thing and can be traced
back for centuries (Carroll, 2008).
CSR is originally considered an American concept (Craps, 2012a). It came into existence
at the beginning of the 20th century and was at that time mainly linked to philanthropy.
Even though the CSR concept did not originate in Europe, social entrepreneurship, which
can be considered a form of CSR, exists even longer, already since the industrial
revolution (Craps, 2012a).
1.2.1 Prior to 1950
There is not a lot of literature on CSR found prior to 1950, but this doesnt mean that
this period was lacking social initiatives and practices. During the Industrial Revolution
there was a strong trend of emerging businesses, whose main concern during the mid-
to-late 1800s was the employees and more specifically how to make them more
productive workers (Carroll, 2008). In that time, but also still nowadays, it is often
difficult to distinguish between what organizations are doing for social reasons and what
they are doing for business reasons (Carroll, 2008).
In the late 1800s philanthropy, or corporate contributions, gained importance. Here it
was difficult to distinguish whether this was actually individual philanthropy or business
philanthropy. According to Carroll (2008) corporate contributions have assumed a
central role in the development of CSR since the beginning of the time periods being
examined (p. 23). Before the 1900s corporate contributions were perceived in a more
negative light as they were being seen as giving away stockholders assets without their
approval (Carroll, 2008). However, later on, they were perceived as a positive thing and
something a company should do.
Carroll (2008, pp. 21-23) talks about several initiatives taken by business owners and
entrepreneurs, prior to 1950, in which they use their own money to support social
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causes. One of these initiatives is for example providing money for various community
projects (Carroll, 2008). Many of those initiatives would probably be categorized as
socially responsible nowadays. It is apparent that even prior to 1950 some degree of
social responsibility was being taken on by companies though they were never called
social responsibility (Carroll, 2008, p. 22). Even though there is evidence of socially
responsible business behavior, it was definitely not a wide-spread practice in those days.
It is important to keep in mind that in those days the term social responsibility (SR) was
more often used than corporate social responsibility (CSR). According to Carroll this use
of SR instead of CSR may have been because the age of the modern corporations
prominence and dominance in the business sector had not yet occurred nor been noted
(p. 25).
Whereas the largest part of the period prior to 1950 was dominated by concern for how
to make the employees more productive, starting in the 1920s-1930s corporate
managers slowly started taking on responsibility to balance competing claims from other
stakeholders (Carroll, 2008). Hay and Gray (1974) claim this to be a result from some
structural changes both in business institutions as well as in society. This change in
mindset among business executives, called businessmen in those days, is made tangible
in the results of a study of Fortune magazine in 1946, Carroll (2008) refers to. One
question these businessmen were being asked was whether they were responsible for
consequences of their actions in a sphere wider than that covered by their profit-and-
loss statements (Carroll, 2008, p. 24). Of the respondents, 93.45% said yes. This
result seems to support the idea that the mindset among business leaders was changing.
1.2.2 The 1950s
The 1950s are the time in which the first important literature on CSR started to appear
(Carroll, 2008). According to Carroll (2008) Howard R. Bowens publication of his
landmark book Social Responsibilities of the Businessman (1953) best marks the
beginnings of the modern period of literature on this subject (p. 25). Bowen was also
the first one to formulate a definition on CSR, which we will discuss later in more detail,
in the section definitional clarity of CSR.
Frederick (2006) summarizes the meaning of CSR in the 1950s by three core ideas. A
first idea is that business managers should consider themselves as trustees of the public
interest. A second one is the idea of business managers balancing competing claims to
the resources of the corporation. A third and last idea is the acceptance of philanthropy
as a manifestation of business support of good causes (Carroll, 2008, p. 26).
The 1950s were characterized by a lot of talk about CSR, but not a lot of action. Carroll
(2008) talks about a period in which attitudes were changing and business executives
were learning to get comfortable with talking about CSR, but he also points out that
there were very few corporate actions other than philanthropy.
1.2.3 The 1960s
This period is similar to the previous one as it was characterized by more talk than action
regarding CSR and as philanthropy continued to be the most noticeable manifestation of
CSR (Carroll, 2008). However, according to Carroll (2008) the 1960s marked a
momentous growth in attempts to formalize or more precisely state what CSR meant
(p. 27). Some important contributors of that time include Keith Davis (1960), William C.
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Frederick (1960) and Clarence Walton. (1967) Each of them set forward their own
definition on CSR and their works contributed significantly to the CSR literature.
1.2.4 The 1970s
The 1970s are an important period for the development of CSR literature. Carroll (2008)
labels it a period of CSR acceleration. Some of the most important contributors of that
time include Morrell Heald (1970), Harold Johnson (1971), George Steiner (1971),
Richard Eels and Clarence Walton (1974) and many others.
Carroll (2008) believes that a ground-breaking contribution to the concept of CSR came
from the Committee for Economic Development (CED) in its 1971 publication, Social
Responsibilities of Business Corporations (p. 29). The CED (1971) started from the
observation that business functions by public consent and its basic purpose is to serve
constructively the needs of society to the satisfaction of society (p. 11). The CED also
pointed out that the social contract between business and society was changing
substantially in a way that business is being asked to assume broader responsibilities to
society than ever before and to serve a wider range of human values (p. 16).
The CED made a distinction between three kinds of social responsibilities, which it
visualizes by using three concentric circles. The inner circle refers to the basic
responsibilities for the efficient execution of the economic function. The intermediate
circle represents the responsibility for the execution of the economic function, but with
respect for changing social values and priorities. Lastly, the outer circle refers to the
newly emerging responsibilities that business should assume.
