Impact of Corporate Social Responsibility on International Corporations as Exemplified by Broad-Based Black Economic Empowerment in the Republic of South Africa


Master's Thesis, 2014
105 Pages, Grade: Summa Cum Laude

Excerpt

TABLE OF CONTENTS

INDEX OF TABLES

INDEX OF FIGURES

LIST OF ABBREVIATIONS

Section 1: INTRODUCTION
I. Overview
II. Personal Statement
III. Gender-Neutral Formulation

Section 2: BASICS OF CSR
I. Conceptual Development and Geographical Origin of CSR
II. The Role of Public Authorities and Other Stakeholders

Section 3: DEFINITION OF TERMS
I. Definitions of CSR
II. Demarcation between CSR and Related Concepts
1. Corporate Citizenship
2. Corporate Social Performance
3. Corporate Governance
4. Sustainable Development

III. Excursus: Morality and Ethics
1. Morality
2. Ethics

Section 4: LEGAL BASIS – PRINCIPLES AND GUIDELINES
I. OECD Guidelines
II. United Nations Global Compact
III. Global Reporting Initiative
IV. ISO
V. ILO Declarations
1. Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
2. Declaration of Fundamental Principles and Rights at Work
VI. United Nations Guiding Principles

Section 5: DIMENSIONS OF CSR ACTIONS
I. Overview
II. Triple-Bottom-Line
1. Social Responsibility
2. Environmental Responsibility
3. Economic Responsibility

Section 6: IMPACT OF CSR ON INTERNATIONAL CORPORATIONS
I. Today’s Role of CSR
II. Pros and Cons of CSR
1. Pros of CSR
2. Cons of CSR
3. “SWOT-Analysis”

III. Impact on the Profitability
1. The Business Case for CSR
2. Interaction between CSR, CSP and CFP

Section 7: HISTORICAL BACKGROUND OF B-BEEE
I. The System of Apartheid
II. Transition to Democracy
III. Composition of the Population in South Africa

Section 8: DEVELOPMENT FROM BEE TO B-BBEE
I. Affirmative Action
1. Principle of Equality
2. Content of Affirmative Actions
3. Justification of Affirmative Actions
II. Black Economic Empowerment (BEE)
III. Broad-Based Black Economic Empowerment (B-BBEE)

Section 9: CONTENT AND ENFORCEABILITY OF B‑BBEE
I. B-BBEE Act
II. B-BBEE Strategy
III. Codes of Good Practice
IV. Scorecards
1. Generic Scorecard
2. Qualifying Small Enterprises (QSE) Scorecard
3. Exempt Micro Enterprises (EME)
4. Scorecard Overview and Calculation
V. Transformation Charters and Sector Codes

Section 10: B-BBEE AMENDMENT BILL
I. Objectives
II. Amendments
1. Overview
2. Generic Scorecard
3. Qualifying Small Enterprises (QSE) Scorecard
4. Exempt Micro Enterprises (EME)
5. Scorecard Overview and Calculation

Section 11: CONCLUSION

REFERENCES

ABSTRACT

INDEX OF TABLES

Table 1: Pros and Cons of CSR

Table 2: Current Generic Scorecard: Elements and Weighting

Table 3: Qualifying Small Enterprises Scorecard: Elements and Weighting

Table 4: Current B-BBEE Scorecards

Table 5: B-BBEE Status Using the Current Generic Scorecard

Table 6: Sector Codes

Table 7: Amended Generic Scorecard: Elements and Weighting

Table 8: Amended B-BBEE Scorecards

Table 9: B-BBEE Status Using the Amended Generic Scorecard

INDEX OF FIGURES

Figure 1: CSR Dimensions

LIST OF ABBREVIATIONS

Abbildung in dieser Leseprobe nicht enthalten

Section 1: INTRODUCTION

I. Overview

“Corporate Social Responsibility” (CSR) received considerable attention in practice and literature over the past years. As a result, nowadays, this concept plays a decisive role in the market place all over the world. Great value is attached to its impact on international corporations in many ways.

CSR means that corporations should act in a socially, environmentally and economically responsible manner and thus, make an important contribution to sustainable development in the future as good as possible. This voluntary concept concerns actions by companies over and above their legal obligations towards society and the environment. It is requested to go beyond compliance and to promote the interaction with internal and external stakeholders. CSR has become an increasingly significant issue in our global society.

The concept of CSR is relevant in all types of companies and in all sectors of activity. Many voluntary guidelines, codes, principles and standards describing responsible business practices have been published over the past years, but there is still no overall, legally binding agreement as to what these responsibilities mean exactly. Although the concept of CSR is widely discussed in theory and practice, there is no general consensus about its definition. Nevertheless, its many different understandings often have certain elements in common. In particular, the importance of responsible behaviour with regard to social policies, the environment and the economy are mainly emphasised.

Organisations around the world, as well as their stakeholders, are becoming more and more aware of the need for and benefits of socially, environmentally and economically responsible behaviour. Corporations are increasingly aware of the fact that a long-term, strategic approach to CSR is essential in order to maximise the creation of shared value.

