Why should multinational corporations engage in Corporate Social Responsibility? Benefits of a CSR Strategy


Bachelor Thesis, 2013

69 Pages, Grade: 1,3


Excerpt

Table of Contents

1 Introduction
1.1 Research Motivations, Objectives and Questions

2 Global Supply Chain Analysis: Survival of the Cheapest
2.1 The Supply Chain of Consumer Goods
2.2 The Impacts of Marketing
2.3 China’s fate as the World’s low cost Manufacturer

3 Introduction to CSR: The Philosophy of Philanthropy
3.1 Origin and Definition
3.2 Evolution and Dimensions of CSR
3.3 CSR Instruments and International Frameworks

4 Building the Business Case for CSR
4.1 Supporting the CSR Business Case
4.2 Critical Appraisal of the CSR Business Case

5 Realizing a CSR Strategy: A Roadmap to Success
5.1 Mapping the status quo
5.2 Creating a Visionary Target Set
5.3 Elaborating CSR initiatives: Best Practices
5.3.1 Philanthropic Giving
5.3.2 Reengineering the Value Chain
5.3.3 Transforming the Ecosystem
5.4 Continuing Progress Review

6 The Potential Benefits of a CSR strategy: A Stakeholder Approach
6.1 Consumers
6.2 Employees
6.3 Suppliers
6.4 Shareholders
6.5 Governments and NGOs

7 Summary and Conclusion
7.1 CSR as Critical Success Factor
7.2 Further Discussion, Limitations and Criticism

List of References

Appendix

List of Figures

Figure 1: Interdependence of Growth Loops

Figure 2: Product Life Cycle

Figure 3: Supply Chain Network

Figure 4: Bill of Materials of the iPhone 4

Figure 5: Average hourly Manufacturing Labor Costs 2002-2009

Figure 6: The Pyramid of CSR

Figure 7: The Triple Bottom Line

Figure 8: The Optimal Level of Responsibility

Figure 9: Roadmap for Building a CSR Strategy

Figure 10: Inside-out Linkages of the Value Chain

Figure 11: The Relevance Matrix

Figure 12: Corporate Giving in the U.S

Figure 13: The Issue-Material Matrix

Figure 14: CSR Project Portfolio

Figure 15: Corporate Stakeholders

Figure 16: Impact on Consumers’ Willingness to Pay

List of Tables

Table 1: Generic Value Chain CSR Efforts

Table 2: Social and Environmental Key Performance Indicators

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

Abstract

Incidents of corporate malpractice are tenaciously reported by mass media. Mass layoffs and record profits at the same time, manager salaries, scarcity of natural resources and imminent climate catastrophe, morally questionable advertising, child labor, corporate fraud, financial crises and the "Occupy Wall Street" movement are just a few examples of corporate social responsibility (CSR). These themes raise questions about justice for current as well as for future generations. This theoretical thesis reviews the four research questions: Why should multinational corporations engage in CSR? Can multinational corporations apply CSR and still ensure economic growth? How can multinational corporations follow a CSR strategy that strengthens their economic profitability instead of limiting it? What is the significance of multinational corporations’ responsible conduct to stakeholders? These questions will be analyzed by introducing the concept of corporate social responsibility, creating the business case for CSR, mapping a roadmap for successful implementation of a CSR strategy using best practice examples from the corporate world, and outlining the importance to understand CSR from a stakeholder perspective.

1 Introduction

“Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.”

― Kenneth E. Boulding

With rising living standards in the developed world, consumption has come to play a central role in people’s lives. We buy things to express our individuality, our personal identity. We define ourselves through the things we purchase, or despise to purchase. In 1955, Economist Victor Lebow wrote in the Journal of Retailing:

“Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption. The measure of social status, of social acceptance, of prestige, is now to be found in our consumptive patterns. […] We need things consumed, burned up, worn out, replaced, and discarded at an ever increasing pace.” (Lebow 1955)

The commerce sector with its multinational retail corporations are the engines of this consumption lunacy. Retailers’ ultimate concern is to keep prices down and inventory moving. They spend billions of dollars on extensive advertising campaigns each year to create a sense of brand identity that drags their customers back into their stores.