This publication, regarding the CEDs view of CSR, was considered especially influential
because the CED was composed of business people and educators. Therefore the
publication reflected an important practitioner view of the changing social contract
between business and society and businesses newly emerging social responsibilities
(Carroll, 2008, p. 29).
We previously mentioned that SR was more often used than CSR in the early days.
However, in the 1970s increasing reference is being made to corporate social
responsibility (Carroll, 2008). The 1970s are also the period during which many articles
began suggesting a managerial approach to CSR. A managerial approach to CSR refers
to the idea of applying traditional management functions to deal with CSR issues
(Carroll, 2008).
This period is still characterized by more talk from an academic side than action at
company level. But slowly legislative initiatives start to emerge dealing with certain
aspects of CSR. These initiatives mandate that companies create organizational
mechanisms for complying with federal laws dealing with the environment, product
safety, employment discrimination, and worker safety (Carroll, 2008, p. 34).
1.2.5 The 1980s
Up till the 1980s there had been a strong focus on the definitional aspect of CSR. Many
academics tried to formulate new or refined definitions (Carroll, 2008). The 1980s,
however, became known as the period in which research became more important and as
the period in which writings emerged on alternative or complementary concepts and
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themes such as corporate social responsiveness, corporate social performance, public
policy, business ethics, and stakeholder theory/management to mention a few (Carroll,
2008, p. 34). We will not further explore these concepts, even though they are linked to
CSR, as they fall outside our scope of focusing on CSR. However, later on we will shortly
discuss some of them when talking about synonyms of CSR.
These writings about alternative or complementary concepts did not mean that the
interest in CSR diminished. The CSR debate continued throughout the 1980s. Thomas M.
Jones (1980) was one of those writers who participated in the debate in those days. One
of his major contributions is his emphasis on CSR as a process instead of as a set of
outcomes (Jones, 1980). He believes that corporate behaviour should not, in most
cases, be judged by the decisions actually reached, but by the process by which they are
reached (Jones, 1980, p. 65).
Jones (1980) also already pointed out in 1980 that one of the arguments used by those
opposed to CSR is that social responsibility is too vague to be useful (p. 60). This
argument is still present in the debate regarding CSR which takes place nowadays.
The 1980s are also the period in which research started taking place on the relationship
between corporate social responsibility and firm profitability (Carroll, 2008). This
relationship continued to be debated over time and is still controversial nowadays. We
will discuss it in chapter 2.
1.2.6 The 1990s
During the 1990s the trend of the 1980s continued as a lot of attention was given to
concepts complementary to CSR. Carroll (2008) states that the CSR concept served as
the basepoint, building block, or point-of-departure for other complementary concepts
and themes, many of which embraced CSR thinking and were quite compatible with
CSR (p. 37). The prominent themes of that period include corporate social performance
(CSP), stakeholder theory, business ethics, sustainability, and corporate citizenship1
(Carroll, 2008).
The 1990s were also characterized by a considerable expansion of philanthropy. In those
days companies also evolved in how they were dealing with CSR. It was the period in
which we start to see management positions solely dedicated to corporate giving on the
organizational charts of major companies. Carroll (2008) mentions a few examples:
managers of corporate giving, corporate social responsibility, and public/community
affairs (p. 38).
These management positions, dedicated to corporate giving, contributed to another
trend of the 90s, which still continues today, namely the appearance of distinct
companies which have developed outstanding reputations for CSR practices. Despite the
skepticism regarding the nature of some of their practices, certain companies are often
associated with having good CSR practices. A few examples include The Body Shop, Ben
& Jerrys, and Johnson and Johnson (Carroll, 2008).
1 Here again we will not further explore these concepts as they fall outside our scope of focusing on CSR.
However, later on we will shortly discuss some of them when talking about synonyms of CSR.
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Carroll (2008) believes that the most significant advances to CSR in this period came in
the business practice territory and more specifically due to the creation of a non-profit
organization called Business for Social Responsibility (BSR) in 1992. BSR was the first of
its kind and was founded by a group of entrepreneurs and businesses who sought to
create an organization that could help companies act in a more responsible manner
(Business for Social Responsibility [BSR], 2012a, how and when was BSR founded). The
founders wanted to bring together on the one hand the businesses which still had to
embrace corporate responsibility and on the other hand the organizations promoting
corporate responsibility (BSR, 2012a). The official mission on the website of BSR says
the following: our mission is to work with business to create a just and sustainable
world (BSR, 2012b, what is the mission of BSR). BSR is still active today and while their
mission hasnt changed throughout their 20-year history, how they pursue their mission
evolves continuously.
1.2.7 The 21st century
During the 21st century the emphasis, so far, remains on empirical research of CSR and
into related topics instead of on theoretical contributions to the concept, which
dominated a few decades before (Carroll, 2008). This emphasis however does not mean
that there has been no evolution on the conceptual front the past decade. Writers
continued their work on definitions, concepts, frameworks, approaches, Carroll (2008)
believes that the interest and growth of CSR has been most evident in the European
Community (p. 41).
From a business-point-of-view this period is characterized by an increased interest in
CSR best practices. Carroll (2008) refers to a book, targeting a business audience,
written by Kotler and Lee (2005) cataloguing these best practices. In their book the
authors present 25 best practices which could be very valuable in assisting companies
with their own CSR programs. Among the best practices are examples from The Body
Shop, Ben & Jerrys, Johnson and Johnson, and many more (Kotler & Lee, 2005). A lot of
these companies already developed an excellent reputation for CSR practices in the 90s,
as mentioned before.
