BUSINESS COMPANIES AND THE CSR: HOW TO MAKE CAPITAL RESPONSIBLE TO SOCIETY AND THE ENVIRONMENT
This paper delves into the corporate world specifically the area of Business Ethics and Social Responsibility. Business corporations, with their aim to make profit, should consider the larger environmental context they are in. In conducting business and making profits in the process, it is inevitable that their measures will impact upon society and the environment. And more often than not, their actions go counter with societal and environmental interests because of the differences in paradigms that govern business and society.
History is full of cases involving corporations defrauding investors, polluting the environment, and generally making people’s lives miserable because of their indecent practices. Because profit is their number one goal and concern, all others are secondary. However, history also shows that these actions often backfire. Concerned citizens act out to bring to the courts of law erring companies. Mother Nature, every once in a while and by herself, acts to correct man’s misdeeds with her unbridled fury. Corporations learn their lessons but some do not and continue their destructive practices.
This paper will delve into these issues and concerns. In the second part, I will present an astute research proposal that will specifically study and analyze selected companies and the actions they have been taking. I will attempt to show how propriety and promptness in adhering to business and societal ethics bodes well for the company.
Introduction
The absorption of the cultural sphere into the commercial sphere signals a fundamental change in human relationships with troubling consequences for the future of society. From the beginning of civilization up to now, culture has always preceded markets. People create communities; construct elaborate codes of social conduct, reproduce shared meanings and values, and build social trust in the form of social capital. Only when social trust and social exchange are well developed do communities engage in commerce and trade…. When the commercial sphere begins to devour the cultural sphere … it threatens to destroy the very social foundations that give rise to commercial relations (, 2000, ).
Corporate social responsibility can be defined as the duty of organizations to conduct their business in a manner that respects the rights of individuals and promotes human welfare. While the level of social responsibility exhibited by multinational corporations is said to be improving, perfection has hardly been attained.
Governments and people around the world seem to have an increasing interest in scrutinizing the actions of global corporations, in effect, forcing international companies to be ‘good corporate citizens’. One reason for this could be the realization that multinational companies (MNCs) are not as invincible as they were once thought to be; therefore, their policies can be influenced to benefit society. A second reason may be a realization that effective legal governance of companies whose activities stretch beyond national borders is impossible, leaving self governance as the only practical alternative.
Social responsibility in business has been debated for a long time, and several sides of the issue have been presented by ethicists. This debate has been extended in recent years to include the operations of MNCs.
Due to a range of societal values, whether they are religious, philosophical, or cultural, a universally accepted code of ethical standards is difficult, if not impossible, to create. Even though certain ethical norms such as honesty, integrity, and loyalty are integral parts of most societies, the intensity of adherence to these norms can vary substantially from person to person across cultural boundaries. The ultimate result of these difficulties is no less than a highly complicated maze of international ethical norms, none of which appear similar in thought or meaning. Thus, any questions concerning business ethics in general, much less international business ethics are becoming increasingly more difficult to deal with by multinational corporations.
In a comparative case study on corporate practices involving corporations in the US and Europe, & (2002) found out that European companies were stricter in their observance of corporate ethics and social responsibility. Thus, it would show that a company located in a different cultural setting has different Corporate Social Responsibility (CSR) principles and practices from that of a company in another country. & posited that the differences may arise from these: 1. The importance of being responsible to the society as implicitly or explicitly defined by the latter; and 2. To the company, what aspect of the (CSR) to put emphasis with.
Nonetheless, it is important that a company, wherever it is, should adhere to standard norms regarding the society and the environment it is in. Especially in this globalized world wherein companies are highly mobile, it is a must that standards are observed, if not, just to remain competitive. Consumers are now increasingly becoming specific not just on the quality of goods produced but also on the manner or its production. Also included here are the various issues raised against and for the company. As the world is increasingly becoming globalized and companies are finding it easier to conduct business in a global scale, non-profit, pro-consumer organizations and various other non-governmental organizations have been sprouting up to protect the rights of people and the environment regarding the possible ill-effects in the proliferation of business worldwide. The actions of these groups- among others Global Watch, various anti-WTO and GATT organizations, international environmental organizations like the WWF and the Greenpeace- can be deleterious to business. It is therefore important for corporations to adhere to strict environmental and societal standards in order that their business may keep on going.