Retailers’ obsession to increase profits has led them to adopt numerous notorious measures that are manipulating consumers’ urge to purchase products they do not need. In the 1920s the concept of planned obsolescence was introduced, presenting a new way to stimulate consumer demand. Back then, the Phoebus cartel including light bulb manufacturers Philips, General Electric and Osram colluded in what has come to be known as the “light bulb conspiracy” and sought to control the global light bulb market by limiting the average life span of light bulbs to 1,000 hours (Wong 2012). The concept was specified in 1932 by Bernhard London who in his pamphlet “Ending the Depression through Planned Obsolescence” envisioned to counter the Great Depression and stimulating the demand of consumer goods by assigning a binding legal life span to capital and consumer goods (London 1932).

Organizations applying the concept of planned obsolescence seek to control the consumer by manipulating a desire to own something sooner than necessary. Typical examples of obsolescence range from generic products such as plastic bags, coffee cups and nylon stockings to printers and software technologies. Planned obsolescence promotes the increasingly disposable nature of consumer goods, or, in other words, the dominance of products that are “designed for the dump”.

The result of planned obsolescence and related measures is a modern retail sector that is booming across the world. In 2010 the global retail industry reached a value of $10.5 trillion and is forecasted to grow at an anticipated CAGR of 4.6 percent for the five year period 2010-2015 (Datamonitor 2011). The world’s ten largest retail companies had combined sales of $1.24 trillion in 2011, according to international consulting group Deloitte (2013). Wal-Mart is not only the largest global retailer; with $447 billion revenues it is also the second largest company of any kind in the world (Cable News Network 2013) and its revenues exceed the GDP of Austria, Argentina and South Africa (The World Bank 2013).

While the short-term benefits of an expanding consumer demand and global economic growth are many, there is also a downside to boundless and redundant consumption. Figure 1 illustrates what Higgins (2013) calls the “interdependence of growth” among the reinforcing loops of consumption, economic growth and resource depletion. The economy feeds on natural resources and emits waste that threatens the global climate on which life relies. “This interdependence has locked society into what psychologists call a social trap, i.e., pursuit of short-term individual gains which leads to a loss for the group as a whole in the long run” (Higgins 2013).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Interdependence of Growth Loops

(Higgins 2013)

Corporations are now torn between their shareholders’ interests of profit maximization and their moral obligation to stakeholders, the society and the environment to do no harm and to serve the needs of the community. The forces of globalization and its numerous technological advancements, however, have increased productivity and put downward pressure on prices of consumer goods. Competition for market share has become so fierce that corporations have adopted management cultures that harm people and the environment in favor of short-term profits. “Survival of the cheapest” has become the credo incorporated in all aspects along the supply chain. But why has international trade resulted in such a rock-bottom price war?

Multinational retail brands are at the center of this debate. Corporate behavior is critically scrutinized by the public eye, “not only because of their products’ perceived adverse effects on consumers, […] they are attacked because the marketing machineries of branded corporations are perceived as the main source of social and environmental harm-doing in globally stretched supply chains” (Smith, Palazzo and Bhattacharya 2010 p. 620). The study of business theory implies that businesses exist to serve the local community by providing qualitative goods and services as well as job opportunities to the people. In an ever more globalized economy, however, labor intensive jobs are outsourced from the developed to the low-cost developing countries. Pictures of sweatshops circulate in the media while businesses green-wash their corporate image by investing vast amounts of money in corporate responsibility communication.

But what does business owe the world? How ethically responsible can we expect corporations to act? Are sustainability and economic growth mutually exclusive?

This thesis analyzes the social and environmental CSR issues that are typically resulting from a global supply chain throughout the life-cycle of consumer goods. The focus will be set on the retail sector, as this sector presents the paramount of controversial business practices with its brand-name multinational corporations (MNCs), sourcing their cheap consumer goods in the product categories apparel, shoes, toys, consumer electronics and others from contract manufacturers in developing countries. This paper specifically focuses on suppliers of consumer goods in China, as China is currently the world’s largest exporter and represents the country with the largest share of consumer goods exports to developed countries (Harney 2008).

