Lecture Note On: Business Ethics & CSR

Chapter Six
Corporate Social Responsibility: In Practice
6.1 Responses to corporate social responsibility
Despite the widespread acceptance and practice of CSR, business enterprises are responding to it in
different ways. Business responses to CSR, ranges beginning with high acceptance and declining to little
or none. The businesses most committed to CSR are social enterprises. Such businesses practice the
social paradigm, which can be described as "Doing well by doing good." This means that the
corporation will undertake socially desirable activities that will result in its doing well economically.
Responses to CSR
Response Explanation Acceptance of CSR
Social Organizations that operate with a social mission without the intention High
enterprise- of operating to make profits with all earnings committed to social
social return causes or projects.
Social Organizations that operate with a social mission but with the High
enterprise- intention of making a profit. "Doing well by doing good" (social
mixed return paradigm). A portion of profits are committed to social causes or
projects with the remainder reinvested or returned to owners.
CSR CSR and sustainability placed high on corporate agenda. Often are Above average
recognition or larger corporations and traded on stock exchanges. Corporate giving
embracers and citizenship are involved. Publish "social reports" of their
initiatives. "Doing good by doing well" (economic paradigm).
Cautious CSR Recognize CSR and sustainability but focus on savings from Some recognition
adaptors environmental projects, energy cost reductions, material efficiency,
and risk reduction.
Tokenism or Corporations are not serious about CSR, but believe they should Low commitment
green washing respond. Might be forced into initiatives by non-governmental
organizations (NGOs), the media, or competitors. NGOs allege many
multinational corporations are responding this way.
Amoral Corporations, and their managers, simply ignore CSR, intentionally Very little, by chance,
or unintentionally. Difficult to identify and measure numbers. or legal requirement
Anti-CSR As CSR is widely accepted and practiced, it is unlikely that these Very little, most likely
corporations will identify themselves as being anti-CSR. Difficult to as required by law
identify numbers.
Unknown Businesses about which not much is known regarding CSR initiatives, Low, but not

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 Lecture Note On: Business Ethics & CSR
including small business enterprises and privately held companies. documented
There is a modest literature on CSR in these types of enterprises.
Many businesses are recognizing CSR as an essential aspect of management. Usually, these businesses
audit their activities and report them to relevant stakeholders. This response is based on the economic
paradigm, which can be described as "Doing good by doing well." This means that the corporation will
do well economically and then undertake to do good socially. The tokenism response is the one alleged
by some non-governmental organizations (NGOs) when they evaluate CSR programs.
An amoral response is believed that a corporation has no or very little social responsibility, or that the
corporation is an autonomous entity and not the creation of society. Lastly, the CSR response
"unknown" has not been widely studied.
Risks of Not Practicing CSR
Not responding to society's demands for CSR can be risky. The risks associated with not practicing CSR
include:
 Damaged reputation  Blockages, attacks against assets
 Negative media coverage  Decrease in share value
 Consumer boycotts  Failure to attract & retain quality
 Lost sales and revenues employees
 Labor disruptions
6.2 Corporate philanthropy, voluntarism, and sponsorship
Corporate Philanthropy: is the effort of business to contribute to society socially and is manifested by
donations of money or goods and services in kind; voluntarism, where corporate employees work for social
causes; and sponsorship of events that contribute to society. Also referred to as corporate giving, philanthropy
takes many forms. Three of these forms are discussed here: corporate giving, or the making of donations;
support for employee voluntarism; and sponsorship of social events and causes.

Corporate voluntarism: is the time and talent employees commit to community organizations with
support and/or consent from employers who recognize the value of such efforts to society. Corporations
view voluntarism as giving something back to the community and society beyond monetary donations.
In addition to employees, corporations now support the voluntary activities of retirees.
Corporate Policies Regarding Voluntarism

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 Lecture Note On: Business Ethics & CSR

Many corporations do not allow employee voluntarism to just exist without some policies formulated to
serve as guidelines in the activity. Some corporate actions that would encourage involvement in the
Volunteering section of their policies:
 Provide information for new employees on available volunteer organizations and opportunities.
 Provide recognition or awards to employees who volunteer in order to encourage additional
employee involvement.
 Encourage employees to volunteer via corporate-sponsored loaned executive and paid leave
programs
 Establish formal programs and designating someone to give administrative support.

Policies on voluntarism are of three types: encouraging, enabling, and promoting. Encouraging
policy statements set the tone or position of the corporation relating to employee voluntarism, and are
positive statements about the value of volunteer activities. