Business Ethics - Corporate Social Responsibility (CSR) 3.4.4

Business ethics - The moral principles that guide the way a business behaves.

Corporate Social Responsibility - A business's initiatives regarding the community and environment and willingness to take responsibility for the effects the company's actions have on environmental and social issues and the impact on a range of stakeholders.

Pressure groups - A group that tries to influence company policy in the interest of a particular cause.

CSR is based on the concept that society needs business to employ staff, make investment and raise taxes from profits and the business needs society to create demand, to use public infrastructure, such as roads and power, and for legal protection.

THE SHAREHOLDER CONCEPT

Not all business organisations operate in a socially responsible manner. Some argue that it is not the job of businesses to be concerned about social issues and problems.

The shareholder concept is closely associated with the writing of US economist Milton Friedman who argued that:

"...the only responsibility of business towards the society is the maximization of profits to the shareholders, within the legal framework and the ethical custom of the country".

The key arguments for businesses focusing on meeting the needs of shareholders rather than wider societal needs include:

• The only social responsibility / corporate objective of business is to create shareholder wealth
• The efficient use of resources will be reduced if businesses are restricted in how they act
• Businesses cannot decided what is in society's interest
• Extra costs will be incurred which must be passed onto the consumers such as costs in looking after employees, using ethical suppliers, enforcing environmentally friendly practices throughout the business' operation
• CSR stifles innovation and growth
• Opportunity cost of spending lots of time on CSR, policies, reports and monitoring

THE STAKEHOLDER CONCEPT

The key arguments underpinning the stakeholder concept are:

• Businesses do not have an unquestioned right to operate in society
• Those managing businesses should recognize that they depend on society
• Business relies on inputs from society and on socially created institutions
• There is a social contract between business and society involving mutual obligations that society and business recognize that they have each other

The key arguments for businesses embracing CSR are:

• It is the ethical thing to do
• Greater customer loyalty
• Potential for differentiation and using CSR as a USP that can allow for premium pricing
• Brings much more positive media attention than negative
• Improves a business' image and reputation
• Necessary in order to avoid excessive regulation
• Socially responsible actions can be profitable
• Improved social environment benefits business
• Helps attract investors
• Avoids fines and environmental taxes
• Lower production costs through efficient procedures and recycling
• Positive relationship with suppliers
• Can increase employee motivation
• Recruitment and retention of staff - attract a wider pool of talent and skills
• Helps to correct the social problems caused by business

THIS CAN LEAD TO A COMPETITIVE ADVANTAGE      !!!!!!!!!!!!!!!!

 

CARROLL'S CORPORATE SOCIAL RESPONSIBILITY

Carroll's CSR Pyramid is a simple framework that helps argue how and why organisations should meet their social responsibilities.

The key features of Carroll's CSR Pyramid are that:

• CSR is built on the foundation of profit – profit must come first
• Then comes the need for a business to ensure it complies with all laws & regulations
• Before a business considers its philanthropic options, it also needs to meet its ethical duties

 

The four responsibilities displayed on the pyramid are:

ECONOMIC

• This is the responsibility of business to be profitable
• Only way to survive and benefit society in long-term
• Have the obligation to pay a fair rate to employees and suppliers whilst rewarding investors

LEGAL

• This is the responsibility to obey laws and other regulations
• E.g. Employment, Competition, Health & Safety

ETHICAL

• This is the responsibility to act morally and ethically correct
• With this responsibility, businesses should go beyond narrow requirements of the law
• E.g. Treatment of suppliers & employees

PHILANTHROPIC

• This is the responsibility to give back to society and do good
• The responsibility is discretionary, but still important
• E.g. charitable donations, staff time on projects

Evaluating Carroll's CSR Pyramid

Strengths

• The model is easy to understand
• Simple message – CSR has more than one element
• Emphasises importance of profit

Weaknesses

• Perhaps too simplistic?
• Should ethics be at the top?
• Businesses don’t always do what they claim when it comes to CSR

PRESSURE GROUPS

Pressure groups have emphasized conflicts with the community by providing a way of voicing opinions which the business will find difficult to ignore, including financial and legal expertise and backing.

 

Pressure can be put on businesses to behave in a socially responsible way:

• Consumer actions
• Pressure groups
• Government actions
• Media coverage / Social media
• Investors