Term Paper (Advanced seminar), 2010
30 Pages, Grade: 1,7
Table of Figures
1.1 Approach to the Issue of Corporate Social Responsibility
1.2 Development and Objective of the Paper
2 Theoretical Background and Development of CSR
2.1 A Definition
2.2 The Infrastructure
2.3 The Theoretical Framework: Neo-Institutional Theory
3 Comparison of the CSR Structure in Germany and the USA
3.1 Main Aspects of the Comparison
3.2 CSR in Germany
3.2.1 Case-Study: Volkswagen AG
3.3 CSR in the United States of America
3.3.1 Case-Study: Ford Motor Company
3.4 Critical Analysis of Similarities and Differences
Figure 1: Cyclical Matrix of CSR
Figure 2: Amount of communicated/named CSR in German media and specialized press
Figure 3: Stated CSR-Communication on WebPages across sectors
Figure 4: CSR-Arrangements in German Corporations
“ Did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked? And by god, it ought to have both! ” 1
Nowadays the power and impact of big organizations has reached a new peak. Cor- porations are among the world’s most powerful and dominant institutions. In some cases they are even surpassing the revenue-producing ability of small governments.2 In contrast to this economic success, globally acting companies are often accused of social and ecological misbehavior. Activists often criticize the growing gap between developing and developed nations as well as between poor and rich. International production processes in different countries with different rules and regulations can easily lead to cut backs, concerning working conditions or environment protection and sustainability. Scandals like the Nike or Adidas case in the late 1990s have shown the extant to with some organizations are willing to reduce working condi- tions to a minimum for the goal of a cheap production. Referring to the stated quota- tion above, there really seems to be a lack of conscience, regarding some globally acting corporations. These critiques imply that corporations often act with solely economic interests and often fail to see the impact of their practices and strategies on nature, employees, society and stakeholders.3 Nevertheless, revealed affairs like the Nike-case have increased the awareness of customers, governmental organizations, trade unions and other stakeholders. For this reason during the past decades, the con- struct of Corporate Social Responsibility (CSR) has gained growing attention, in both political and academic ways. Businesses and large corporations are increasingly showing signs of becoming aware of human rights and business ethics as well as being environmentally, economically and socially responsible and active.4
While the image of socially contributing companies, acting beyond their legal duties and obligations, has a longer and more intensive history in the Anglo-Saxon coun- tries and particularly in the United States, the concept is less implemented in central Europe.5 This is often explained by the fact that in these states many environmental and social responsibilities of companies are defined by laws, which are optional in Anglo-Saxon countries. These cross-national differences shall be outlined and criti- cally analyzed within this paper, by comparing the CSR practices of Germany and the USA. Furthermore the question shall be answered to which extend the institu- tional background of corporations can shape their behavior and finally lead to a high or weak adoption of corporate social practices.
For the purpose of this paper the following framework shall guide the reader through the complex topic of CSR and its cross-national differences.
The first part is principally concerned with providing a theoretical understanding by creating a working definition and setting up the emerging infrastructure around CSR. For a better understanding, which influence institutions might have and why there are differences among the extent of applied CSR, the Neo-Institutionalism is going to be discussed and used as a theoretical framework.
In the main part of this paper, cross national differences among the adoption of CSR practices are going to be outlined. For this purpose a comparison of USA and Ger- many shall be provided, including two corporations that are heaving their headquar- ters in one of the stated countries. In the case of the United States the Ford Motor Company is going to be analyzed and for the case of Germany the Volkswagen AG.
Three specific aspects of Corporate Social Responsibility shall be regarded and compared in particular:
1. Employee Rights
2. Environmental Policies
The last part of this paper is going to sum up the similarities and differences in regard to the provided theoretical framework and definition.
Before proceeding, it is important to outline what is generally understood by the term Corporate Social Responsibility across nations. Certainly, there seems to be plenty of cross-national evidence that CSR varies massively concerning its understanding and underlying meanings.6 Debates have existed concerning its implications and key elements, ever since the introduction and first usage of the term during the 1950s in the United States of America.7 CSR is said to be a quite complex phenomena with open rules of application and a dynamic structure. And even though there is a vast and growing number of an academic literature concerning this topic, there is no overall accepted definition. For this reason describing or even defining CSR as a whole is not easy.8
Some often cited definitions are:
“A concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis.” (European Commission 2005)
“ The commitment of business to contribute to sustainable economic development working with employees, their families, the local community and society at large to improve their quality of life. ” (World Business Council, 2005)
Regarding these definitions it is straightforward to see that they contain some differ- ent elements even though they are all describing Corporate Social Responsibility. Moreover there are some overlaps with other concepts, such as corporate social per- formance or stakeholder management.9 On this basis, for the purpose of this paper, CSR is going to be generally understood referring to the following declarations:
CSR shall be seen as a firm’s voluntary engagement to operate in a socially respon- sible manner above legally determined minimum standards.10 Therefore the business shall undertake ethical practices in labour and employment by enhancing the workplace of all employees, by going beyond existing regulatory standards and meeting stakeholder’s claims. Moreover the business shall invest in social infrastruc- ture, be involved in building local communities, and account for a cleaner environ- ment and its sustainability and protection.11 The outlined areas of a contribution to a more ethical society can be summed up in terms of economic, environmental, social and ethical investments, as shown in Figure 1.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: Cyclical Matrix of CSR (c.f. Kanji/Chopra, 2010, p.121)
Therefore it can be stated that CSR is separated from a company’s core fulfillment to increase profits as well as government’s regulations for social or ethical responsibili- ties12 13
However, due to the voluntariness and a lack of binding governance structure, prob- lems can still be identified in questions of transparency and reporting systems, as well as in revealing the black sheep within the system, which are using CSR- strategies only for image-improvements or an enhancement of the value or reputation of the brand.14 This can also be the case when CSR is simply seen as a strategic re- sponse to stakeholder pressure, concerning unethical company practices.15
For this reason it will be subsequently outlined which instruments and institutions build the emerging institutional infrastructure around CSR.
Due to the absence of a binding governance structure, which is able to ensure global- ly, that companies act responsible, transparent and ecologically sustainable, a vast voluntary CSR infrastructure has emerged during the last years.16 These emerging institutions are trying to reshape the regulations by which companies act and to inte- grate stakeholder issues into their business-models. By adopting these new rules, companies are able to be socially accepted by the actors and to sustain their legitima- cy.17
The following Infrastructure framework is broadly classifying three different CSR institutions, according to Waddock (2008):
1. Market/Business institutions
2. Civil/Societal institutions
3. State/Government institutions
The first group, the market/business institutions, is addressing those initiatives that arise from corporations themselves or that are a response from corporations to mar- ket pressure. This kind of institutions can be divided into a responsibility assurance infrastructure, business and other associations, and the responsible investment movement.
The responsibility assurance infrastructure contains codes of conduct18, standards and principles; credible verification, monitoring and certification services19, which ensures that corporations are doing what they are claiming to do; as well as broadly accepted reporting systems20 concerning environmental, social and governance is- sues.21
Business and other associations are building the second kind of institutions within the Marked/Business Institutions. In general they are focusing on peer pressure from leading-edge corporations. Engagement and interest is generated by dialogues or conferences which are examining CSR practices of companies.22 Nowadays there are a lot of business membership organizations concerning CSR topics, like sustainabili- ty or social investment.23
The responsible investment movement includes responsible investment firms and funds, including investors like Trillium or Calvert.24 It includes also a small number of professions corporations, like the Social investment research Analysts Network (SIRAN) in Europe, or, in the USA; the Social Investment Forums.25
The second group, the Civil Society Institutions, is addressing those initiatives that arise from pressure and criticisms from organizations, which are based in the civil society. The scope of the civil society institutions is broad and can be basically di most of them are nongovernmental organizations (NGOs). Some examples are: the Greenhouse Gas Protocol, Fair Trade Labeling Organizations or LEED. Also mentionable at this point is the Interna- tional Organization for Standardization (ISO) and the ISO 26000. For more detailed information see: Waddock (2008), or http://www.iso.org (accessed: 20-06-010).