There is a range of approaches to CSR in the various countries, whereby the corporations’ practices usually have different priorities. As a currently significant emerging market, the Republic of South Africa constitutes a perfect basis to exemplify one of several options to conform to this concept. Due to the nation’s unique historical background, CSR gradually gained importance there, with respect to the economy, the state, as well as the public opinion.

By the end of the system of apartheid the legal equality of all South Africans was achieved. Nevertheless, the aftermath of the social and economic discrimination of Blacks, Coloureds, Indians and Chinese was still present. The elimination of these kinds of discrimination failed.[1]

The South African government launched a programme, namely the Black Economic Empowerment (BEE) and in further development the Broad-Based Black Economic Empowerment (B-BBEE), to redress the inequalities of apartheid. In particular, the former disadvantaged groups of South African citizens were given privileges in economy that were previously not available to them. The politics of B-BBEE are aimed at the promotion and acceleration of the economic equality of all citizens in South Africa.[2]

B-BBEE, which constitutes a form of CSR, provides an opportunity for South African companies to comply with the requirements of this special kind of responsibility. The government’s interventions in this process have been quite successful over the years.

As a long-term economic policy B-BBEE has an important effect on the restructuring of South Africa’s economy and subsequently a big impact on international corporations. The declared goal focuses on the active integration of the former discriminated groups into the private economy on the basis of different measures. Special scorecards, which have been introduced by the legislator, intend to implement these goals and to make them measurable.[3]

The main purpose of B-BBEE is to foster the economic growth. All segments of the population should be incorporated in the economy to obtain exhaustion and strengthening of the full potential of South Africa’s economy and not only previously disadvantaged segments of the population.[4]

Every area in the economy is affected by B-BBEE as a form of CSR and it will considerably gain importance in the upcoming years. Especially entrepreneurs who already do business in South Africa or are interested to do so in the future have to familiarise themselves with the concept and requirements of B-BBEE.[5]

II. Personal Statement

The topic of this Master’s thesis, especially the illustrated issue, is of great personal interest for me. In 2013, I was working at the office of the Austrian Federal Economic Chamber in Johannesburg, South Africa. My tasks covered, inter alia, a lot of research regarding the current situation of the South African market. I had to elaborate its different industry sectors with regard to potentially future development opportunities in order to provide Austrian companies fundamental information about the chances of success of doing business with or within that country. My work showed me that the Republic of South Africa becomes increasingly important for international corporations and worldwide business transactions as such, most of all because of its currently significant emerging market.

During my job I was confronted with the concept of B-BBEE for the first time, but soon I got a deep insight how important that governmental program is to redress the inequalities of apartheid and to eliminate all kinds of discriminations within the state. Furthermore, I learned that B-BBEE is not only significant for national enterprises but especially for international corporations as well. Handling that matter aroused my interest to elaborate the concept of CSR as a whole, and in particular, its impact on international corporations. CSR has become an increasingly significant issue in our global society that needs to be taken into consideration by everyone.

III. Gender-Neutral Formulation

In the interest of a reader-friendly flow of text, gender-neutral terminology has been used throughout this Master’s thesis. All gender-specific terms are to be considered to refer to both the feminine and the masculine form.

Section 2: BASICS OF CSR

I. Conceptual Development and Geographical Origin of CSR

Although the term “corporate social responsibility” is more and more often used in theory and practice today, the underlying concept is nothing new. First attempts to develop this idea reach back into antiquity.[6] Early stages of that kind of responsibility can also be observed in medieval civilisation, when there has been interdependence between landlords and workmen based on special rules for relationships.[7] During the age of mercantilism, the responsibility of corporations became manifest in providing the society a part of their financial result. In contrast, during the age of industrialisation, corporations abdicated from their responsibility because at that time it was hold that poverty would be based on weakness of character.[8]

At the beginning of the twentieth century, business ethics gained importance considerably and therefore, the responsibility of corporations regarding social aspects was also more often discussed. Simultaneously, a socio-economic system was developed, which was based on moral obligations.[9] Particularly from the 1920s/1930s, corporations’ duties were challenged and analysed in different ways. The majority opinion requested that companies should not only pursue their business goals but also consider social ones.[10] Later on, it was stated that the corporations’ financial power should be used for the demands of society as well, instead of fostering profit maximisation.[11]

In 1953, Howard Rothmann Bowen, one of the most important and influential authors for the future development of the concept and its notion per se,[12] summarised the social responsibility of businessmen concisely as follows:

“It refers to the obligation of businessmen to pursue those policies, to make those decisions, or to follow those lines of action, which are desirable in terms of the objectives and values of our society.”[13]

Although in the 1950s the modern era of CSR was marked, there were increasing attempts to formalise and state the meaning of CSR precisely not until the 1960s. This decade brought quite a literature expansion which proliferated in the 1970s.[14] During these decades, it was usual in some states to enact laws in order to encourage companies to foster and support public issues,[15] as well as to enable the government to control and regulate CSR.[16] In contrary, in the 1980s and 1990s, there was a movement towards self-regulation of companies and social securities or other benefits decreased.[17]

Furthermore, in the 1990s, alternative themes began to mature, such as corporate citizenship (CC) and corporate social performance (CSP), which are closely linked to the concept of CSR. The boundaries between these terms are fluid and sometimes they are even used synonymously. Detailed information regarding the demarcation of terms is provided below (see Section 3: Definition of Terms).

