Business Ethics
Chapter 7:
Corporate Social Responsibility
Ethics and the Conduct of Business
Eighth edition
Chapter 7
Chapter 12 (Textbook)
Stakeholders and
Corporate Social
Responsibility
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Corporate Social Responsibility
• Introduction: Corporate Social Responsibility
• 1: The CSR Debate
• 2: Normative Case for CSR
• 3: Business Case for CSR
• 4: Implementing CSR
• 5: Business with a Mission
• 6: Case Studies
• Conclusion: Corporate Social Responsibility
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Learning Objectives (1 of 2)
• 1: Recognize the significance and implications of corporate
social responsibility for businesses, how CSR is commonly
demonstrated, and its related concepts
• 2: Describe the dominant moral arguments against the
concept of CSR and the counterarguments and
justifications for CSR as a requirement of companies
• 3: Analyze the arguments that a market for virtue makes
CSR a profitable strategy and a source of competitive
advantage
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Learning Objectives (2 of 2)
• 4: Summarize the important aspects of successful CSR
programs, the difficulties with measuring the social
performance of companies, and various attempts at
measurement
• 5: Compare how nonprofit and for-profit social enterprises
operate and can compete successfully in the marketplace
• 6: Compare how nonprofit and for-profit social enterprises
operate and can compete successfully in the marketplace
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Meeting the Needs of Stakeholders
• What are stakeholders?
• Why be concerned about the needs of
stakeholders?
Meeting the Needs of Stakeholders
What are stakeholders?
• Stakeholders include groups who stand to benefit or lose
by the actions of corporations.
– Shareholders (stockholders/owners)
– Employees.
– Customers.
– Suppliers.
– Society.
• Could also be extended to include environment
What are stakeholders?
• Stakeholders are “any group or individual who is
affected by or can affect the achievement of an
organization’s objectives” (Freeman, 1984)
• Are an individual or a group that can impact or be
impacted by the organization’s activities.
• Participants who have some legal right to the
enterprise (Hill and Jones, 1992)
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What are stakeholders?
• People or groups that bear the risk of investing
into a company (Clarkson, 1995). Clarkson’s view
is that stakeholders all bear some risks relating to
organization regardless of whether they have any
contractual agreement with the firm
• Carroll (1999) defines stakeholders in
consideration of their corresponding CSR’s
expectation, including employees, customers,
business owners, local communities, and society.
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Introduction: Corporate Social
Responsibility
• Basis for social responsibility
• Requirements to implement CSR programs
• Benefits of CSR programs
• Social enterprises
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1: The CSR Debate (1 of 2)
Objective: Recognize the significance and implications of corporate social responsibility
for businesses, how CSR is commonly demonstrated, and its related concepts
• 1.1: Meaning of CSR
– Concept of CSR
• Voluntary contribution to community
• Not legally required
• Selection of corporate goals and evaluation of outcomes
by ethical standards
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Figure1
• Inner circle represents
economic responsibilities
• Intermediate circle
represents social
responsibilities arising
from business activities
• Outer circle represents
responsibility to address
larger social problems
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Corporate Social Responsibility
• Carroll (1979, 1991): The social responsibility of
business encompasses the economic, legal,
ethical, and discretionary (philanthropic)
expectations that society has of organisations at a
given point in time.
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Corporate Social Responsibility
Corporate Social Responsibility
Definition
CSR is a company's sense of responsibility towards
the community and environment (both ecological and
social) in which it operates. Companies express this
citizenship (Kaschny, 2018):
1. through their waste and pollution reduction processes
2. by contributing educational and social programs
3. by earning adequate returns on the employed
resources
Corporate Social Responsibility
The diversity of this concept
Since the 1960s, CSR has attracted attention from a
range of businesses. A wide variety of definitions have
been developed but with little consensus. The diversity
of definitions has arisen because of the different
interests represented.