1 First Baron Thurlow (1731-1806), Lord Chancellor of England, c.f.: Banerjee, S.B., CSR, the Good, the Bad and the Ugly, 2007, p. 15.
2 Anderson, S./Cavanagh, J. (2000), The rise of corporate global power, retrieved July 19, 2010 from CorpWatch website, http://www.corpwatch.org/article.php?id=377 (accessed: 20-06-010).
3 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008, p. 88.
4 Kanji, G.K./Chopra, P.K., Corporate social responsibility in a global economy, Total Quality Management, 21(2), p. 119.
5 Barth, R./Wolff, F., CSR in Europe, 2009, p. 3.
6 Matten, D./Moon, J., Implicit and Explicit CSR: A conceptual framework for a comparative under standing of corporate social responsibility, Academy of management Review, 2008.
7 Bowen, H., Social Rresponsibilities of the Businessman, 1.ed. New York, 1953.
8 Davis, K., The case for and against Business Assumption of Social Responsibilities, Academy of Management Journal, 1973.
9 Jackson, G., Androniki, A., CSR in Western Europe: An Institutional Mirror or Substitute?, Journal of business ethics, 2009.
10 Kindermann, D., The political economy of CR in Germany, 1995-2008 part 5 of the Germany in Global Economic Governance Series.
11 Kanji, G.K./Chopra, P.K., Corporate social responsibility in a global economy, Total Quality Management, 2010.
12 Matten, D./Moon, J., “ Implicit and Explicit CSR: A conceptual framework for a comparative un derstanding of corporate social responsibility”, Academy of management Review, 2008.
13 Kanji, G.K./Chopra, P.K., Corporate social responsibility in a global economy, Total Quality Management, 2010.
14 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008.
15 Jackson, G./Apostolakou, A ., CSR in western Europe: An institutional mirror or a substitute?, Journal of Business ethics, 2009.
16 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008.
17 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008.
18 Codes of Conduct have its beginning in the early 1990s. Since then there has been an explosion of a variety of codes concerning principles and standards affecting business activities. A lot of codes are company specific, but there are also a lot of codes which were developed by multi-stakeholder coali- tions or business-associations. Examples for well known codes of conduct are: Principles for Respon- sible Investing, UN Global Compact principles, CERES Principles, and so on. For more detailed in- formation see Waddock (2008) or http://www.un.org/esa/ffd/tax/thirdsession/EC18_2007_CRP17.pdf, for an example of a code (accessed: 20-06-010).
19 Credible verification, monitoring and certification services were installed due to often unsatisfying company-generating reports. The problem with these reports was that companies were often writing about CSR-activities but did not accurately implement them. It became apparent that independent verification was needed. Most of these independent enterprises are undertaking a mix of activities and
20 Transparency and reporting systems were installed because of a lack of guidelines concerning the format, content or some other reporting requirements. Due to a need for standardization the Global Reporting Initiative (GRI) set up a common framework for sustainability reporting. As a result cross- industry and cross-company comparisons or reports are possible. For more information see Waddock (2008), Chen/Bouvain (2009) or http://www.globalreporting.org/ReportingFramework/ (accessed: 20- 06-010).
21 Waddock, S., What will it take to create a tipping point for corporate responsibility ? M.Epstein &K.O. Hanson (Eds), the accountable corporation (pp.75-96), 2006.
22 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008.
23 Major CR consulting organizations are as an example: Corporate Citizenship, Utopies or Verité. For more detailed information see: http://www.corporate-citizenship.co.uk, http://www.utopies.com, http://www.verite.org (accessed: 20-06-010).
24 Waddock, S., Building a new institutional infrastructure for corporate responsibility, academy of Management Perspectives, 2008.
25 For more information see http://www.siran.org or http://www.socialinvest.org.
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