The geographical origin of CSR is quite controversial, but in overall, it can be emphasised that the concept has its origin in the United States of America (USA). The cautious and merely appreciable European influence is of little importance for the development of CSR. Moreover, the concept emerged and really became serious in Europe years since the term was first mentioned in the USA.[18]

II. The Role of Public Authorities and Other Stakeholders

As noted below (see Section 3: Definition of Terms) CSR is business-driven which means that the development of CSR should be led exclusively by companies themselves. The enterprises’ own conviction and willingness to act sustainably in regard of the different dimensions of CSR, even when things are tough, is fundamental. In contrast, the role of public authorities is complementary thereto. Nevertheless, they provide support by offering a combination of voluntary policy measures, as well as regulations. For instance, public authorities are empowered to promote transparency, create market incentives for responsible business conduct and ensure corporate accountability.[19]

Considering the particular circumstances of enterprises, they should be free to decide flexibly how to innovate and develop an approach to CSR. Anyway, numerous enterprises appreciate the existing principles and guidelines (see Section 4: Legal Basis – Principles and Guidelines), which are supported by public authorities, in order to assess their own policies and performance, as well as to foster a more level playing field.[20]

The role of other stakeholders, as for example trade unions and civil society organisations, is identifying problems, bringing pressure for improvement and working out solutions together with enterprises. Beyond that, consumers and investors are able to increase market reward for corporations which act socially responsible through the consumption and investment decisions they take. Because of its extensive power, the media is in a position to raise awareness of the positive as well as the negative impacts of companies.[21]

Public authorities and all of the other last named stakeholders should set a good example by demonstrating social responsibility, in particular, regarding their relations with corporations.[22]

Section 3: DEFINITION OF TERMS

I. Definitions of CSR

No absolute or unique definition of CSR exists that is commonly agreed upon by corporations, interest groups, states and business institutions all over the world.[23] There are many different understandings of CSR, but nevertheless, they often have certain elements in common. A selection of a wide range of definitions is presented below to show the manifold approaches to CSR in theory and practice.

The most common definition of CSR was put forward by the European Commission in 2011, when its renewed EU strategy 2011-2014 for CSR was presented.

Therein the European Commission defines CSR as “responsibility of enterprises for their impacts on society.”[24]

To comply with that responsibility, companies should integrate – by means of an appropriate process – the social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy, while collaborating closely with their stakeholders.[25]

The aim of this process is declared by the European Commission as “maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large” as well as “identifying, preventing and mitigating their possible adverse impacts.”[26]

The process of CSR is very complex and it depends on different factors like the company’s size or the nature of its operations. Maximising the creation of shared value requires enterprises to adopt a long-term, strategic approach to CSR. It is necessary to be aware of chances to create innovative products, services and business models which provide social well-being and procure higher quality and more productive jobs. Identifying, preventing and mitigating potentially negative impacts, presupposes that corporations, inter alia, carry out risk-based due diligence.[27]

The European Commission’s definition of CSR is quite narrow. Its understanding prevails primarily in Europe. In contrast, the International Organisation for Standardisation (ISO) offers a much broader definition which includes all essential aspects and moreover, that approach is widely internationally recognised.

In terms of the ISO social responsibility is defined as

“responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour, that

- contributes to sustainable development, including health and the welfare of society,
- takes into account the expectations of stakeholders,
- is in compliance with law and consistent with international norms of behaviour, and
- is integrated throughout the organisation and is practiced in its relationships.”[28]

The World Business Council for Sustainable Development (WBCSD) defines CSR as follows:

“Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society as large.”[29]

The non-profit business organisation Business for Social Responsibility (BSR), which provides socially responsible business solutions to many of the world’s leading corporations, is aimed at creating a more just and sustainable global economy.[30] The BSR defines CSR as “achieving commercial success in ways that honour ethical values and respect people, communities, and the natural environment.”[31]

Considering the approaches above, it is difficult to find a common definition of CSR. In any case, it can be concluded that CSR – just to highlight the main aspects – basically illustrates some kind of voluntarily corporate responsibility aimed at sustainability that combines the three dimensions of society, environment and economy. However, one thing is clear: although the expression of CSR highlights literally “just” social responsibility, the concept includes much more than that.

II. Demarcation between CSR and Related Concepts

In literature, but also in practice, the term “CSR” is often used in connection with several contextually-related terms. The boundaries between these terms and CSR are fluid, so their incorporation into or their relation to the concept of CSR is not always clear to define. Nevertheless, trying to analyse the terms respectively is important to better understand the scope of each concept and its significance for CSR:

The most common terms that are mentioned in conjunction with CSR are “Corporate Citizenship” (CC), “Corporate Social Performance” (CSP), “Corporate Government” (CG) and “Sustainable Development” (SD).

1. Corporate Citizenship

The terminology of “Corporate Citizenship” (CC) has been around for many years, but it was mainly used in the 1980s and 1990s. In literature and practice there are many different views of CC and no overall definition can be found. Most statements refer to the integration of the company into its direct local community and the idea of being a good neighbour, which means creating a mutually beneficial relationship between corporations and their stakeholders. Furthermore, it is requested to comply with local laws and regulations, and to promote the development of local communities in every aspect.[32] CC basically implies voluntary civil involvement in a wider sense and thus, it is aimed at enhancing active citizenship.

In contrast to CSR, which is subdivided into three dimensions, namely social, environmental and economic responsibility (see Section 3: Definition of Terms), CC is primarily an instrument to comply with the dimension of social responsibility.[33] CC includes all activities by means of which enterprises invest in social environment and assume regulatory shared responsibility. Companies assist in creating multidisciplinary cooperation and building up social capital in order to tackle concrete problems and challenges of the local community, and solve them in collaboration with partners from other social sectors, such as non-governmental organisations, associations, politicians or competitors. Corporations have an input into this process in providing not only financial means but all resources, for instance, information, expertise, organisational competence, commitment of employees etc.[34]

In compliance with CC it is requested to do more than what is necessary in every regard. Conducting the businesses properly is not enough, but companies rather have to show real commitment in what they do and go beyond the existing laws and regulations.[35] Moreover, it can be found that CC is strongly focused on local activities of corporations, whereas CSR is often seen as a global concept.

To implement the concept of CC, there exist at least nine different well-established approaches for companies, irrespective of their size, to foster social issues. In general, there is the same emphasis on each of these instruments, so the corporations are free to decide which approach fits most and to adopt one or more thereof. A short overview of the so-called “Corporate Citizenship Mix” based on the model of Felix Dresewski is presented below.[36]

- Corporate Giving means all kinds of altruistic donations based on ethical grounds, whether in-kind or monetary. It also comprises donations in terms of company performances, products and logistics free of charge.
- Social Sponsoring refers to transferring a common marketing measure, namely sponsoring – as a business which is all about reciprocity – on the social sector. This approach creates new and more flexible channels of communication for corporations and opens up opportunities of further funding options for non-profit organisations.
- Cause Related Marketing is an instrument that companies can use to implement the concept of CC. This approach requires that the product or service is promoted to the public, maintaining that part of the proceeds will be passed to social projects or will be granted special organisations as a donation.
- Corporate Foundations describe the establishment of foundations by companies as one category of social commitment. This approach is more and more often used by small and medium-sized corporations.
- Corporate Volunteering is characterised by social commitment of companies in terms of investment of their employees’ time, knowledge and expertise. It also refers to the companies’ support of their employees’ voluntary work which is undertaken during or outside regular working hours.
- Social Commissioning is an approach that focuses on the pro-active commercial partnership with non-profit organisations that employ handicapped and socially disadvantaged people. Companies provide the required assistance by awarding contracts to non-profit organisations. Subsequently, these organisations can take the position of service providers or suppliers for the company.
- Community Joint-Venture is a type of cooperation between a non-profit organisation and an enterprise. Both partners provide resources and expertise for a particular project which cannot be carried out by just one of the partners.
- Social Lobbying refers to the use of the corporations’ contact and influence in order to pursue aims of non-profit organisations or to represent general concerns of special groups in the community.
- Venture Philanthropy is an instrument that deals with venture capitalists which are properly acting on the basis of business principles. On a temporary basis they invest time and expertise in non-profit organisations for any particular activity.

2. Corporate Social Performance

Due to the increasing significance of CSR, theoretical and empirical studies tried to measure the companies’ specific value of CSR activities in order to compare this so-called “Corporate Social Performance” (CSP) with “Corporate Financial Performance” (CFP) and to analyse the long-term impact of responsible actions on the companies’ profitability (see Section 6: Impact of CSR on International Corporations).

CSP was developed in the 1970s and it was primarily used as a synonym for CSR. The concept was actually recognised not until the beginning of the 1990s, when an interest in the relation between CSR actions and their impact on the companies’ profitability increasingly arose.[37] The most significant and common definition of CSP was created by Donna Wood, who stated the concept as follows:

“CSP is a business organisation’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationships.”[38]

In order to measure CSP there exist basically four approaches. First of all it is possible to carry out a content analysis on the basis of information regarding social, environmental and economic activities, which is provided by the company itself. Thus, the analysis investigates to which extent CSR relevant topics are considered quantitatively as well as qualitatively in the company’s publications, such as brochures, annual reports or advertisements. Another option for measuring CSP is to rate reputations, whereby the extent to which corporations show responsible behaviour is evaluated by means of external sources. The third possibility of measuring CSP focuses on social audits, which means that external auditors record and evaluate at reasonable intervals actual initiatives, measures and processes in terms of taking over responsibility. Finally, there are also so-called “CSR Indices”, such as the “Dow Jones Sustainability Index”, which strengthen the corporate image, influence the investors’ choice, and thereby, show the company’s CSP.[39]

3. Corporate Governance

The term “Corporate Governance” (CG) means much more than just the governance of a corporation. CG covers a wide range of concepts and ideas how to run and control businesses.[40] In fact, CG mainly refers to a multifarious system by which corporations are directed and controlled.[41] Although there does not exist an overall definition of this terminology, it can predominantly be compared with corporation management and control.[42] There exist several national and international CG codes in order to create more transparency of the companies’ internal structure.[43]

The Organisation for Economic Co-operation and Development (OECD) sets forth certain principles as non-binding standards and good practices, as well as guidance on implementation, on which companies can rely. The principles form a basis for corporate governance initiatives in both OECD and non-OECD countries alike.[44]

These so-called “OECD Principles of Corporate Governance”, which build the essence of good CG, refer to ensuring the basis for an effective CG framework, the rights of shareholders and key ownership functions, the equitable treatment of shareholders, the role of stakeholders in CG, disclosure and transparency, and the responsibilities of the board. [45]

4. Sustainable Development

For more than 30 years the concept of “Sustainable Development” (SD) has been evolving.[46] Nevertheless, there is still no overall definition of this term. However, it can be noted that in essence, SD is based on the idea that there is a need for integrated decision-making which balances the economic and social needs of the people with the regenerative capacity of the natural environment.[47] SD basically requires that the natural capital stock does not decrease over time, whereby natural capital stock means the stock of all environmental and natural resource assets.[48] SD is characterised as a dynamic process of change. Certain elements of utmost importance, as for example the exploitation of resources, have to be made consistent with future and present needs. [49]

The most common definition was created in 1987 by the World Commission on Environment and Development (WCED), the so-called “Brundtland-Commission” (named after its Chair the former Norwegian Prime Minister Gro Harlem Brundtland). This international group of politicians, civil servants and experts on environmental and development issues provided a key statement on SD in its report “Our Common Future”, also known as the “Brundland-Report”.[50] The Commission stated as follows:

“Sustainable Development meets the needs of the present without compromising the ability of future generations to meet their own needs.”[51]

In compliance with this report, there can be distinguished three key dimensions of sustainability within the concept of SD, namely a social, an environmental and an economic one. The Commission accentuated these fundamental components of SD and presented a number of major proposals for SD.[52] By examining these three approaches, which correspond with the “Triple-Bottom-Line” (see Section 5: Dimensions of CSR Actions), the success of a particular development process can be measured, whereby each component has the same value.[53]

Companies and other stakeholders, who take care of SD, think about the impacts of their actions to all intents and purposes. They examine whether the expected impacts are negative or positive in terms of meeting the criteria for sustainability. The impacts include physical consequences as well as related social consequences and economic costs.[54] In contrast to CSR, SD do not only refer to the present but also to future generations.

III. Excursus: Morality and Ethics

When examining the concept of CSR it is important to explore it from different points of views. In particular, the influence of morals and ethics on CSR needs a detailed investigation. The interdependence of business, morals and ethics is evident. Long-term success and economic viability of an enterprise request morally and ethically correct business practices.

Thus, the terminology of CSR is strongly influenced by morality and ethics. It comprises the quintessence of commitment that is aimed at global justice movements, sustainable development, economical resource management and the improvement of the living conditions for the next generation.[55]

1. Morality

The term “morality” derives from the Latin word “moralitas”, which means manner, character or proper behaviour. It stands for all principles concerning the distinction between right and wrong or good and bad behaviour.[56] The connection between morals and CSR becomes apparent in the following statement by the famous author Archie B. Carroll:

“Social responsibility can only become reality if more managers become moral instead of amoral or immoral.”[57]

From this follows that morals are dependent on the managers’ norms and values. Carroll differentiates between immoral, amoral and moral management as descriptive categories of three different kinds of managers. Immoral managers just focus on the company’s profitability and success. Thus, they aim for exploitation of opportunities for personal or corporate gain. Their decisions imply an active negation of what is moral. Legal regulations are seen as barriers. Amoral managers act neither immoral nor moral, but they are not aware of the fact that their acts and everyday business decisions may have harmful effects on others. They may are just careless or act inattentively. In contrast, moral managers consider ethical norms that adhere to a high standard of right behaviour. Moral managers act in conformity with the law and ethical requirements. Although they want to be profitable, the focus of their leadership primarily is on fairness, justice and due process. Moreover, they often apply standards that are higher than the standards established by proper laws and regulations.[58]

2. Ethics

The term “ethics” derives from the Greek word “ethos” which means character. It constitutes the branch of knowledge that deals with moral principles.[59] The relation between morality and ethics is dynamic. Changes in morality also interfere with ethics.[60] Ethics is a branch of philosophy that seeks to resolve questions dealing with morality. Therefore, ethics is the theory of morality.[61] The four key branches of ethics and main areas of study are meta-ethics, normative ethics, applied ethics, and descriptive ethics.[62]