To guarantee the continual creation and modification of international ethical codes, MNCs have been encouraged to make the process of developing them an integral part of their long-term strategy. Whenever long-term strategic decisions are made, an MNC’s international ethical profile should be examined and modified if necessary. One approach that might help corporate executives develop culturally appropriate policies is the periodic use of group discussions between MNC management and management teams or government officials from the various international markets in which the company does business. In sum, top management should systematically determine and develop the ethical profile it wishes to present to the rest of the business world. When irreconcilable differences appear between the ethical values of the host country and those of the multinational corporation, both scholars and business persons have suggested that activities within that country be voluntarily suspended until these differences can be resolved.
Review of Related Literature
One of the most controversial issues that has been widely debated over the last two decades is the corporate social responsibility of organizations. Opinions about business social responsibilities lie mainly between two extremes. One extreme is the classical view that state business is an economic institution directed towards profit whose only responsibility to society is to provide goods and services and to return maximum benefits to shareholders (, ., 2003, ). The Nobel Prize winning economist endorsed this classical view. said that the primary responsibility of managers is to operate the business to satisfy the interest of shareholders, and this interest of course is profit maximization (., 2003, ). The other extreme is the socioeconomic view that states business is a part of the larger society and, therefore, it has responsibilities other than simply maximizing profits (., 2003, ). Some proponents of this view also contend that it is often in a company’s financial self-interest to be socially responsible.
The topic of corporate social responsibility has been widely argued and debated about because it is becoming an increasingly important concern to the society in which an organization operates in. Over time, the classical economic theory based business social responsibility evolved to see business social responsibility as more than just profit. Businesses worldwide have become more socially responsible, but they are still pursuing economic interests. Economic interests will always remain the number one priority for businesses all over the world. “Any mechanism for enforcing or urging social responsibility upon firms must of course reckon with a profit motive…” (, 1973, ).
According to a (1997), the public has less confidence in big business than other institutions such as the military, the police, public schools and newspapers. The only institutions ranking lower in consumer confidence were Congress and the criminal justice system. Concurrently, firms are under increasing pressure to give money to charities, protect the environment, and help solve social problems in their communities–in other words, to behave in socially responsible ways. Although academics and business leaders have engaged in a great deal of debate about the social responsibilities of business, there has been little research on what the general public expects. As a result, those who run corporations lacks a clear understanding of what the public wants from them and how far they are expected to go toward helping their communities.
As global multinational corporations (MNCs) penetrate new regions and cultures, their primary aim is to find new and loyal customers for their products. While some corporate managers may demonstrate ‘sensitivity’ to local cultures and mores, their ultimate aim is to sell more. Business people, mass media, and advertisers are proud of their ability to project images and enticements around the globe, to homogenize tastes throughout the world and “to encourage everybody to desire the same goods and services” (, 1993, ). Within the United States, advertising gives business unopposed cultural influence (, 1993, ). The enduring ethical legacy of this century–one which is now being “exported” by MNCs to people everywhere–may well be the belief that in consuming new things, humans enter the domains of freedom, self-expression, and fulfillment. This concept of humanity is essentially egoistic and distinctly material rather than spiritual or moral. If there is ‘value’ in such a view of life, it is economic value. To paraphrase , the economic view of life values people as consumers rather than as neighbors or citizens, and celebrates people’s willingness to quest after whatever is ‘new’, to violate boundaries, to abandon habits and traditions, and to bring to themselves as individuals even more goods, money, and experiences (, 1993, ). In The Poverty of Affluence, claims that the over-emphasis on business and corporations have removed our very human identity. He argues that the siren song of “newer, better, and more” is illusion that is making us psychologically and morally ill-at-ease, if not ill (, 1989, )
Increased industrialization often accompanies economic globalization. Industrialization, in turn, leads to environmental contamination. For example, industrialization facilitated by the North American Free Trade Agreement (NAFTA) has exacerbated the massive environmental problems along the U.S./Mexican border ( & , 1996). In Juarez, Mexico, open canals carry sewage and industrial sludge from the city’s 350 maquiladoras or assembly plants (, 2000, ). Such problems are found throughout the world, especially in developing nations with large percentages of their people living in poverty.
Environmental damage is also inextricably linked to two widening gaps that go hand-in-hand: the gap between rich and poor and the gap between developed and developing countries. Despite increasing wealth on a global scale, about half of the world’s people live on a day or less, and at least 1.2 million people live on less than a day (, 2000, ) In Afghanistan, per capita income is less than a day, and 80% of the people (including 90% of the women) are illiterate (, 2001, ). The gap between rich and poor is especially pronounced in South America. Argentina is in its fifth year of the worst economic crisis of its history, a crisis that led to the resignations of four presidents within two weeks at the end of 2001 and the beginning of 2002 (, 2002, ). Concurrently, the country is suffering from a severe food shortage, causing many citizens to rely on the government for food supplies (, 2001). In Brazil, Argentina’s neighbor and trade partner, 78% of the population survives in less than 0 U.S. per month per family (, 1998).
