1. Copyright © 2008 McGraw-Hill Ryerson Ltd. 1 Chapter Seven Corporate Social Responsibility: The Concept Prepared by Mark Schwartz, York University Canadian Business and Society: Ethics & Responsibilities

2. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.2 Chapter Outline Corporate Social Responsibility: Definition and Key Elements Case for Involvement and Counterarguments Social Responsibility Theories Pyramid of Corporate Social Responsibility Corporate Sustainability (CS) Reputation Management Social Impact Management Triple-E Bottom Line (TBL) Good Corporate Citizenship

3. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.3 Corporate Social Responsibility: Definition The way a corporation achieves a balance among it economic, social, and environmental responsibilities in its operations so as to address shareholder and other stakeholder expectations.

4. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.4 Key Elements of CSR Corporations have responsibilities beyond the production of goods and services. These responsibilities involve helping to solve social problems. Corporations have a broader constituency than just stockholders. Corporations have impacts beyond simple marketplace transactions. Corporations serve a wider range of human values than just economic values.

5. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.5 Case for Involvement Business must satisfy society’s needs. CSR prevents public criticism and government regulation. Business and society are interdependent. CSR is good for the bottom line. Investors and consumers support CSR. Addressing social problems can become financial opportunities (e.g., pollution abatement).

6. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.6 Case for Involvement Business should take long-term CSR approach. Social actions improve public image and goodwill. Business can solve problems as well as government. Proactive approach is better than reactive. Businesspeople are also concerned citizens.

7. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.7 Counterarguments Profit maximization is the primary purpose of business. Business is responsible to shareholders. Social policy is role of government. Business lacks training in social issues. CSR would give too much power to business.

8. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.8 Counterarguments Business involvement in social matters increases costs. No reliable guidance for business in CSR matters. Business cannot be held accountable unlike social institutions. There is divided support in business community for social involvement.

9. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.9 Social Responsibility Theories Amoral view  Traditional view of business as merely profit- making entity Personal view  Corporations are like people and can therefore be held accountable for their actions Social view  Corporations are social institutions with social responsibilities Source: Klonoski, 1991

10. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.10 Pyramid of Corporate Social Responsibility Economic Legal Ethical Philan- thropic “Be profitable” “Obey the law” “Be ethical” “Be a good corporate citizen” Desired Expected Required Source: Archie Carroll, 1991

11. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.11 Corporate Sustainability (CS) Compliance-driven CS: follow regulations Profit-driven CS: focus on bottom line Caring CS: go beyond legal compliance Synergistic CS: well balanced solutions Holistic CS: fully integrated CS

12. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.12 Reputation Management Reputation management is an effort to enhance a corporation’s image Previous focus on media and public relations as well as crisis management Today, focus is on relationships with all stakeholders Reputations take a long time to be established, but can be destroyed quickly

13. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.13 Social Impact Management Field of inquiry at the intersection of business needs and wider societal concerns that reflects and respects the complex interdependency between the two. Evaluates 3 aspects of business:  Purpose of business  Social context of business  Metrics: how performance is measured

14. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.14 Triple-E Bottom Line (TBL) Evaluates a corporation’s performance according to a summary of the economic, social, and environmental value the corporation adds or destroys. Now forms the basis for corporate reporting of economic, ethical, and environmental responsibilities.

15. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.15 Good Corporate Citizenship: Benefits Reputation management Risk profile and risk management Employee recruitment, motivation, and retention Investor relations and access to capital Learning and innovation Competitiveness and market positioning Operational efficiency Licence to operate Source: World Economic Forum

16. Chapter 7 Copyright © 2008 McGraw-Hill Ryerson Ltd.16 New Approach to Corporate Citizenship Limited  Focus on corporate giving Equivalent  Emphasis on sustainability Extended  Defined as a set of individual, social, civil, and political rights Source: Matten and Crane, 2005