The concept of CSR is part of business ethics which is, in turn, a form of applied ethics.[63] Business ethics is concerned with ethical principles or problems that arise in a business organisation. It examines the questions “what is right and wrong, good and bad, harmful and beneficial regarding decisions and actions” from a business perspective.[64] Thus, business ethics is no more than ethics as it applies to business.[65]

Ethics matters in business at various levels. In order that a company stays viable, ethical behaviour by its employees is important. Behaving ethically has a significant impact on organisations, stakeholders and the public in general. Acting in compliance with ethical principles means saving money and preventing law suits as well as settlements. In today’s society it is very hard to recover from ethical misdeeds. Business managers and leaders, who are leading and managing ethically, should be also aware of integrity, which is profitable for the values, climate or culture of the organisation [66]

Section 4: LEGAL BASIS – PRINCIPLES AND GUIDELINES

In order to attain a formal approach to CSR, several internationally recognised principles and guidelines were established providing an authoritative guidance for companies. Altogether they represent a core set that illustrates the multidimensional nature of CSR.[67]

The principles described below form an evolving and recently strengthened global framework for CSR. It is of fundamental importance to align European and international policy to promote CSR with this framework.[68] Corporations around the world, and their stakeholders, shall become aware of the need for responsible behaviour and the benefits of operating in an overall responsible manner in order to contribute to sustainable development.[69]

Companies should work towards the implementation of these principles but they are not legally obligated to do so. Their behaviour is just a commitment on a voluntary basis. Furthermore, there is no uniform rule that is legally binding for all enterprises concerning the question how to exactly implement CSR.

The aim of the CSR movement is to persuade the companies to adopt voluntarily certain codes of conduct and to implement business practices that focus on the CSR’s main dimensions, namely social, environmental and economic responsibility. Nevertheless, currently there is no overall agreement as what exactly these responsibilities are. Over the past years, there has been an increase in publishing voluntary guidelines, codes, principles and standards describing responsible business practices.[70]

I. OECD Guidelines

The Guidelines for Multinational Enterprises, which were first adopted by the “Organisation for Economic Co-operation and Development” (OECD) in 1976 and were revised several times in subsequent years, provide voluntary, legally non-binding principles and standards for responsible business conduct in a global context. These recommendations, which are addressed by government to multinational enterprises operating in or from adhering countries, are in line with applicable laws and internationally recognised standards.[71]

Expressing the shared values of the governments, the guidelines – as the only multilaterally agreed and comprehensive code of responsible business conduct that governments have committed to promoting – aim to foster positive contributions by corporations to economic, environmental and social progress all over the world.[72]

The OECD Guidelines for Multinational Enterprises, as well as the “United Nations Global Compact” (UNGC), form a significant voluntary initiative to promote CSR and sustainable business practices.

The guidelines cover business ethics on various issues, namely:[73]

- general policies for enterprises (sustainable development, respect for human rights, encouragement of local capacity),
- disclosure policies (disclosure of material information on all matters regarding the companies’ activities, structure, financial situation, performance, ownership and governance),
- human rights policies (protection and respect of human rights, prevention or mitigation of adverse human rights impacts),
- policies regarding employment and industrial relations (promotion of fundamental rights at work, compliance with the standards of the International Labour Organisation (ILO) in general),
- environmental policies (establishment and maintenance of a system of environmental management, guarantee of transparent environmental media coverage, orientation at the precautionary principle),
- combating bribery, bribe solicitation and extortion (refusal of undue pecuniary or other advantage from public officials, development of internal controls, ethics and compliance programs or measures),
- policies regarding consumer interests (acts in accordance with fair business, marketing and advertising practices, ensuring the quality and reliability of the goods and services that they provide),
- science and technology policies (protection of intellectual property rights, transfer of technology and expertise),
- competition policies (acceptance of all applicable competition laws and regulations, refrainment from entering into carrying out anti-competitive agreements among competitors) and
- taxation policies (contribution to the public finances of host countries, compliance with all tax laws and regulations).

II. United Nations Global Compact

The “United Nations Global Compact” (UNGC) was first announced by the former UN Secretary-General Kofi Annan at the World Economic Forum in Davos, Switzerland, on January 31, 1999.[74] Its official launch was at the UN Headquarters in New York on 26 July, 2000.

As the world’s largest corporate citizenship and sustainability initiative it provides a platform for business and non-business entities to expand their international network and to engage in different areas in order to build a sustainable and inclusive global economy.[75] It includes actually over 7.000 businesses in 145 countries around the world. All relevant social actors are involved, for instance, companies, government, labour, civil society organisations and the United Nations.[76]

The UNGC states ten principles[77] in the areas of human rights, labour, the environment and anti-corruption, which were derived from the Universal Declaration of Human Rights,[78] the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work,[79] the Rio Declaration on Environment and Development[80] and the United Nations Convention Against Corruption[81].[82]

The ten principles of the UNGC deal with the following issues:[83]

Human rights

1. Businesses should support and respect the protection of internationally proclaimed human rights and

2. make sure that they are not complicit in human rights abuses.

