Corporate Social Responsibility (CSR)
Writer: Hannah Cheang
Editor: Aubrey Lim
Graphic Designer: Wanyinee (Prim) Ratanavaraha
What is CSR
Corporate Social Responsibility (CSR) refers to the obligations of a firm to society. More specifically, to those affected by corporate practices and policies. There is a clear difference between CSR that stems from a desire to do good and CSR that reflects an enlightened self-interest. Some CSR might reflect a mixture of these motivations.
A report from World Economic Forum: “In the face of high levels of insecurity and poverty, the backlash against globalization, and mistrust of big business, there is growing pressure on companies to deliver wider societal value. This calls for effective management of the company’s wider impacts on and contributions to society.”
What are the social responsibilities of a business? The area defined by advocates of CSR covers a wide range of issues such as employee relations, human rights, corporate ethics, community relations, and the environment.
CSR Europe, a membership organization of large companies across Europe, looks at the following areas in its reporting guidelines:
- Workplace (employees)
- Marketplace (customers, suppliers)
- Environment
- Community
- Ethics
- Human rights.
Whether or not businesses should undertake CSR and the forms that responsibility should take, depends upon the economic perspective of the firm that is adopted.
The Facade of CSR? Does a company take its social responsibility values seriously, or is it simply a façade for image and marketing purposes? Facades are a way of promoting a certain image in front of the public and shareholders, and subsequently a way of gaining financial benefits. Starbuck and Nystrom assert “managers of business organizations can and do benefit by appearing to conform to ideologies that their environments prefer.”
Variables like economic realities, perception of trust in business, regulatory scrutiny, social expectations related to the business role, and unfamiliar risks could be described as closer or more distant to the idea of a façade mimicking the social interest of the corporation, but in reality a form of avoiding taxation or “green-washing”.
For example, Starbucks prides itself on Coffee and Farmer Equity (C.A.F.E.), the corporation’s ethical sourcing approach to buying coffee. It promotes transparent, profitable, and sustainable coffee growing practices while also protecting the well-being of coffee farmers and workers, their families, and their communities. However, child labor was found on all five farms in Guatemala that are linked to Starbucks. The children work 40-hour weeks in grueling conditions, picking coffee for a daily wage little more than the price of a latte (or as low as 31penny an hour). Starbucks has refuted the claims by saying, “we have not purchased coffee from the farms in question during the most recent harvest season,” and reinstated that it has zero tolerance for child labour.
Another example is Amazon, which has pledged to go carbon neutral by 2040, and that it would be using 100% renewable energy by the year 2025. Yet Amazon still refuses to release the figures for energy consumption while other big technology companies publish annual reports that detail their overall energy consumption.
When it comes to CSR concerning the workplace, Amazon won praise when it raised its minimum wage to $15 an hour in 2018. However, the minimum wage increase came with the elimination of monthly bonuses and stock options for employees, which has lessened the impact of the wage rise. Many also claim that its fulfillment center had exclusively hired temporary workers who don’t have the same job security and benefits as direct hires. Amazon has also threatened, interrogated, and surveilled employees at a New York warehouse where workers are trying to unionize.
Along with heightened societal expectations and demands of business, the globalization of large corporations has led to firms increasingly operating in countries with very different and generally much lower standards of living than found in their domestic base.
More extensive media reach coupled with advances in information technology has allowed rapid and widespread exposure of alleged corporate abuses in even the most remote corners of the world, such as Shell’s oil spill in Nigeria and Nike’s sweatshop labor conditions.
A critical consideration for many firms is reputational risk, heightened by the greater visibility and criticism of corporate practices, particularly by NGOs.
Boycotts are one manifestation of CSR pressure. The Economist observed: “Consumer boycotts are becoming an epidemic for one simple reason: they work.” Research has found that product boycott announcements are associated with significant negative stock market reactions. Stock market reactions reflect investor beliefs about boycotts having an effect on sales, both directly and indirectly, through harm to the firm’s and brand’s reputation.
Boycotts may be only the most manifest example of a broader phenomenon of consumer behavior influenced by perceived CSR lapses. Surveys of consumers report that many claim to be influenced in their purchasing decisions by the CSR reputation of firms.
In conclusion, a powerful set of external forces and changes have contributed to the recent rise in prominence of CSR: increased societal expectations of business voiced, in part, by powerful NGOs; a diminution of the power and scope of government; globalization; heightened media reach, assisted by advances in information technology; and the greater spread of democracy.
Many companies appear to be doing more in response to the pressures for increased attention to CSR, especially in light of their apparent importance within an ever more competitive product, employment, and equity markets and the potential for reputational risk. And lastly, as stakeholders, we should always question the legitimacy of these CSR initiatives.
Resources:
Channel4 (The Truth About Your Coffee)
Craig Smith (Corporate Social Responsibility)
Al Jazeera (Amazon Illegally Threatened Staff)
Crisan & Moraru (Corporate Foundations)
Starbuck & Nystrom (Organizational Facades in Organizational Realities)