The growing interest of businesses in CSR has been driven by a number of factors. One
of those factors is a reaction to the scandals, during the 21st century, such as Enron and
Worldcom, which led to diminished public support for businesses. Another factor is the
increased pressure from non-governmental organizations and trade unions to respect
human rights and adopt good practices. A last factor is the belief that there is a
business case2 for ethical management (corporate social responsibility, 2008, para. 1).
Especially since the beginning of the 21st century, the CSR movement has been a global
phenomenon. But even though its a global phenomenon, there are important inter- and
even intra-regional variations in practice (Carroll, 2008). There appears to be some
divergence of commitment and management practices. Carroll (2008) also points out
that some initiatives are more voluntary than others as some companies have been
under legal and regulatory pressure to adopt them (p. 41).
2 This refers to the justification of ethical management in terms of its contribution to business performance (Business case, 2008)
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Nonetheless, 2012 is not the year in which the development of CSR stops, CSR is still a
developing field of research. The delineation of the field is not easy as it is interrelated
with so many other concepts. Carroll (2008) states the following: the field of
scholarship that CSR represents is a broad and diverse one, encompassing debates of
many perspectives, disciplines and ideological positions; it is located at an intersection of
many contributing disciplines (p. 7), which clearly makes it hard to study.
1.3 To whom is an organization expected to have responsibility?
The different views on to whom an organization is expected to have responsibility have
not been constant over time. Van Marrewijk (2003) acknowledges a sequence of three
approaches to CSR that has been referred to by various authors in academic literature.
Each approach includes and transcends the previous one and tries to formulate the
subject of responsibility for the organization (Van Marrewijk, 2003).
A first approach is the shareholder approach. Van Marrewijk (2003) quotes Friedman
(1962), who says that according to the shareholder approach the social responsibility of
business is to increase its profits (p. 96). This approach starts from profit maximization
as an ultimate goal and believes that socially responsible activities dont belong to the
domain of organizations but are a major task of governments (Van Marrewijk, 2003, p.
96). This approach states that organizations should only be concerned with CSR to the
extent that it contributes to the profit maximization goal of the business (Van Marrewijk,
2003).
A second approach is the stakeholder approach. This approach indicates that an
organization should not only be accountable to its shareholders, but that it should also
take into consideration the interests of all its stakeholders which might be affected by
the organization trying to achieve its objectives (Van Marrewijk, 2003). Under this
definition an organization is accountable to all its stakeholders, which are according to
Jensen (2002) all individuals or groups who can substantially affect the welfare of the
firm not only financial claimants, but also employees, customers, communities and
government officials (p. 236).
A third and last approach is the societal approach. Van Marrewijk (2003) considers this
to be the broader view on CSR, but not necessarily the contemporary one. This approach
indicates that companies are responsible to society as a whole, of which they are an
integral part (Van Marrewijk, 2003, p. 97). It means that an organization should
operate in a way that serves and satisfies the needs of society.
Where Van Marrewijk (2003) talks about three approaches to CSR, Hay and Gray (1974)
talk about three different phases over time and did this already 30 years before Van
Marrewijk. Despite the different choice of wording, both frameworks are very much alike.
Hay and Gray (1974) labeled the first phase profit maximization management. The
phase I concept was the belief that business managers have but one single objective
to maximize profits (Hay & Gray, 1974, p. 135). Hay and Gray state that there is only
one constraint to this pursuit of profit maximization, namely the legal framework within
which the firm is operating. This view was widely accepted throughout the nineteenth
century and the beginning of the twentieth century (Hay & Gray, 1974).
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A second phase introduced by Hay and Gray (1974) is called the Trusteeship
management. According to Hay and Gray this phase emerged in the 1920s and 1930s.
They claim this second phase to be a result of some structural changes both in business
institutions as well as in society. According to this concept, corporate managers were
responsible not simply for maximizing stockholder wealth but also for maintaining an
equitable balance among the competing claims of customers, employees, suppliers,
creditors, and the community, as well as the stockholders (Hay & Gray, 1974, p. 136).
In this view, the manager is no longer considered simply as an agent of the owners, but
he is more seen as a trustee for the various contributor groups to the firm (Hay &
Gray, 1974, p. 136).
A third phase is labeled quality of life management which arose in the 1950s. Just like
Van Marrewijks (2003) societal approach, the socially responsible firm under phase III
reasoning is one that becomes deeply involved in the solution of societys major
problems (Hay & Gray, 1974, p. 138). Societys major problems refers to social
problems which had developed as direct and indirect results of economic success of the
preceding years. Hay and Gray (1974, p. 137) give the following examples: air and
water pollution, deteriorating cities, disregard for consumers,
1.4 Definitional clarity of CSR
Many definitions of CSR can be found throughout literature. According to Carroll (2008)
one of the first people to articulate a definition on CSR was R. Bowen. He did this in his
book Social Responsibilities of the Businessman of 1953. We previously mentioned that
in those days the term social responsibility (SR) was more often used than corporate
social responsibility (CSR), therefore thats also the term that Bowen used in his
definition. Bowens definition stated the following It (SR) 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 (Carroll,
2008, p. 25).
Since then many more have tried to formulate a clear and unbiased definition of CSR
(Dahlsrud, 2008) Despite the high amount of studies empirically examining CSR and the
numerous efforts to bring about this definition, Clarkson (1995) believes there has not
yet been established a satisfactory and generally accepted definition for CSR, which still
leads to great confusion (Dahlsrud, 2008). The confusion stems from the fact that
without a clear definition theoretical development and measurement are difficult
(McWilliams, Siegel, & Wright, 2006). Banerjee (2001) expresses the same idea by
saying that corporate social responsibility is too broad in its scope to be relevant to
organizations (p. 42). This is not a new idea as we previously pointed out that Jones
(1980) already said in 1980 that social responsibility is too vague to be useful (p. 60).