Labour

3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining,

4. the elimination of all forms of forced and compulsory labour,
5. the effective abolition of child labour and
6. the elimination of discrimination in respect of employment and occupation.

Environment

7. Businesses should support a precautionary approach to environmental challenges,
8. undertake initiatives to promote greater environmental responsibility and
9. encourage the development and diffusion of environmentally friendly technologies.

Anti-corruption

10. Businesses should work against corruption in all its forms, including extortion and bribery.

The UNGC states a set of core values in the areas of human rights, labour, the environment and anti-corruption. It forms a purely voluntary initiative that seeks to promote universal issues. The ten principles established that way, are universally accepted. Participants are requested to embrace, support and enact these core values, but they are not legally bound to do so.[84]

Participants commit voluntarily to make the principles part of their business strategies and day-to-day operations. Their only duty is to issue an annual report, the so-called “Communication on Progress”, a public disclosure to stakeholders on progress made by implementing the ten principles and in supporting broader UN development goals.[85]

The UNGC, as well as the OECD Guidelines for Multinational Enterprises, form a significant voluntary initiative to promote CSR and sustainable business practices. These initiatives complement each other in creating a more responsible and accountable corporate sector. They feature complementary mechanisms of engagement and accountability but provide respectively, by defining and enhancing the relationship between businesses and international standard, a comprehensive model for responsible business practices today.[86]

The introduction of the UNGC represents a significant milestone for the idea of CSR. It enables to get managers aware of social, environmental and economic responsibility, and to implement these issues in the strategies of international corporations. This initiative emphasises that social affairs and the protection of the environment are issues of common concern that is not only matter of the government but also of business entities.[87]

Critics of the UNGC often use the term “Blue Washing” which refers to the blue colour of the UN flag. It means that some corporations just commit officially to the UNGC in order to create a positive image, but in reality, they do not comply with the UNGC principles.[88]

III. Global Reporting Initiative

The “Global Reporting Initiative” (GRI), a leading organisation in the sustainability field, was founded by the non-profit organisation “Coalition for Environmentally Responsible Economics” (CERES) and the Tellus Institute, with the support of the “United Nations Environment Programme” (UNEP) in Boston in 1997.[89]

GRI created a comprehensive sustainability reporting framework which is widely used all over the world. In order to enable greater organisational transparency and accountability, the framework includes reporting guidelines, sector guidance and other resources. GRI wants sustainability reporting to become standard practice. It facilitates the demonstration of the connection between an organisation and its commitment to a sustainable global economy.[90]

GRI’s framework is used by thousands of organisations to understand and communicate their sustainability performance. Compiling sustainable reports enables organisations to make an essential contribution to sustainable development and to become aware of this issue.[91] Sustainable reporting shall be improved in quality and it shall become an integral part of corporate publication. A parallel can be found between sustainable reporting and financial reporting, and it can be considered – at least under certain circumstances – that the two reports even enrich each other, although sustainable reports are voluntary and financial reports are compulsory.[92]

The GRI sustainability reporting guidelines provide, inter alia, reporting principles, standard disclosures and an implementation manual for the preparation of sustainability reports by organisations. They were developed through a global multi-stakeholder process. The latest version of the GRI sustainability reporting guidelines is called “G4”.[93] It comprises a large number of different aspects which are classified into three main categories, namely the economic, the environmental and the social category.

GRI is of utmost importance for CSR. Its guidelines support participating enterprises in reporting about the social, environmental and economic impacts caused by its everyday activities. Due to the provided methods for measuring and reporting impacts and performance in matters of sustainability, more transparency is created and a possibility of comparison is ensured.

This initiative is linked closely with the UNGC. They complement each other and emphasize a common core set of values. Both initiatives enjoy international prestige in regard to sustainable reporting. While the UNGC sets forth principles and activities of corporate social, environmental and economic responsibility in its guidelines, the GRI provides a basis of well-balanced and detailed reporting of CSR measures. UNGC and GRI are accredits concerning CSR aspects, particularly at an international level.[94]

IV. ISO 26000

The “International Organisation for Standardisation” (ISO) is the world’s largest developer of voluntary international standards. It was founded in Geneva, Switzerland, in 1947. Since then, more than 19.500 international standards have been published covering almost all aspects of technology and business in order to make industry more efficient and effective, and break down barriers in international trade. ISO is composed of members from the national standard bodies of 161 countries, which represent ISO in their country.[95]

The ISO 26000 Guidance Standard on Social Responsibility was launched by ISO in 2010 following five years of negotiations between representatives from different stakeholder groups, namely government, non-governmental organisations, industry, consumer groups, labour organisations, service, support, research, academics and others around the world. Due to the fact that these experts from more than 90 countries and 40 international or broadly-based regional organisations involved in different aspects of social responsibility participated in the standard’s development, it really represents an international consensus.[96]

ISO 26000 was, inter alia, derived from the European Convention on Human Rights (ECHR), principles of the International Labour Organisation (ILO) and the Global Reporting Initiative (GRI).[97]

This voluntary standard provides guidance on how to operate effectively socially responsible. Attention is drawn to the possibility for business and organisations to foster their relationship to the society and environment by acting in an ethical and transparent way that contributes to the health and welfare of society. ISO 26000 helps to translate stated principles into effective actions and shows best socially responsible practices, globally. It emphasises the significance of results and improvements in performance in social responsibility. The standard applies to all kinds of organisations in the private, public and non-profit sectors, irrespective of their activity, size or location.[98] Due to the fact that ISO 26000 is not just aimed at corporations, it uses the simple term “social responsibility” instead of “corporate social responsibility”.