A major question for business historically has been whether corporate decision makers should be concerned with issues other than profitability. (1863) argued that business owners, in the pursuit of profit, will ultimately produce the greatest social good because of the invisible hand of the marketplace. Many contemporary thinkers, however (e.g., and , 1992; , 1995) believe that conditions that impede the effectiveness of the invisible hand are often present. These include, among other factors, the lack of consumer information and imperfect competition. For this reason, there is a growing literature attempting to define what it means for a company to be socially responsible.
Over the past several decades, there has been a gradual but steady evolution of the idea that corporations have certain ethical responsibilities toward society. Prior to the 1970s, the dominant view was that the only responsibility of businesses is to increase profits for owners and investors. This is a legal obligation only (, 1970). In the 1970s, in the wake of the Lockheed, ITT, Ford Pinto, and other scandals, the view that businesses must not engage in bribery, fraud, or collusive practices, nor may they interfere in the political affairs of host states, gained acceptance. This led to passage of the Foreign Corrupt Practices Act in the United States, and to the first wave of attempts by the UN Economic and Social Council and other international organizations to regulate MNC behavior. In the 1980s, the corporate social responsibility (CSR) agenda was significantly broadened, in the wake of Bhopal, Exxon Valdez, and other highly publicized environmental disasters, the NGO environmental movement pressed home the idea that MNCs must also protect the environment, thus further expanding the notion that corporations have social responsibilities. From the early 1990s on, human rights NGOs and other voices within civil society have been calling upon corporations to accept responsibility for promoting labor rights, human rights, environmental quality, and sustainable development.
These aspirations center upon CSR or the so-called Corporate Social Responsibility. There is no single definition for CSR. People of diverging ideologies and persuasions see it differently. For example, the labour watchdog Ethical Trade (n.d.) defines it as “A concept of business ethics based on the idea that companies have stakeholders who are broadly defined as anyone or group affected by the activities of the company.” Included in this broad definition are customers, community organizations, employees, local neighborhoods, subsidiaries and affiliates, joint venture partners, the environment, investors and shareholder/s. It is implied within the domain of the CSR that the corporation is responsible for all its actions which impact upon its stakeholders. Corollary to that is the principle that development should not be only centered around economic arguments but in socio-environmental domains as well. Meanwhile, , an American philosopher and businessman, advances the argument that business is not supposed to be influenced by stakeholders but the sole purview of owners. He further states that social responsibility is not part of the conduct of business. The aim, he says, is purely to gain profit (, 2003). (2003) groups the definitions into two general types: (1) multidimensional definitions and (2) definitions based on the concept of societal marketing. Multidimensional definitions delineate the major responsibilities of companies. Of these, & ’s (1991) work has received the most attention. The two suggest that CSR includes four kinds of responsibilities or dimensions: economic, legal, ethical, and philanthropic. In their model, each dimension of CSR can be examined in relation to the various stakeholders of the organization (e.g., owners, customers, employees, the community, and the public at large). and (1992) extend this concept, defining CSR to include both avoiding harm and doing well.
According to and (1998) posit that acting responsibly via the CSR can lead to financial success. He adds that it is not just the matter of adhering to CSR principles, but showing it to the whole wide world. Large companies are responding to this information worryingly slowly. (2002) offers the observation that though 80% of marketing directors agree that CSR is important in the profitability of the company, posits that only about half of that percentage will seriously allocate resources for its implementation. For example Wal-Mart have been accused of using sweatshop labour. Greenpeace and other groups are boycotting Exxon Mobil in the US and Esso in the U.K. (, 2002). Conversely, CSM begins to take more importance in considering the growing anti-globalization movement and new evidence that socially responsible behaviour pays off.
(2001) points out that CSR will be the next big point of contention for companies. In a study of big corporations which included, among others, the softdrinks leader Coca-Cola and the food chain McDonald’s, (2002) observed that these corporations were now incorporating CSR precepts into their business strategies. Coca-Cola has been offering scholarships to Hispanics while McDo caters to children’s needs via its playgrounds. However, these kinds of enticements are, to be blunt, of low taste and quality. It is of no surprise that NGOs from the environment and health movements have been critical of these two companies.