Corporate Social Responsibility
The diversity of this concept
The disagreement about the definition has arisen also
because of different disciplinary approaches:
1. Economic definition of sacrificing profits
2. A management definition of beyond compliance
3. Institutionalist views of CSR as a socio-political
movement
4. The law's focus on directors' duties
1: The CSR Debate (2 of 2)
Objective: Recognize the significance and implications of corporate social responsibility
for businesses, how CSR is commonly demonstrated, and its related concepts
• 1.2: Examples of CSR
– General agreements:
• Operating on ethical level higher than law requires
• Corporate philanthropy
• Employee benefits
• Improving quality of life in workplace
• Taking advantage of economic opportunity more socially desirable
• Using resources to address major social problems
• Benefits of corporate philanthropy
• Best CSR reputation: BMW, Google, Disney
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1: The CSR Debate (2 of 2)
Objective: Recognize the significance and implications of corporate social responsibility
for businesses, how CSR is commonly demonstrated, and its related concepts
• 1.3: Related Concepts
– Corporate social responsiveness
– Elements of corporate social performance
– Corporate citizens
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1: The CSR Debate (2 of 2)
1.3: Related Concepts
• Point 1- Corporate social responsiveness
• Capacity of corporation to respond to social pressure
• Uses resources to deal with social issues
• Point 2- Elements of corporate social performance
• Principle
• Process
• Outcome
• Corporate citizens
• Point 3- Corporate citizens
• Integration of social concerns into company policies
• Company owes something to society
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2: Normative Case for CSR
Objective: Describe the dominant moral arguments against the concept of CSR and the
counterarguments and justifications for CSR as a requirement of companies
• 2.1: Classical View
– Expression of classical view
• Corporations should engage in economic activity
• Social concerns should be left to other institutions
• Justifying classical view
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2: Normative Case for CSR
Objective: Describe the dominant moral arguments against the concept of CSR and the
counterarguments and justifications for CSR as a requirement of companies
• 2.2: Friedman on CSR
– Fiduciary argument
• Rules of the game
• Indirect benefit from contribution
– Taxation argument
• Managers act as unelected civil servants
• Lack expertise
• Criticism of taxation argument
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3: Business Case for CSR (1 of 2)
Objective: Analyze the arguments that a market for virtue makes CSR a profitable strategy
and a source of competitive advantage
• 3.1: The Market for Virtue
– Factors that induce managers to take on CSR
activities
• Market demand
• Social forces
– Power of virtue
• Activists are powerful in influencing corporate decisions
• Constrained managers engage in some socially responsive
behavior
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Table 2: A Watch List of Industries and
Companies
Industries Issue(s) Companies
Consumer goods: Goods are Nike, Gap, Walmart
shoes, apparel, and manufactured in
household products contract factories
overseas.
Petroleum, timber, and Environment issues Shell, Home Depot, Rio
mining Tinto
Food and beverage Raw materials are Starbucks, Nestlé,
sourced from less- Coca-Cola
developed countries.
Tobacco and fast foods Tobacco-related deaths Altria (Philip Morris),
and obesity Kraft, McDonald’s
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3: Business Case for CSR (2 of 2)
Objective: Analyze the arguments that a market for virtue makes CSR a profitable strategy
and a source of competitive advantage
• 3.2: Competitive Advantage
– Strategic CSR
• Win-win opportunity
• Source of opportunity, innovation, and competitive advantage
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4: Implementing CSR
Objective: Summarize the important aspects of successful CSR programs, the difficulties
with measuring the social performance of companies, and various attempts at
measurement
• 4.1: Program Selection and Design
– Guidelines
• Management of reputation risk
• Closely linked to employment needs or sales yields
• Make use of company’s mission and core competencies
• Identifies opportunities that fit with company’s strategy
• Incorporate stakeholder engagement
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4: Implementing CSR
Objective: Summarize the important aspects of successful CSR programs, the difficulties
with measuring the social performance of companies, and various attempts at
measurement
• 4.2: Reporting and Accountability
– Social reporting
• SEAAR
• 3BL
• Sources that force accountability
• Increases social performance
• Transparency of CSR activities
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5: Business with a Mission
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 5.1: Social Enterprise
– Definition:
• Business for social purpose
• Reduce social problem
• Generate social value
– Forms
• Nonprofit social enterprise
• For-profit social enterprise
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5: Business with a Mission
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 5.2: Competing Successfully