By voluntary use of these international standards, organisations are encouraged to become more socially responsible. They are free to choose which issues are relevant and significant for the organisation to address. ISO 26000 comprises, among others, the following core subjects and issues of social responsibility:[99]

- organisational governance,
- human rights (due diligence; human rights risk situations; avoidance of complicity; resolving grievances; discrimination and vulnerable groups; civil and political rights; economic, social and cultural rights; fundamental principles and rights at work),
- labour practices (employment and employment relationships, conditions of work and social protection, social dialogue, health and safety at work, human development and training in the workplace),
- the environment (prevention of pollution; sustainable resource use; climate change mitigation and adaption; protection of the environment, biodiversity and restoration of natural habitats),
- fair operating practices (anti-corruption, responsible political involvement, fair competition, promoting social responsibility in the value chain, respect for property rights),
- consumer issues (fair marketing, factual and unbiased information and fair contractual practices; protecting consumers’ health and safety; sustainable consumption; consumer service, support and complaint; dispute resolution; consumer data protection and privacy; access to essential services; education and awareness) and
- community involvement and development (community involvement, education and culture, employment creation and skills development, technology development and access, wealth and income creation, health, social investment).

ISO 26000 provides guidance rather than requirements. The standard offers suggestions, advice, proposals and recommendations. It is neither intended nor appropriate for certification purposes, measurement or conformity assessment. So it cannot be certified to unlike some other ISO standards.[100]

V. ILO Declarations

The “International Labour Organisation” (ILO), a United Nations agency dealing with labour issues, was created in 1919 based on the idea that universal and lasting peace can be accomplished only if it is based on social justice. Nowadays, it focuses on international labour standards and decent work primarily. Juan Somavía, the former Director-General of the ILO, stated correctly at a meeting in Beijing, China, in 2009 as follows:

“Working for social justice is our assessment of the past and our mandate for the future.” [101]

The ILO is characterised by its unique tripartite governing structure, which gives an equal voice to workers, employers and governments. The rationale behind this structure is to ensure that the views of the social partners are closely reflected in labour standards, as well as in shaping policies and programmes. By this means, a free and open debate among governments and social partners is possible, in order to foster economic and social progress.[102]

The four main objectives of the ILO are[103]

- the promotion and realisation of standards, fundamental principles, as well as rights at work,
- the encouragement of decent employment and income opportunities,
- the enhancement of the coverage and effectiveness of social protection for all and
- the strengthening of tripartism and social dialogue on work-related issues.

1. Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy

The ILO issued the “Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy”[104] in Geneva, Switzerland, in 1977 in response to the increasing activities of multinational enterprises in the 1960s and 1970s that gave rise to concerns regarding labour-related and social policy issues. The Declaration was created in order to provide international guidelines for multinational enterprises on how to regulate their conduct.

The principles laid down in the Declaration offer guidelines in various areas, for instance:

- employment (employment promotion, equality of opportunity and treatment, security of employment),

[...]


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Details

Title
Impact of Corporate Social Responsibility on International Corporations as Exemplified by Broad-Based Black Economic Empowerment in the Republic of South Africa
College
University of Vienna
Grade
Summa Cum Laude
Author
Year
2014
Pages
105
Catalog Number
V285098
ISBN (eBook)
9783656850601
ISBN (Book)
9783656850618
File size
955 KB
Language
English
Tags
Corporate Social Responisbility, CSR, Black Economic Empowerment, Broad-Based Black Economic Empowerment, B-BBEE, South Africa, Corporate Citizenship, Corporate Social Performance, Corporate Governance, Sustainable Development, OECD, United Nations Global Compact, Global Reporting Initiative, ISO 26000, ILO Declaration, United Nations Guiding Principles, Triple-Bottom-Line, Social Responsibility, Environmental Responsibility, Economic Responsibility, SWOT-Analysis, CSP, CFP, CG, Apartheid, Nelson Mandela, BEE, Affirmative Action, Codes of Good Practice, Scorecard, Direct Empowerment, Ownership, Management Control, Human Resources Empowerment, Employment Equity, Skills Development, Indirect Empowerment, Preferential Procurement, Enterprise Developent, Socio-Economic Development, Qualifying Small Enterprises Scorecard, Exempt Micro Enterprises, Transformation Charter, Sector Code
Quote paper
Dr. Theresa Adamek (Author), 2014, Impact of Corporate Social Responsibility on International Corporations as Exemplified by Broad-Based Black Economic Empowerment in the Republic of South Africa, Munich, GRIN Verlag, https://www.grin.com/document/285098

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