For the immediate purposes of this thesis a number of limitations and premises need to be established.

- The scope of the term corporate social responsibility (CSR) and its synonyms corporate responsibility (CR) and corporate sustainability follows the dimension of the Triple Bottom Line (TBL), which is frequently applied to measure financial, social and environmental performance of a corporation. The definition and historical development of CSR are outlined in chapter three. The concepts of business ethics, corporate citizenship and stakeholder management are overlapping.
- The term supply chain is defined as the network of organizations, people, activities, information, and resources involved in moving a product from the supplier to the customer. When using the term supply chain the author refers to all actors participating in the product life cycle from raw material over finished good to product disposal (see Figure 2).
The analysis is focused on but not limited to the MNCs of the retail sector, i.e. international retailers (e.g. Wal-Mart) and brand-name multinationals (e.g. Apple)
- The terms retailers, retail brands, retail corporations, international brands, multinational corporations (MNCs) and multinational enterprises (MNEs) are used interchangeably

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Product Life Cycle

(cf. PE Energy 2012)

1.1 Research Motivations, Objectives and Questions

This thesis has been established as final paper in the course of achieving the bachelor’s degree of business administration at the HFU University of Applied Sciences. The topic corporate social responsibility was chosen for this thesis based on personal interests of the author in the theme. As CSR theory was no component of the academic syllabus of the international business program at the HFU business school, the author’s objective was to procure theoretical knowledge of the evolution of the concept of CSR. The thesis seeks to provide basic understanding of what CSR is, why the concept has come to gain such significance in the corporate world and how corporations can take advantage of CSR when applying the concept in management practice.

This thesis is a theoretical paper and was established in collaboration with two supervising professors of the HFU business school. The research conducted was purely qualitative and limited to secondary research as no organization was to be recruited for an expert interview. Extensive research has been conducted in the field of CSR, sustainability and business strategy and historical landmark literature has been reviewed.

The research questions that have been examined in the course of this thesis are:

1. Why should MNCs engage in corporate social responsibility?
2. Can MNCs apply CSR and still ensure economic growth?
3. How can MNCs follow a corporate social responsibility strategy that strengthens their economic profitability instead of limiting it?
4. What is the significance of MNCs’ responsible conduct to stakeholders?

This thesis is divided into three sections. The first section is comprised by chapters two and three, with chapter two aiming at providing a basic understanding of the tense issues of corporate supply chain practices that form the starting point of the CSR debate, and chapter three introducing the CSR theory and analyzing whether the generic CSR tools are sufficient to improve the ethical conduct of the supply chain. Chapters four and five comprise the main section of this thesis which identifies the controversial business case for CSR and outlines a roadmap for how to implement a CSR strategy that creates benefits to the corporation by using supply chain practices as positive reinforcement. By doing so, the author defines possible impacts of a CSR strategy on MNCs economical performance, their competitiveness, or their brand image towards customers, employees, governments, NGOs and other stakeholders. Section three, comprised by chapters six and seven, presents the results in the form of the establishment of a holistic reasoning for (and against) a CSR strategy which will either legitimize the CSR strategy as an economically and ethically beneficial management approach or prove the strategy as uneconomical and invalid.

2 Global Supply Chain Analysis: Survival of the Cheapest

The global retail industry is home to a number of retail formats that vary in size, product segment offer and geographic reach. Datamonitor (2011) defines six product segments: food and grocery, apparel, house and garden, electronics, media products and sports and leisure. There is an increasing number of consumers that international retailers seek to attract with the two most successfully applied strategic business approaches. Retail giants such as Wal-Mart, Carrefour, Sears, and many more typically compete on low-cost merchandize in all six product segments and follow a low-cost-high-volume strategy that is based on economies of scale and efficiency. On the contrary, brand-name multinationals such as Nike, Coca-Cola and Apple, usually compete in only one respective product segment and differentiate themselves from their competitors by building a strong brand identity, which legitimizes them to charge premium prices for their products.

Yet, players of both retail formats have come under attack by social activists, the media and NGOs for not being content to promote and audit their supply chains regarding safe working conditions, fair wages, usage of toxic chemicals and other related issues. This chapter outlines the global supply chain of consumer goods, analyzes the impacts of marketing on the supply chain as well as China’s situation as the world’s largest manufacturer of consumer goods. The author will identify the social and environmental consequences of multinational corporations’ universal cost-cutting strategies that form the basis for the debate on the necessity to adopt responsible business conduct.

2.1 The Supply Chain of Consumer Goods

Wal-Mart offers a great deal on its website on the Toshiba SD3300 Progressive Scan DVD Player, made in China, for only $29.00 (Wal-Mart 2013a). In 2010, Apple offered its iPhone 4 for $600.00 (Barboza 2010). Buyers of the DVD player value the low price, whereas buyers of Apple’s popular high-end mobile device value the style, brand image and the sense of social belonging that is attached to the product.

In order to learn about the composition of these prices, the supply chains of the respective products need to be investigated. Figure 3 schematically illustrates a generic supply chain of any consumer good’s journey from raw material to the end consumer. The finished consumer good represents the link between the supply and demand network, while the size and structure of the network may vary with different product categories. Through vertical integration, different levels of the supply chain can be bypassed such as, for example, the function of the wholesaler that becomes redundant to retail giants such as Wal-Mart, who order quantities large enough to source their products directly from manufacturers and sell to end consumers via a comprehensive distribution network.

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Supply Chain Network

(cf. Wieland and Wallenburg 2011)

The DVD player and the iPhone are similar to most consumer goods offered by international retail brands that are subject to global commerce where the design, manufacturing and assembly of products often involve several countries. And while it is virtually impossible to reproduce the bill of materials of a generic DVD player available at a department store of choice, international electronics brands such as Apple are frequently subject to research firms who tear down a specific product to identify its exact bill of materials.

An analysis by IHS iSuppli on the iPhone 4 revealed that a total of over 100 components are sourced from South Korea, the United States, Germany, Italy, Taiwan and Japan (Barboza 2010, see appendix A1). The total bill of materials on the $600 iPhone is $187.51 (see Figure 4). The components are shipped to factories in southern China for final assembly, which accounts for only 1 percent of the retail price. By comparison, Apple’s decision to manufacture its iPhone in the United States or in Western Europe, would add a multiple of two or three to its labor cost. The increase in total production cost would be negligible and the product would still be highly profitable (Ojo 2011).

Abbildung in dieser Leseprobe nicht enthalten

Figure 4: Bill of Materials of the iPhone 4

(cf. Barboza 2010)

Regardless of whether a corporation follows a low-cost or a differentiation strategy, key element of any sourcing strategy is the pressure on procurement costs. “Companies that were traditionally satisfied with a 100 percent mark up between the cost of the factory production and the retail price have been scouring the globe for factories that can make their products so inexpensively that the mark up is closer to 400 percent” (Ortega 1998 cited by Klein 2000 p. 197). Orders are usually placed with one contractor, “who may well turn over these orders to as many as ten subcontractors, who […] may in turn pass a portion of the subcontracts on to a network of home workers who will complete the jobs in basements and living rooms” (Klein 2000 p. 201). “Workers are paid less than a dollar an hour to solder, assemble and package products for the world’s best-known brands” (Barboza 2010).

However, even the supply chain of renowned brands such as Apple, who in January 2012 yielded to intense public criticism and released a list of its suppliers on its website, is untraceable beyond first-tier suppliers (Wingfield and Duhigg 2012). In addition to the price tag and the “Made in China” label, the consumer in the retail outlet usually lacks information about the origin of the materials built into the product and the working conditions in the supplier factories that manufactured or assembled the components of the finished product. The consumer rarely knows whether a product contains conflict minerals, whether child labor was involved somewhere along the supply chain, or whether the components were treated with toxic chemicals that may present a health threat to producers, users, and disposers alike. The lack of information about the products’ supply chains leaves the socially conscious consumers unfit to base their purchasing decisions on.

The trend towards the conscious consumer is apparent in research studies. According to the 2013 Cone Communications/Echo Global CSR Study, 91 percent of global citizens believe companies must go beyond the minimum standards required by law to operate responsibly, whereas one-in-five consumers proactively seek to purchase products and services they feel are ethically produced every time they shop (Cone Communications 2013).

As a result, corporations are increasingly held responsible for the hidden cost in their supply chain. The media frequently reports on corporate negligence concerning child labor, inhumane working conditions, collapsing factories, workers’ suicides and other issues.

2.2 The Impacts of Marketing

The marketing machineries have taken control over branded corporations’ supply chains. By outsourcing production to low-cost countries, corporate marketing budgets have been expanded while “the competitive pressures of manufacturing – low costs, order completion, and quick delivery – were transferred to suppliers” (Lim and Phillips 2007 cited by Smith et al. 2010 p. 620).

Phil Knight, CEO of Nike, argues that “there is no value in making things anymore. The value is added by careful research, by innovation and by marketing” (Katz 1995 cited by Klein 2000 p. 197). In fact, most of the value in high-end products is captured at the beginning and end of the value chain, by the brand and the distributors and retailers. That is why many brands now bypass production entirely and source their products offshore from third party manufacturers.

This development away from in-house production, from vertical integration, has caused an enormous job-flight; 45,000 U.S. apparel workers lost their jobs in 1997 alone (Klein 2000). Along with the jobs vanishes the old-fashioned idea that a manufacturer is responsible for its own workforce. “The global brands are sloughing the responsibility of production onto their contractors; they just tell them to make the damn thing, and make it cheap, so there’s lots of money left over for branding” (Klein 2000 p. 198).

“Products are made in the factory, […] but brands are made in the mind” (Klein 2000 p. 195). By investing unsettling amounts in marketing campaigns, international brands such as Apple, Coca-Cola and many more are able to create a sense of brand identity in the minds of consumers that is completely disconnected from the product. The results are companies such as Wal-Mart, which is the world’s most admired company while at the same time being subject to harsh criticism and a symbol of “what is wrong with the 21st century capitalism” (Smith et al. 2010).

Multinational corporations’ business priorities become apparent when considering the allocation of funds across business units. “After the multimillion-dollar sponsorships have been signed, and the cool hunters and marketing mavens have received their checks, there may not be all that much money left over” (Klein 2000 p. 196). Hence, multinational corporations typically face downward pressure on materials, manufacturing and overheads budgets. These budget-cuts are passed on to suppliers, who are then required to deliver the same goods at lower prices.

2.3 China’s fate as the World’s low cost Manufacturer

China’s competitiveness as low-cost manufacturer of consumer goods is exceptional and its ability to undercut prices has become legendary. Cheap consumer goods “Made in China” have gained shelve space all over the world. Exports, mainly from coastal China, have grown from $24 billion worth of goods to the world in 1984 to $2,049 billion in 2012 (Trading Economics 2013 ). China has overtaken Germany and the United States as both the world’s largest manufacturer and exporter (Marsh 2011; Thompson 2010).

The main reasons for the competitive advantage of Chinese goods over goods produced in other countries are the low labor costs, illustrated in Figure 5, and the low exchange rate that has made Chinese products relatively cheap. Workers in China were paid an average of only $1.74 per hour in 2009, far less than their East Asian neighbors in Japan ($30.03) and roughly par with workers from the Philippines, who were paid an average of $1.70 (U.S. Bureau of Labor Statistics 2013). However, these wages are still high compared to a 1998 study of brand-name manufacturing in China which found that Wal-Mart, Ralph Lauren, Ann Taylor, Esprit, Liz Claiborne, Kmart, Nike Adidas, J.C. Penny and the Limited were paying their workers as little as 13 cents an hour (Klein 2000, see Appendix A2).