Hence, even though there is 20 years between both articles, the problem remains
current.
Part of the difficulty in defining CSR lays in the fact that it is unclear whether CSR is
really a concept. In their book The Oxford Handbook of corporate social responsibility
Crane, McWilliams, Matten, Moon and Siegel (2008) suggest that CSR should not be
considered a concept, but rather a field of scholarship. Various authors have developed
important and influential concepts, constructs, and theories of CSR, these are competing
with many other concepts, constructs, and theories of CSR (Crane et al., 2008, p. 6).
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Crane et al. believe that a closely defined term is not the solution because these
differences should be accommodated for in CSR and not avoided to obtain a narrow
definition. Kakabadse, Rozuel and Lee-Davies (2005) also believe that CSR should be
seen as a process rather than a set of outcomes. They state that CSR cannot be a static
concept because the environment society members live in is dynamic (Kakabadse et al.,
2005, p. 285). Kakabadse et al. were not the first ones to come up with this. We
previously mentioned Jones (1980) who also believed that CSR should be considered a
process instead of a set of outcomes.
Another part of the difficulty in defining CSR lays in the fact that different types of
organizations present different views on CSR. According to Van Marrewijk (2003) their
different views on CSR are based on the specific situation and challenges that distinct
types of organizations are facing. This is in line with the view of Kakabadse et al. (2005)
who state the following: CSR in practice tends to be very contextual, very sensitive to
environmental, organisational, even individual specificities (p. 286). They continue:
this characteristic makes CSR a very rich, but highly complex concept, and certainly
difficult to define once and for all (Kakabadse et al., 2005, p. 286)
Because of this Van Marrewijk (2003) believes that the current concepts and definitions
are often biased towards specific interests (p. 96) He does, however believe in the
importance of a definition, but argues that that one solution fits all definition for
CS(R) should be abandoned, accepting various and more specific definitions matching
the development, awareness and ambition levels of organizations (Van Marrewijk, 2003,
p. 95). The reason why Van Marrewijk is not in favor of one definition is because it would
be too broadly defined and too vague, which would make it useless in academic debate
or in corporate implementation. He believes that each company should choose from
the many opportunities which concept and definition is the best option, matching the
companys aims and intentions and aligned with the companys strategy, as a response
to the circumstances in which it operates (Van Marrewijk, 2003, p. 96).
Despite the various definitions and the confusion that comes with it, Dahlsrud (2008)
came to an interesting conclusion. He recognizes the wide array of definitions available,
but shows in his analysis that the existing definitions are to a large degree congruent
(Dahlsrud, 2008, p. 1). Dahlsrud came to this conclusion by looking for similarities and
differences between existing definitions and executing frequency counts. Through a
content analysis of existing CSR definitions he reasoned that all of them were
consistently referring to five dimensions, being: the environmental dimension, the social
dimension, the economic dimension, the stakeholder dimension and the voluntariness
dimension. Afterwards he used frequency counts from Google to analyze how often the
different dimensions were invoked. Dahlsrud (p. 5) found that four out of five
dimensions have a comparable dimension ratio above 80% (the stakeholder dimension:
88%, the social dimension: 88%, the economic dimension: 86%, the voluntariness
dimension: 80%). The fifth dimension, which is the environmental one, has a
significantly lower dimension ratio of 59%. It is important however that all the
dimensions have dimension ratios above 50%, which indicate that they are more likely
than not to be included in a random definition (Dahlsrud, 2008, p. 5).
In a next step Dahlsrud (2008) studied the consistency between the definitions by
looking at how many of the five different dimensions each definition used. He found that
eight of the definitions he worked with include all five dimensions. These eight, account
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for 40% of the total frequency count. When looking at the definitions including three or
more dimensions, he counted 31 definitions, constituting 97% of the total frequency
count. Based on his research Dahlsrud concluded that although they apply different
phrases, the definitions are predominantly congruent, making the lack of one universally
accepted definition less problematic than it might seem at first glance (Dahlsrud, 2008,
p. 7). Dahlsrud therefore concludes that the confusion is not so much about how CSR is
defined, as about how CSR is socially constructed in a specific context (p. 1).
It is interesting to see how the first definition of (corporate) social responsibility we
discussed before, formulated by Bowen, mainly focusses on the social dimension. As
mentioned before: in the days in which the definition was published, 1953, social
responsibility (SR) was more often used than corporate social responsibility (CSR)
(Carroll, 2008). It is therefore not surprising that most attention in this definition is
given to the social dimension and that the other dimensions, more related to the
corporate aspect, are not really present. As SR evolved more into CSR over time, the
definitions in literature started to include more dimensions.
From Dahlsruds (2008) study we could conclude that the definition of CSR, formulated
by the Commission of the European Communities in 2001, is the best one. We do this
based on the fact that this definition has the highest frequency count and because it
includes all 5 dimensions. Their definition on CSR is the following: A concept whereby
companies integrate social and environmental concerns in their business operations and
in their interaction with their stakeholders on a voluntary basis (Commission of the
European Communities, 2001, p. 6; Dahlsrud, 2008, appendix). Unfortunately Dahlsruds
paper wasnt the solution to the problem regarding the CSR definition; many definitions
on CSR have continued to exist. Even the European Commission altered its definition in
2011 and put forward a new, simpler, but also vaguer definition on CSR being the
responsibility of enterprises for their impacts on society (European Commission, 2011,
p. 6). The Commission then defines, in more generic terms, what enterprises should
undertake to meet this responsibility.
As mentioned before, the lack of a general definition leads to confusion, but also hinders
academic debate and corporate implementation. Nevertheless, for companies it is critical
to know what consumers consider to be CSR or CSR related activities. To say it with the
words of Dahlsrud (2008): the challenge for business is not so much to define CSR, as it
is to understand how CSR is socially constructed in a specific context and how to take
this into account when business strategies are developed (p. 1).
For the remainder of this thesis we will work with the initially proposed definition by the
Commission of the European Communities in 2001. We already motivated why we
believe this to be an appropriate choice.
1.5 Synonyms
We previously mentioned that the lack of a satisfactory and generally accepted definition
for CSR leads to great confusion (Clarkson, 1995; Dahlsrud, 2008). Furthermore there is
a long list of concepts which are often used synonymously for CSR, which leads to an
even greater amount of confusion.
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Carroll (2008) provides a list of some of the terms which are often used interchangeably
to talk about corporate social responsibility. They include the following: business ethics,
corporate citizenship, corporate accountability, and sustainability (Carroll, 2008, p. 38).
There are many other synonyms or related concepts which might be used to talk about
CSR, including: conscious capitalism, corporate governance, and ecological economics
(Craps, 2012b). However, we believe Carroll (2008) captures the most important ones
and thats why we will focus on his list.
Just as CSR is not clearly defined and delineated, the concepts below suffer from the
same problem. Therefore it is important to keep in mind that the explanations below are
not absolute and just views of different writers.
1.5.1 Business ethics
According to the dictionary of human resource management by Oxford University Press
(2008), business ethics is the application of ethical reasoning to the situation of
business organizations (Business ethics, 2008). While CSR requires ethical reasoning,
business ethics and CSR are not completely the same. Business ethics can be considered
part of CSR, which is clearly illustrated in the hierarchical approach to CSR by Archie
Carroll3.
Carroll (2001) talks about the pyramid of corporate social responsibility and suggests
that four kinds of social responsibilities constitute total CSR: economic, legal, ethical,
and philanthropic (p. 40). He believes that there is a hierarchy in these company
responsibilities and thats why his framework is often referred to as the hierarchical
approach to CSR (Craps, 2012a).
Carroll (2001) believes that the main responsibilities of companies lay in the economical
field and more precisely through being profitable. It is often argued that the economic
responsibilities refer to what a business does for itself, and that the legal, ethical and
philanthropic components refer to what businesses do for others. Carroll (2008),
however, argues that economic viability is also something business does for society as it
contributes to maintaining the business system. It is therefore that Carroll includes
economic responsibilities in its view on CSR.
A next set of responsibilities a company has to fulfill, are labeled legal responsibilities.
This means that they are required to obey the law. Following the legal responsibilities
are the ethical responsibilities, which refer to business ethics. It is clear from this that
business ethics are only a part of CSR. Ethical responsibilities are the obligation to do
what is right, just and fair (Craps, 2012a). These three aforementioned responsibilities
are however not enough to constitute CSR. CSR also requires philanthropic
responsibilities, which means that the company has to be a good corporate citizen.
Carroll (2001) describes this as contribute resources to the community, improve the
quality of life (p. 42).
Within the field of business ethics, a range of competing positions can be found. These
different positions are grounded in different schools of moral philosophy. The dictionary
of human resource management by Oxford University Press mentions three positions,
3 Whereas the framework as a whole explains CSR, it is discussed in this section to illustrate how business
ethics is only just a part of CSR.
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being deontology, utilitarianism, and justice-based theories of ethics. Essentially, these
positions consist of arguments for identifying ethical or desirable management practice
(Business ethics, 2008, para. 1). They provide the following example:
Action (HR policy) may be considered desirable because it treats employees as
ends-in-themselves with rights to dignity, privacy, and respect (deontology);
because it promotes the greatest good of the greatest number (utilitarianism); or
because it satisfies the tests of procedural and distributive justice (justice-based
theory) (Business ethics, 2008, para. 1).
1.5.2 Corporate citizenship
Corporate citizenship is another concept which is often used synonymously for CSR. The
Canadian Oxford dictionary by the Oxford University press defines a corporate citizen as
a business corporation considered in term of its responsibility to society as a whole
(corporate citizen, 2004). Carroll (2008) states that corporate citizenship may be
broadly or narrowly conceived (p. 37). Hence, depending on which way it is defined, the
concept seems to overlap more or less with the concept of CSR.
Here again we can make a link with the hierarchical framework by Carroll (2001). The
philanthropic responsibilities, mentioned before, refer to being a good corporate citizen.
On the one hand, if corporate citizenship is broadly conceived, it might be that it refers
to philanthropic responsibilities and all the other responsibilities (ethical, legal and
economic) which precede in the hierarchy. Hence it refers to CSR. On the other hand, if
corporate citizenship is narrowly conceived, it might be that it refers only to the
philanthropic responsibilities. In that case, corporate citizenship cannot be considered a
synonym for CSR as you need all four kinds of responsibilities to constitute total CSR.
1.5.3 Corporate accountability
Corporate accountability is often used to talk about CSR and sometimes used as a
synonym for it. However, Craps (2012b) states that corporate accountability is actually
part of CSR. If a company wants to be socially responsible, it has to be accountable (M.
