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Different Approaches to CSR
This assignment will critically discuss three approaches to Corporate Social Responsibility (CSR) which are as follows: CSR as value creation; CSR as risk management and CSR as corporate philanthropy. For the purposes of this assignment, the definition of CSR will be based on Carroll’s CSR Pyramid (1991) which states that the economic, legal, ethical and philanthropic responsibilities of the organisation are dependent upon their particular context (Crane and Matten 2010).
This first section of the assignment will critique CSR in terms of value creation. Value creation can be interpreted in two ways. Firstly, there are the values created by the organisation which influences its CSR practices such as their role, ethical stance and stakeholder management (Crane, Matten and Spence 2014). Secondly, there is the value created by the delivery of these CSR practices. This may include an economic value, such as the reduction in pollution costs, and a social value, in terms of a reduced negative impact on society (Griseri and Seppala 2010). The model of Carroll’s CSR pyramid (1991) argues that the economic and legal responsibilities of an organisation are expected by society, such as the payment of taxes and operating within the law. However the changing context of society also expects an organisation to undertake both ethical and philanthropic responsibilities, particularly in response to the increased power and influence of organisations within society (Crane and Matten 2010). An organisation undertaking these greater levels of responsibility can arguably create value both for themselves and the society in terms of responding to a wider societal need in terms of harm reduction and the creation of benefits and value. However, critics of CSR suggest that there is no tangible link between CSR and value creation, but this may be in part due to the difficulties in measuring these links (Crane, Matten and Spence 2014). In order to assist in an assessment of CSR, ISO26000 offers a pathway for organisations to improve and report their CSR activities but this is a voluntary scheme (International Standards Organisation 2013). Other CSR value creation methods include triple bottom line reporting which includes the measurement of value in terms of economy, society and environment. However it can be difficult to measure how these three merge together to contribute to value creation and often, each element is measured individually (Blowfield and Murray 2011).
The traditionally held viewpoint of an organisation is as a creator of economic value for its shareholders (Friedman 1970). However CSR as a value creation tool argues that both economic and social value must be considered and this needs to include a wider view of stakeholders (Haigh and Jones 2012). Organisational initiatives which may decrease harm in terms of pollution or natural resource usage could create value for the organisation in terms of lower economic costs, in addition to creating societal value in terms of a reduction in pollution. However, it may be the pursuit of lower economic costs which may be more of an incentive for organisations, particularly in the current economic climate.
The argument for a better understanding of CSR as value creation is through aligning economic and social value. Porter and Kramer (2011) suggest a concept of shared value as a route to, not only increase the connections between economy and society, but as a way of enhancing the organisation’s competitiveness and growth. This form of value creation focuses on the future of the organisation and its interdependencies on society as a provider of, and consumer of, its goods and services. However, this relationship may be affected by issues such as who the organisation views as its most important customers or stakeholders and what matters to them in terms of the value creation proposition of CSR (Basu and Palazzo 2008).
In conclusion, CSR as value creation has moved from a traditional economic based view to a more inclusive economic and social value one. Value can be created by providing different CSR approaches to an organisational role such as reducing pollution, which creates economic and social value, in terms of reduced costs and harm. Concepts such as Porter and Kramer’s shared value (2011) suggest that the connections between economic and social issues can create competitiveness. However issues with measuring social value have led to some criticism of CSR.
The second part of the assignment will consider CSR as risk management. Risk is defined as an uncertainty which has an impact which needs to be assessed and responded to through the process of risk management (Institute of Risk Management 2015). CSR as risk management will therefore need to consider external issues such as the changing societal context within which they operate and consider risks such as human rights, particularly if the organisation operates in different countries (Crane and Matten 2010). Changes in economic, legal, ethical and philanthropic responsibilities may create uncertainty, which the organisation will need to assess within their internal environment. Blowfield and Murray (2011) suggest that risk management may include areas such as brand value and reputation; working conditions and human rights. With an increasingly connected society, risk management and CSR will need to look at tangible risks, such as a business premises fire, and intangible risks, such as human rights in order to protect the reputation of the organisation. The tragedy of garment factory fires in Bangladesh have highlighted the need for greater worker protection but have also demonstrated the difficulties of implementing CSR as risk management in countries where regulations are weaker (Husock 2013). The process of CSR as risk management should therefore assess these factories in terms of the implementation and monitoring of health and safety issues in order to protect the human rights of the factory workers (Griseri and Seppala 2010). If CSR as risk management is designed to lessen an organisation’s negative impact on society, then this must include all stakeholders who are essential for the survival of the organisation (Griseri and Seppala 2010).