Abbildung in dieser Leseprobe nicht enthalten

Figure 5: Average hourly Manufacturing Labor Costs 2002-2009

(cf. U.S. Bureau of Labor Statistics 2013)

The world of contract manufacturing in China is a $250 billion industry but kept invisible to consumers (Barboza 2010). Merely a handful of companies like Foxconn, Quanta Computer, Pegatron, and Wistron manufacture and assemble for all the global electronics brands (Shu 2013). With 1.2 million workers in China alone and contracts to supply Apple, Dell and H.P., Foxconn Electronics Inc. is the world’s largest contract electronics manufacturer (Shu 2013; Barboza 2010). The manufacturer is also notorious for its poor working conditions and regularly hits the headlines with workers’ suicides (Jones 2012).

Supplier factories compete fiercely on price and earn small profit margins (Barboza 2010). Retailers compete in “the race to zero”, demanding continual price declines from their suppliers (Harney 2008). With their control over the supply chain, international brands have the power to make and break the fortunes of many of its suppliers. If one supplier cannot provide any given product at the demanded price, they find another supplier that can.

The codes of conduct, standards and supplier audits of multinationals impose a significant threat to contract factories. These require suppliers to follow the local labor law, limit working hours, install safety equipment and pay workers at least minimum wage before the factory will be approved as a supplier (Harney 2008). Complying with retailers’ standards and still meeting delivery deadlines and keeping production costs low poses significant pressure on factories, as they typically depend on the large orders involved in supplying to overseas markets.

In addition to forging workers’ time cards and rehearsing answers that buyers want to hear during factory audits, factory managers have developed a common approach to ensure compliance with the rules of retailers and still be able to meet delivery deadlines and offer competitive prices. Factory managers set up “model” or “five-star” factories that are designed to pass supplier audits, and outsource the major portion of incoming orders to what Harney in her book “The China Price” (2008) calls “shadow” factories. Shadow factories are typically not registered with the Chinese government, lack basic safety equipment or insurance and exceed legal working hours. Assembly-line workers are usually tucked shoulder-to-shoulder in windowless workshops toiling 10 to 12 hours a day, six or seven days a week (Barboza 2010). Even though brand-name multinationals buy much from those factories, no one ever actually sees any one of them. “Officially, this factory does not even exist” (Harney 2008 p. 35). An expert estimates that 99 percent of contract factories in China have a “shadow”, helping them to meet buyers’ demands (Harney 2008).

Many see a pessimistic future for the Chinese manufacturing and exporting sector. Manufacturing is about to get far more expensive with workers becoming increasingly powerful in demanding safe working conditions and fair pay and the government raising the legal minimum wage. Labor shortage is increasingly becoming an issue for supplier factories and the Renminbi's appreciation against the U.S. dollar is particularly threatening to Chinese products' competitiveness.

Brand-name multinationals such as Apple, with profit margins of as much as 60 percent, can cope better with increasing manufacturing costs than most companies. Most manufacturers, however, deal with much slimmer profit margins and the soaring labor costs pose a serious problem to them. In the attempt of finding ways to reduce manufacturing costs, many contract suppliers are now considering moving their factories inland, where wages are still 20 to 30 percent lower (Barboza 2010).

“There is growing skepticism about China’s manufacturing model” and experts from iSuppli Research agree that China’s labor-intensive manufacturing model is not sustainable (Barboza 2010). Analysts claim that this type of low-end assembly work is no longer favored in China. Pietra Rivoli, professor of international business at Georgetown University and author of “The Travels of a T-Shirt in the Global Economy”, argues that “China doesn’t want to be the workshop of the world anymore” (Barboza 2010).

China’s remarkable development over the past 30 years has lifted millions of citizens out of poverty, but it has also raised questions of sustainability as the country is confronted with serious social and environmental challenges. China has had to cope with all the problems of industrialization – an exploding population of migrant workers, pollution, water shortage, intensive energy use, resource depletion, rivers of sewage – and had none of the benefits. Sustainable growth is one of the key themes in its 12th Five-Year Plan (KPMG 2011). Also, China plans to strengthen domestic consumption in order to not depend too much on its exports.

3 Introduction to CSR: The Philosophy of Philanthropy

Two schools of thought have instigated the general debate on corporate social responsibility. On the one hand, the economist Milton Friedman stands for the efficiency theory, which limits its narrow view on business responsibility on shareholder wealth maximization. “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud” (Friedman 1962 p. 133). Opponents to Friedman’s theory support the social responsibility theory and stress the importance to broaden the view and take into account the interests of different stakeholders, such as employees, customers, suppliers, and communities when making business decisions. “Socially responsible companies not only try to be economically sustainable and profitable, but also endeavor to work with their employees, families, local communities and nation states to improve the quality of life in ways that are both ethical and sustainable in relation to society and the environment” (Cacioppe, Foster and Fox 2008 p. 684).

Every business impacts society. With the emergence of the concept of corporate social responsibility, a central debate has emerged about what can be expected from corporations and how accountable corporations should be held for their actions. To what extend should a business pursue profits? Should companies give parts of their wealth back to communities? What does business owe the world?

This chapter introduces the concept of CSR and outlines the evolution and distinct dimensions of CSR. Further, a number of generic CSR instruments are reviewed and the most popular international organizations in the field are introduced.

3.1 Origin and Definition

In 1909, the confectionary company Cadbury’s (now Cadburry Schweppes) was accused of knowingly buying cocoa produced by slaves in Africa. Almost a century later, in 2000, the company was accused of the same offence (Blowfield an Murray 2008). These events prove that throughout history, society has judged business from a moral perspective.

Howard R. Bowen is oftentimes regarded as the father of CSR (Moon and Vogel 2008). His book “Social Responsibilities of the Businessman” (1953) is argued to mark the beginnings of modern corporate social responsibility and has had a significant influence on future thought on the subject. Numerous writings in the following decades expanded the range of CSR definitions and advanced the theoretical concept as a whole. The “Father of Modern Management”, Peter Drucker, defined corporations’ responsibility as “primum non nocere”, translated as “above all, do no harm” (Cohen 2010) and Davis (1973 cited by Blowield and Murray 2008 p. 12) suggested that “corporate responsibility begins where the law ends”, implying that companies had certain responsibilities to society beyond their legal obligations.

In 1987, the United Nations World Commission on Environment and Development, also known as the Brundtland Commission, defined the related concept of sustainable development as the ability of humanity to ensure that it “meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development 1987).

In the 1980s and 1990s, overall interest in business ethics started to dramatically accelerate when the media brought attention to the harsh conditions of workers producing consumables for multinational corporations (Mamik 2004). Since then, more and more companies have realized the relevance of moral practices in their business.

Even though corporations seem to be seriously concerned about the topic, there is no universal definition of the concept of corporate social responsibility and its synonyms and related concepts. Broad and widespread disagreement about definition, scope and level of obligation exists. Definitions of corporate social responsibility are “constantly changing as society itself evolves, affecting our expectations of business and the way in which its relationship with society is handled” (Blowfield an Murray 2008 p. 36).

Should corporate responsibility be limited to what companies do to generate profits? To whom is business responsible? With these questions in mind Carroll (1991) has established a multi-dimensional CSR construct embracing four sets of responsibilities that has been applied in CSR research for over 25 years (Carroll 1991; Carroll and Shabana 2010). He defined the social responsibilities of an organization as the corporations’ fulfillment of the economic, legal, ethical and philanthropic expectations that society has at any given point in time. By differentiating between required, expected and desired responsibilities, Carroll made a distinction between the traditional responsibilities that reflect the old social contract between business and society, and the new responsibilities that reflect the new, broader, social contract between business and society (Carroll and Shabana 2010).

[...]

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Details

Title
Why should multinational corporations engage in Corporate Social Responsibility? Benefits of a CSR Strategy
College
Furtwangen University; Villingen-Schwenningen  (HFU Business School)
Grade
1,3
Author
Year
2013
Pages
69
Catalog Number
V457976
ISBN (eBook)
9783668931077
Language
English
Tags
Corporate Social Responsibility, CSR, Business Ehtics, International Business Management, Sustainability, Sustainability Management, CSR strategy, management trends, Corporate sustainability, Sustainable business, CSR management
Quote paper
Lisa Indlekofer (Author), 2013, Why should multinational corporations engage in Corporate Social Responsibility? Benefits of a CSR Strategy, Munich, GRIN Verlag, https://www.grin.com/document/457976

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