The amount of power that global and national companies weald over those who surround them is a scary thought, especially when this power is not regulated strongly enough by government. These are the worries held by anti-capitalists all over the world: “With globalization, there need to be some common standards – and the governments certainly aren’t setting them” (, 2001, ). Even more worrying are the allegations that terrorism arises in poor countries because of the alleged imperialistic designs of multinational corporations (, 2002). Further to this, businesses are influencing government policy, affecting the laws we adhere and the way we live. “‘Corporatism’ indicates that {Government} consultation tends to be some what selective with established bodies such as the confederation of British Industry” (, 2002, ).
Observing CSR can bring rewards back to the company. Shell learned this lesson in Nigeria when it was widely criticized for violating human rights. Its sales dramatically plunged, forcing its managers to carry out an overhaul of its labour policies ( & , 2002).
In 1999, global stock exchange markets launched the Dow Jones Sustainability Index (DJSI) with the purpose to “track the financial performance of sustainability leaders on a global scale” (, 1999). The Index encompasses around 2500 companies in 60 industry groups from 23 countries, with a performance, in industry specific environmental and social criteria, higher than its peers. Those with 10% upper performance are selected. Updated monthly, this index has shown that these companies have provided a return to its investors of 55% higher than the Dow Jones General Index. This is unquestionable evidence of the link between financial result, as recognition by the society, and higher performance on societal corporate responsibility issues.
Statement of the Problem
The Corporate Social Responsibility (CSR) is a way in which consumers can gauge which company to patronize its products depending on a set of standards designed to make the company adhere to specifications deemed friendly to the environment and society in general. Indeed, it can be a determining factor in the finacial success of companies as consumers and watchdog groups are becoming more assertive these days. As shown by the examples given above, companies which adhere to strict CSR standards are rewarded while those which eschew CSR principles suffer the indignity of being punished by consumers.
The CSR bodes well for society and for everyone else. Knowing that a product or service came to a consumer in good ways; unharmful to workers and the environment makes one at ease. Conversely, a product or service which was made via questionable means like a bell tolls at the conscience of the consumer. Yet, these emotions or feelings are not the important and primary considerations behind the advancement of CSR. It is in the effect to people and the environment that matters most. Labourers must work in a decent and healthy environment and be given decent wages. Companies must not employ corrupt or which means to get business deals. Companies must not defraud its investors. Companies must see to it that in its operations, nature and the environment is well-cared for. These are the primary concerns on why corporations should endeavor to deploy CSR into their company standard regulations.
The problem here is on the way these measures are observed and on how people keep track of them. Another is the manner in which society impose upon businesses to really observe standard CSR. For though it is popular, some companies still eschew its use reasoning out that economic considerations must still hold sway. The challenge therefore is to keep a vigilant and effective checking mechanism for these companies.
Objectives
It is paramount that companies know that an intelligent business strategy is the inclusion of an acceptable CSR. Too, it is a must that society know how to properly convince these companies to employ the CSR. The former must clearly enunciate its desires for the latter’s considerations.
The research proposal aims to show how business corporations who adhere to standard CSR guidelines are rewarded while those who do the opposite are punished. I break it down to two specific objectives: 1. To determine which action/s are most effective in convincing business companies to adhere to a standard CSR; and 2. To ascertain which method/s are most effective in making CSR-observing companies to remain so.
Significance of the Study
The importance of the study need not be overstated. Indeed, it concerns almost everyone- consumers, business companies, governments. Everyone is involved in the project. To make business corporations responsive to the needs of the society bodes well for everyone. The business company is not separate from the rest of society. Everything is interconnected.
The world does not need companies that can pollute its rivers and seas, defoliate its mountains and forests, or kill its flora and fauna. Society does not need companies who defraud, bribe or corrupt politicians. Business which in any way act contrary to the best interests of people, whether they be labourers, or consumers do not deserve patronage.
The study is significant for it adds to the burgeoning literature involving corporations and their responsibility towards humankind. Profit should not be the only driving force and reason behind any business endeavor. Companies should consider, side by side with profit, the society and the environment. The latter should have a co-equal importance with financial objectives.