– Overview
• Generating enough revenue
• Nonprofit organization – Philanthropy, donations, sales
• For-profit organization – Access to equity capital, innovation, impact
investment
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5: Business with a Mission
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 5.3: Mission and Trust
– For-profit organization
• Difficulty in maintaining social benefit mission
• Equity capital has significant liability
• Profit-minded shareholders
• Loss of trust
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Table 3: Nonprofit versus For-Profit
Social Enterprises
Categories Nonprofit SE For-Profit SE
Definition A nonprofit whose main source of revenue is A business created for a social purpose, that operates in
earned income, not donations a socially-beneficial manner
AKA Enterprising nonprofits, commercial nonprofits Possible forms:
• subsidiary of a hybrid nonprofit
• benefit corporation (community interest company)
• Certified B Corporation
Example(s) Benetech (technology to aid global literacy) Patagonia (environmentally-sustainable clothing)
Toms Shoes (donates shoes to the needy)
Available Sales, donations, loans Sales, equity capital, impact investment
funding
Advantages Tax benefits Equity capital allows faster growth, more effective use of
Income from donations resources
People have more confidence in nonprofit causes Ability to make a profit
Challenges Need for innovation Sales, equity capital, impact investment
Pressure to use donations for given purposes Need for innovation
Limits on spending Pressure to give some control to outside investors
Difficulty keeping focus on social mission over profit
Loss of public trust
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6: Case Studies (1 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 6.1: Case: Starbucks and Fair Trade Coffee
– Mission
– Issue
– Fair trade coffee
– Starbucks response
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6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 6.2: Case: Timberland and Community Service
– Commerce and justice
– City Year nonprofit organization
– Community service program
– Change in economic situation
• 6.3: Case: Coca-Cola’s Water Use in India
– Groundwater depletion case
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Table 4: Requirements for Fair Trade
Certification
Condition Description
Fair prices Democratically organized farmer groups receive a guaranteed minimum floor price
and an additional premium for certified organic products. Farmer organizations are
also eligible for pre-harvest credit.
Fair labor conditions Workers on Fair Trade farms enjoy freedom of association, safe working conditions,
and living wages. Forced child labor is strictly prohibited.
Direct trade Importers purchase from Fair Trade producer groups as directly as possible,
eliminating unnecessary middlemen and empowering farmers to develop the
business capacity necessary to compete in the global marketplace.
Democratic and transparent Fair Trade farmers and farmworkers decide democratically how to invest Fair Trade
organizations revenues.
Community development Fair Trade farmers and farmworkers invest Fair Trade premiums in social and
business development projects such as scholarship programs, quality-improvement
training, and organic certification.
Environmental sustainability Harmful agrochemicals and GMOs are strictly prohibited in favor of environmentally
sustainable farming methods that protect farmers’ health and preserve valuable
ecosystems for future generations.
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6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 6.2: Case: Timberland and Community Service
– Commerce and justice
– City Year nonprofit organization
– Community service program
– Change in economic situation
• 6.3: Case: Coca-Cola’s Water Use in India
– Groundwater depletion case
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6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 6.2: Case: Timberland and Community Service
• Point 1- Commerce and justice
• Employees must devote time to community service
• Create solution for community needs
• Point 2- City Year nonprofit organization
• Timberland gave donations to City Year
• Joint community service program
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6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
6.2: Case: Timberland and Community Service
• Point 3- Community service program
• Expanded collaboration with nonprofit organizations
• Provided voluntary training to people
• Point 4- Change in economic situation
• Economic downturn
• Change in ownership
• Community service that was a part of the company’s
culture was continued
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6: Case Studies (2 of 2)
Objective: Compare how nonprofit and for-profit social enterprises operate and can
compete successfully in the marketplace
• 6.3: Case: Coca-Cola’s Water Use in India
– Groundwater depletion case
• Depletion of groundwater around Coke plants
• Overexploitation of ground water
• Improvement in water efficiency
• Efficacy in returning water was questioned
• Fair share of water
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Conclusion: Corporate Social
Responsibility
• Meaning of CSR
• Arguments for CSR
• Normative case for CSR
• Virtual industry
• Strategic CSR
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