Chapter 3
The social responsibility of business
Figure 3.1 Dimensions of corporate responsibility
Economic responsibility
• A company must be financially sustainable.
• By being financially sustainable, a company can
contribute in various ways to the well-being of
society.
• By being financially sustainable, a company
continues to create value for a wide range of
stakeholders. It provides employment in the
community, business to suppliers, and goods and
services for customers.
Mandatory responsibilities
• A company must comply with formal obligations
imposed by society so it does not engage in
irresponsible behaviour that might harm the
economy, employees, society or the environment.
• Mandatory responsibilities include legislation (e.g.
anti-competition, labour and environmental laws)
and standards set by professional and regulatory
bodies.
Societal expectations
• These can either be formalised in voluntary best
practice codes, or be unwritten norms or standard
that communities expect companies to uphold.
• The three main reasons why companies need to
respond to societal expectations:
1) To gain legitimacy
2) To enhance their strategic interests
3) To honour their ethical duties to society
Discretionary contributions
• These take the form of philanthropy or social
investment.
• Reasons for discretionary contributions:
1) Sympathy for less fortunate members of society
2) Desire to give something back to the community
3) Benefit to a company’s reputation
4) Brand exposure
5) Corporate social investment
Corporate citizenship
• In the narrow sense, this refers specifically to the
political responsibilities of corporations; in the
broad sense, it refers to all the responsibilities of
corporations in society.
• Corporations are often called upon to step into
areas where government has failed to deliver or to
protect its citizens; however, in doing this, they are
often accused of abusing their power to gain and
exercise undue influence in society.
Questions
• 1. Name the four broad areas corporations have responsibilities in? (The
economy, the workplace, the social environment and the natural environment).
• 2. Name at least two national or international standards wherein
corporations’ requirement to act responsibly is laid out? (UN Global Compact, th
Global Reporting Initiative’s Sustainability Reporting Guidelines, the Internationa
Standards Organisation’s Guidance on Social Responsibility (ISO 26000), KingIV,
and Companies Act 2008)
• 3. List at least three mandatory responsibilities corporations may face from
society? (Legislation – e.g. Anti-competition, labour, or environmental laws;
regulations, e.g. against insider trading; stock exchanges requirements; standard
set by professional associations)
• 4. The approval that companies need from society in order to be accepted
as legitimate is sometimes referred to as a company’s social capital or its
__________ (licence to operate).
• 5. What is the increasingly preferred term used to capture that formerly
demarcated by the concept ‘Corporate social responsibility (CSR)? (Corporate
Questions
• 1. Name the four broad areas corporations have responsibilities in? (The
economy, the workplace, the social environment and the natural environment).
• 2. Name at least two national or international standards wherein
corporations’ requirement to act responsibly is laid out? (UN Global Compact, th
Global Reporting Initiative’s Sustainability Reporting Guidelines, the Internationa
Standards Organisation’s Guidance on Social Responsibility (ISO 26000), KingIV,
and Companies Act 2008)
• 3. List at least three mandatory responsibilities corporations may face from
society? (Legislation – e.g. Anti-competition, labour, or environmental laws;
regulations, e.g. against insider trading; stock exchanges requirements; standard
set by professional associations)
• 4. The approval that companies need from society in order to be accepted
as legitimate is sometimes referred to as a company’s social capital or its
__________ (licence to operate).
• 5. What is the increasingly preferred term used to capture that formerly
demarcated by the concept ‘Corporate social responsibility (CSR)? (Corporate