Craps, 16 February, 2012). According to Craps, accountability refers to the recognition
by an organization of the impact it has on the external environment. On top of that the
organization has to assume responsibility for those effects to all involved
parties/stakeholders (Craps, 2012b, slide 13). Corporate accountability also requires a
willingness of the company to report to all its stakeholders in a transparent way.
1.5.4 (Corporate) sustainability
Sustainability is often used to describe a type of development. Sustainable development
is a development which meets the needs of the present without compromising the
ability of future generations to meet their own needs (World Commission on
Environment and Development [WCED], 1987, article 27). According to the WCED
(1987), the concept of sustainable development implies limits. These limits are not
necessarily absolute, but limitations imposed by the present state of technology and
social organization on environmental resources and by the ability of the biosphere to
absorb the effects of human activities (WCED, 1987, article 27).
Whereas the C in CSR clearly refers to social responsibility at a company level,
sustainability is a term often used at a societal level. Therefore in the following
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paragraphs we will talk about corporate sustainability (CS), to make the two concepts,
CS and CSR, comparable at a company level.
Even though CSR and CS are often used as synonyms, Olawale (2009) says they are not
exactly identical. According to Olawale: CS seems to concentrate more on the impact of
a company on its environment and vice-versa, whilst CSR seems to focus on the
benevolent and beneficial activities of the company to society (p. 4). Olawale believes
that the major difference is the type of equity on which both focus. CSR is more focused
on stakeholder benefit or stakeholder equity considerations, while CS more focusses on
social equity and more specifically how to foster socio-economic development.
Sustainability is characterized by the fact that generally a reference is made to the
notion of inter-generational equity. When we talk about corporate sustainability, this
means a reference to inter-generational equity between present and future
shareholders and stakeholders of companies (Olawale, 2009, p. 7).
We can argue that the link between CSR and sustainability is that CSR should be
considered part of sustainability. To achieve sustainable development efforts at company
level, in the form of CSR, are a necessary condition, but not sufficient. Sustainable
development also requires efforts at other levels, such as by the government, by society
as a whole, on individual level,
The Interdepartmental Commission for Sustainable Development (ICSD, 2006) agrees
with this to a certain extent. The ICSD also believes that sustainable development is
much wider than CSR and that it does not just concern companies. They say the
following: sustainable development has a generally transversal character, which means
that all actors in society are involved (ICSD, 2006, p. 8). However, they dont consider
CSR to be part of sustainability. Rather they see CSR as an application of sustainable
development to the activities and accompanying responsibilities of businesses (ICSD,
2006, p. 8).
Each of the aforementioned topics or concepts has their own extensive literature, which
overlaps to a certain extent with the CSR literature. However, it is beyond the scope of
this thesis to further elaborate on those areas of research.
1.6 Conclusion
It is clear that the origins of CSR can be traced back for centuries. Despite its long-
ranging history, no consensus has been reached yet on the definition of CSR, due to the
complexity of the subject matter. This lack of satisfactory and generally accepted
definition together with a variety of concepts which are often used interchangeably to
describe CSR, leads to great confusion.
For the remainder of this thesis we will work with the initially proposed definition by the
Commission of the European Communities in 2001. We believe it to be a good choice
because Dahlsruds (2008) study indicated that this definition includes all five
dimensions of CSR and he pointed out that its the definition with the highest frequency
count in his study.
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Chapter 2: Different views on CSR
2.1 Introduction
In this chapter we take a look at the different views on CSR. We will list a few of the
proponents and opponents and we will look into the arguments which they generally use
to defend their positions. We will talk a little about the link between corporate social
performance and corporate financial performance and in a last section we will briefly
discuss the emergence of a new view.
2.2 Different views on CSR
As discussed before there are three approaches to CSR: the shareholder approach, the
stakeholder approach and the societal approach. Van Marrewijk (2003) however does
not state that the latter is also the contemporary one. The problem is that there are
different views on the relationship between CSR and business and that there is still an
on-going academic debate as to whether corporate decision makers should be
concerned with issues other than profitability (Mohr, Webb, & Harris, 2001, p. 46). This
debate is not a recent phenomenon, but is as old as CSR itself.
To understand the different views it is useful to look at the two extreme cases. A first
view is formulated by the proponents or advocates of CSR. They believe that companies
are capable of making more long term profit and increasing long term success by
operating with a CSR perspective. Opponents or critics, on the other hand, argue that
CSR would only distract firms from the economic role of businesses, namely profit
generation (Buhr & Grafstrm, 2007).
Jensen (2002) also describes these two competing views. He claims that the proponents
of CSR usually support the stakeholder theory, while the opponents support the value
maximization proposition. Stakeholder theory says that managers should make
decisions so as to take account of the interests of all stakeholders in a firm (p. 236). On
the other hand, value maximization states that managers should make all decisions so
as to increase the total long-run market value of the firm (p. 236).
According to Mohr et al. (2001), Adam Smith (1863) argued in 1863 that the pursuit of
profit generation and doing well for society can go together, it doesnt have to be one or
the other. Smith believed that business owners, in pursuit of profit, will ultimately
produce the greatest social good because of the invisible hand of the marketplace (Mohr
et al., 2001, p. 46). The view of Adam Smith was, and still is, subject to a lot of critique
because many contemporary thinkers believe in the presence of several conditions which
actually hinder the effectiveness of the invisible hand (Mohr et al., 2001). According to
Mohr et al. some of these conditions include the lack of consumer information and
imperfect competition (p. 46). Because many believe the view of Adam Smith to be
unrealistic, we will now take a look at the views formulated by the proponents and
opponents of CSR.