Methodology
The research proposal will use a mix of qualitative and quantitative methods in order to arrive at the best optimal conclusions which will serve my objectives. It will be a combination of content analysis, qualitative case study, and survey method utilizing a mix of interview techniques. Content analysis is defined by (1969) as “…any technique for making inferences by objectively and systematically identifying specified characteristics of messages” ( ). Specifically, I will be using this method to determine general patterns of company actions as influenced by societal and/or NGO actions. The purpose is to determine which of the actions have considerable impact to company decisions regarding CSR. This is in consonant with one of the objectives of the study which is to determine which tactics are most effective in convincing companies to observe standard CSR. The qualitative case study will be used to analyze a number of selected NGOs and consumer advocacy groups to determine their individual methods and tactics in lobbying the government and speaking out to business interests regarding the proper implementation of CSR. This will enable the researcher to compare and contrast differing methods and determine which are more effective, basing from the history of successes and failures of the respective organizations. Lastly, I utilize the survey method to know the position of various people in the society regarding CSR, including their proposed effective strategies. I will draw my sample from an array of selected sectors of society which will include government officials, NGO resource persons, business executives, and consumers. Because these methods demand time, the study will have a time frame of six months.
Sampling
As stated before, I will be using a mix of research methods. In the content analysis, I will be using books, scientific journals, company records, and the Internet to determine the general trends regarding companies and the Corporate Social Responsibility. In the case study, I will be using purposive sampling to select three nationally prominent NGOs or cause-oriented groups involved in the advocacy for companies’ adherance to a standard CSR. To reach the desired number (3) of sample, I first collect ten prospective samples using ’media exposure’ as basis. I must admit that this is not an optimal criteria but it will nevertheless serve the purpose- in the game of advocacy, the noisiest are usually the most effective. From the ten, I will use random selection to have three which will be my sample. In the case of the survey, I will use stratified sampling method to arrive at the desired number of respondents for each category mentioned above. The first three substratum- government officials, NGO people, business executives – will have a sample number (n) of 10. In the case of the consumers, I will select a sample size of 50.
Pretest Plans
In order to have a better-planned and well-prepared research, I will utilize a pre-testing method specifically for the interview. I will be inviting fellow graduate students and friends, including some available persons from the government, business, and NGOs to take part in the pretest. The purpose is to determine whether my survey method is effective and whether the questions designed for the interviews are well-crafted. I shall record observations from the participants and my own regarding their answers so as to enable me to refine my questions and my methods of questioning.
Timetable
The study shall take six (6) months to finish, starting from the pretest activity. The pretest will take two week to finish, including everything from the collation of interested volunteers to the interview proper to the analysis of the answers and the incorporation of the results to the final survey plan. Next will be the content analysis of available data from books, scientific journals, company and government records, and the Internet database. This will be done concurrent with the case study. The content analysis will be accomplished in two months while the case study will last for five months. The survey will take place after the content analysis is finished. The timetable for this will be three months. All in all, the study proper consisting of the content analysis, the case study and the survey will last for a total of five months. The remaining month will be used to evaluate the results and write the necessary reports.
Budget
The proposed study will take six months. Moreover, three methods are used- the content analysis, the case study, and the survey. Thus, the researcher will need considerable resources. Expenses in the content analysis part will mostly consist of printing and Internet costs. Non-sensitive government records are mostly allowed to be photo-copied at an affordable fee. Companies, astutely business-minded may, however, offer theirs for sale. The case study offers less expenses as most NGOs allow for it, especially when done in a non-intrusive manner. Too, with the nature of the study, these groups should be more than willing. The survey should be the most costly of all the three endeavors. Indeed, it offers an altogether different set of expenses. Money starts rolling out even in the formulation of questions. It increases in the gathering of sample populations. Here, the telephone should be more than enough to contact respondents because of the relatively small size of the sample- 80 all in all. The interview proper however should be face-to-face because the questions will be designed to be both close and open-ended. Transportation costs will eat away a sizable amount of the budget.
Initial computations and basing upon previous research works of roughly the same kind with the same time frame and methodologies show that the research would need at least US, 000 give or take.
Ethics and Miscellaneous
In conducting research, the researcher must see to it that her methods stay within the generally accepted norms of the academe. She must ensure that she lies within the ethical bounds of research. It is thus important to use methods concurring with ethical specifications.
In the content analysis, the researcher will have to ask the permission of authors, when indicated so. This is more prevalent in the Internet wherein its unbridled use opens up the possibilities of abuse, e.g. copyright infringement, etc. Books, journals, and company and government records should be no problem as long as proper citation is observed. In the case study involving the NGOs and cause-oriented groups, it is a must that the researcher inform them all of the facets of the report, and should they request for anonymity, it should be strictly observed in the final written reports. In the survey, this should be given more emphasis as the sample consists of individual persons not groups. Ethical research calls for the use of methods which are designed to ensure the safety of participants, whenever required.
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