Blowfield and Murray (2011) cite Schafer (2005) who suggests that risk management tends to focus on the economic consequences and this forms the basis by which it approaches the risk management of social or environmental risks. However, most organisations are built around an economic model, so the tendency to view organisational issues may be through the economic viewpoint (Crane, Matten and Spence 2014). This viewpoint may reduce the understanding of risk management, in terms of reducing harms to society, as the emphasis will be on the economic impact, rather than the societal one (Margolis and Walsh 2003 cited by Blowfield and Murray 2011). This focus on the organisation and the impacts of risk upon them arguably narrows the CSR approach, however, without a broader, voluntary approach, governments may be forced to bring in regulations to change the behaviour of firms (Crane and Matten 2010).
The use of Carroll’s pyramid as a model for CSR highlights some of the areas of risk management. For instance, an organisation has legal and economic responsibilities to society such as paying tax and adhering to the law in the context within which they operate with the state providing a framework for risk management through legislation (Power 2004). Failure to do this may lead to consequences such as economic and legal sanctions such as fines. However, adhering to these economic and legal responsibilities also implies an ethical responsibility (Crane and Matten 2010). Tax avoidance by organisations arguably undermines the CSR approach of an organisation as it fails to consider the impact of this decision on the wider society, in terms of loss of income and the negative impact on the organisation’s reputation (Crane, Matten and Moon 2008). Here the risk management arguably needs to not only cover what might happen, but also to be undertaken in the context of the expected behaviour of CSR activities. Risk management may involve the reduction of harm to the organisation, but CSR outlines a wider approach, in terms of the lessening of harm to the wider society (Warhurst 2005).
In conclusion CSR as risk management needs to undertake a broader approach due to the connections between the organisation and society. Risk management addresses uncertainties and these are part of the changing context within which the organisation operates and therefore needs to include both economic and social issues. However, there may be difficulties with risk management in countries where regulations are weaker.
The third section will consider CSR from the approach of corporate philanthropy. Corporate philanthropy is defined as charitable donations made by organisations and is described as a desired responsibility of an organisation as per Carroll’s CSR pyramid (1991) (Crane, Matten and Spence 2014). Motivations for philanthropy may vary, but these charitable donations may be underpinned by economic motives such as increasing sales or to improve the public image (Crane, Matten and Spence 2014). Porter and Kramer (2002) argue that philanthropy is becoming more strategic for the organisation and in order to be effective for the organisation, in terms of achieving competitive advantage, needs to be assessed in terms of the economic and social impact of the philanthropic action. If an organisation’s CSR activities are strategic, this will support their competitive advantage (Husted 2003). For example, the organisation is part of the society within which it operates, so therefore its actions, positive or negative, impact on this society. If an organisation needs skilled workers in order to grow, philanthropy which improves the local education system could have both a societal and economic benefit (Porter and Kramer 2002).
An organisation may only have a limited knowledge of the society within which it operates in terms of the marketing and economic knowledge or it may be seeking to enter a new market. Here in order for philanthropic activities to have the greatest impact, it may be that partnerships with non-government organisations may be sought (Warhurst 2005). These partnerships may benefit organisations in terms of building relationships and trust within the local context and this may in turn provide access to a market for the organisation as well. Here the consideration of the internal and external context of philanthropy may increase its benefit to both the organisation and the society within which it operates.
There are a number of routes by which an organisation may choose to undertake philanthropic activities in order to gain the most benefit (Husted 2003). Three different options are suggested which include charitable contributions; an organisation-led project or a collaboration between the organisation and an NGO. Blowfield and Murray (2011:244) suggest a form of philanthropy called ‘venture philanthropy’. This focuses on the social impact of the philanthropic action by working in partnership with NGOs in order to alleviate a social issue (Blowfield and Murray 2011). Here the desired activity of the philanthropic activity considers the context within which it is operating in order to create benefits for the organisation and its community by reducing harms. This activity arguably creates a greater level of CSR for the organisation as it may be seen to be undertaking a role of corporate citizenship in the performance of its duties not only to itself, but to others (Crane, Matten and Moon 2008). Corporate citizenship, in terms of CSR, conceptualizes the role of the organisation in society in terms of their responsibility, such as philanthropic actions as per Carroll’s CSR pyramid (Crane, Matten and Spence 2014). However, it is the way in which the philanthropy is undertaken which seems to have the greatest impact on societal issues (Husted 2003). This includes whether the CSR as corporate philanthropy aligns with the organisation and the society which the philanthropy is aimed at. For example the donation of food by supermarkets to food banks has a number of CSR as corporate philanthropy elements such as a charitable donation, reduction of food waste and enhancing the reputation of the supermarket as helping the community within which it is based (Willsher 2015).
In conclusion, CSR as corporate philanthropy may undertake a number of forms including charitable donations and partnerships with NGOs. There are different motivations for corporate philanthropy and these may include increasing sales or improving the company image. The approach to philanthropy may depend upon the strategy of the organisation. If the organisation’s strategy and philanthropy are closely aligned, competitive advantage may be created.
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