2.3 Proponents
Keith Davis (1960) is one of the proponents. He believes that the primary economic
objectives of a business have to come first, because otherwise the business will lose its
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reason for existence (Davis, 1960). However, while he believes that economic functions
are the most important for business, he also states that this does not negate the
existence of non-economic functions and responsibilities (Davis, 1960, p. 76).
Carrolls (2001) hierarchical approach is in line with the view of Davis (1960). Carroll is
also an advocate of CSR, but as previously discussed, economic responsibilities are found
at the bottom of Carrolls pyramid of CSR. Hence, just as Davis, Carroll considers the
economic functions to be the most important ones.
Among the advocates of CSR we also find John Elkington (1997), who is an important
European scholar in the field of CSR. Elkington is often compared to Carroll. Whereas
both of them agree on the importance of CSR in business, both take a different view on
how to approach it. We previously discussed the hierarchical view of Carroll. Elkingtons
view is often labelled the horizontal view, the triple bottom line or PPP. It is called the
horizontal view, because whereas Carroll talks about a hierarchy in responsibilities,
Elkington believes that all Ps, which stand for people, planet and profit, are equally
important (Craps, 2012a).
Labelling it a horizontal view is not completely correct though. Elkington (1997) stated
that society depends on the economy and the economy depends on the global
ecosystem, whose health represents the ultimate bottom line (p. 73). Hence, Elkington
does believe in a kind of hierarchy because he believes there is an environmental bottom
line, which is the most important one, so not all Ps are equally important. His
environmental bottom line starts from the idea that you cannot negotiate with the
environmental system because there are limits. Where two Ps or two bottom lines come
together, is what Elkington labels the shear zones. He believes that CSR is put into
practice in those shear zones because the Ps that come together often contradict.
Post and Sachs (2002) are also found among the proponents. They talk about the new
stakeholder view and state the following: the new stakeholder view posits that the
capacity of a firm to generate sustainable wealth over time, and hence its long-term
value, is determined by its relationships with critical stakeholders (p. 9). The exact
details of how the new stakeholder view differs from the traditional stakeholder view are
irrelevant for our CSR discussion. The essence here is that Post and Sachs believe that
focusing on the interests of the shareholders alone wont be sufficient to increase long
term success.
2.3.1 Arguments in favor of CSR
While we briefly mentioned a few of the proponents in the previous section, it is more
interesting to look at some of the arguments used by the proponents to defend their
position.
Davis (1973) documented the CSR debate and provided an overview of arguments for
corporate social responsibility and arguments against corporate social responsibility.
Even though his article was written in 1973, many of the arguments are still relevant in
the current CSR debate. Jones (1980) is another writer who briefly documented the
debate in his article corporate social responsibility revisited, redefined. The view of the
proponents, he labels prosocial responsibility position, which means that corporations
have an obligation to constituent groups other than shareholders (p. 61). The view of
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the opponents, he labels the antisocial responsibility position, which refers to the idea
that corporations have an obligation to stockholders alone (p. 61).
A first argument Davis (1973) discusses is long-run self-interest (p. 313). This
argument states that spending money on social programs is actually in the long-run
interest of the business itself. It might seem contradictory that spending money will
increase profit, but the idea behind it is that there is a strong link between business and
society. By creating a better community and a better society, through these social
programs, the firm will benefit as well. In that way companies create a better
environment for their business. Davis gives a few examples: labor recruiting will be
easier, and labor will be of higher quality, turnover and absenteeism will be reduced,
crime will decrease, less taxes will have to be paid to support police forces, (p. 313).
A second argument is public image, which is closely related to the previous one (Davis,
1973). Each individual firm aims at enhancing its own public image and hopes it leads to
an increase in customers, better employees, and other benefits. A firm that wishes to
capture a favorable public image will have to show it supports the social goals that the
members of the public find important.
Another argument is labeled by Davis (1973) as viability of business. It relates to the
Iron Law of Responsibility, which says in the long run, those who do not use power in a
manner which society considers responsible will tend to lose it (Davis & Blomstrom,
1971, p. 95). It is reasoned that business, as an institution, only exits because it
performs valuable services for society (Davis, 1973). Davis states:
Society gave business its charter to exist, and that charter could be amended or
revoked at any time that business fails to live up to societys expectations.
Therefore, if business wishes to retain its present social role and social power, it
must respond to societys needs and give society what it wants (p. 314).
Hence, if businessmen do not accept social-responsibility obligations, other groups will
eventually step in and assume those responsibilities. The power that comes with those
obligations will then be assumed by those other groups.
A fourth argument in favor of CSR has to do with the avoidance of government
regulation (Davis, 1973). It is argued that if the businessman on his own engages in
socially responsible behavior, he can prevent the government from introducing new
regulations. Businesses are not in favor of new regulations because they are costly to
the business and they restrict their flexibility in decision making.
A fifth argument deals with sociocultural norms (Davis, 1973). The idea is that the
operations of a businessman are subject to a set of cultural constraints in the same way
as any other person in society operates under a set of cultural constraints. Davis (1973)
says that research shows that those cultural norms are powerful tools in determining
behavior. Consequently, as the norms in society change, the businessman will adapt his
behavior as well. For example: if society moves toward norms of social responsibility as
it is now doing, then the businessman is subtly and inevitably guided by these same
norms (Davis, 1973, p. 315).
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Another argument in favor of the business engaging in CSR is that it is in the interest of
the stockholder (Davis, 1973, p. 315). This argument is of course strongly linked to all
the other ones.
Davis (1973) lists another argument: many other institutions have failed in handling
social problems, so why not turn to business (p. 316). This argument, however, is not a
very strong one as it is made more out of desperation and frustration than out of reason.
A related argument is that business has valuable resources which could be applied to
social problems, so society should use them (Davis, 1973, p. 316). Resources does not
only refer to money, but also to management talent, functional expertise, and innovative
abilities. If business were to use these innovative abilities to deal with social problems,
many of these problems could be handled in a profitable way according to the traditional
business concepts. In that way problems can become profits, which is another
argument by Davis (1973, p. 317).
A final argument in favor of CSR is that prevention is better than curing (Davis, 1973,
p. 317). The social problems will not go away by themselves and will have to be dealt
with at some point in time. It is argued that it is actually more economical to deal with
them now before they grow into bigger problems. If business postpones dealing with
these problems now, it might have to spend a lot more time on them in the future, which
will leave less time to achieve its primary objectives.
2.4 Opponents
Milton Friedman (1962, 1970) is one of the most notorious opponents of incorporating
CSR into business practices. He clearly formulated his opinion on CSR in the title of one
of his works, being: the social responsibility of business is to increase its profits
(Friedman, 1970, p. 1). He already expressed his opinion before, in his work of 1962, by
saying: few trends could so thoroughly undermine the very foundations of our free
society as the acceptance by corporate officials of a social responsibility other than to
make as much money for their stockholders as possible (Friedman, 1962, p. 133).
Friedman (1970) believes that only people have responsibilities. He states that a
corporation is an artificial person and in this sense may have artificial responsibilities,
but business as a whole cannot said to have responsibilities, even in this vague sense
(Friedman, 1970, p. 1).
In his paper Friedman (1970) makes a distinction between the business, the owners of
the business and corporate executives. These three are linked by the fact that Friedman
defines a corporate executive as an employee of the owners of the business. In this way
the corporate executive has direct responsibility to his employers (Friedman, 1970). This
responsibility entails conducting the business in accordance with their desires, which
generally will be to make as much money as possible while conforming to their basic
rules of the society, both those embodied in law and those embodied in ethical custom
(Friedman, 1970, p. 1). Of course in some cases the employers might have a different
objective other than making as much money as possible. Putting aside the issue of the
objective of the owners, the general idea is that the corporate executive, also called the
manager, is the agent of the individuals who own the corporation and his primary
responsibility is to them (Friedman, 1970, p. 1).
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Friedman believes that a distinction should be made between a person in his role of
corporate executive, as discussed before, and as a person in his own right (Friedman,
1970, p. 2). As a person, he may have other responsibilities, for example: to his family.
It might be that he devotes part of his income to some of these responsibilities, also
referred to as social responsibilities. This situation has to be distinguished from the
previous one as in this case he is not acting as an agent, but as a principal because he
is spending his own money or time or energy, not the money of his employers or the
time or energy he has contracted to devote to their purposes (Friedman, 1970, p. 2).
Therefore these are social responsibilities of an individual and not of a business.
According to Friedman, a corporate executive can spend his own money on general
social interests, but he should not spend the money of his employers on this. Because if
he does, he is acting in a way that is not in the interest of his employers, as they wish to
make as much money as possible. He should not spend the money in a different way
than the employers would have spent it.
Porter and Kramer (2011) refer to the fact that the reasoning above doesnt suggest that
businesses shouldnt contribute to social benefit. But the belief here is that CSR shouldnt
be incorporated into business practices because business already contributes to society
by making profit. In its turn, profit generation leads to employment, wages, purchases,
investments and taxes. Hence Porter and Kramer state conducting social business as
usual is sufficient social benefit (Porter & Kramer, 2011, p. 66) according to this view.
This statement of Porter and Kramer (2011) is in line with the idea of the invisible hand,
introduced by Adam Smith (1863).
Jensen (2002) is one of those critics who believes that social responsibility shouldnt be
incorporated into the business because business already contributes to society by
making profit. He states that 200 years (sic) worth of work in economics and finance
indicate that social welfare is maximized when all firms in an economy maximize total
firm value (p. 239). Jensen acknowledges that in order to succeed, companies must
address multiple constituencies. However, he believes that it is logically impossible to
maximize along more than one dimension at the same time, so he claims that there will
always be trade-offs. He believes that maximizing the total market value of the firm is
one objective function that will resolve the tradeoff problem among multiple
constituencies (p. 239). Margolis and Walsh (2003) state that those subscribing to the
view of Jensen believe that if shareholder wealth is maximized, social welfare is
maximized as well (p. 271).
Another early opponent is Theodore Levitt (1958). In his article he points out the
dangers of social responsibility (Levitt, 1958). He believes that CSR leads to the profit
motive being compromised. Levitt states that business will have a much better chance
of surviving if there is no nonsense about its goals that is, if long-run profit
maximization is the one dominant objective in practice as well as in theory (p. 49). He
believes that businesses should let the government take care of the general welfare and
the business should take care of more material aspects of welfare.
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2.4.1 Arguments against CSR
After briefly discussing the ideas of Friedman (1970), Jensen (2002) and Levitt (1958),
we will take a look at the arguments which are generally used by opponents to defend
their viewpoint.
The most prevailing argument against CSR is the classical economic doctrine of profit
maximization (Davis, 1973, p. 317). According to this point of view, business only has
one function, being an economic one. Therefore success will be measured by only using
economic values as criteria. The manager is the agent of the stockholders, and all of his
decisions are controlled by his desire to maximize profits for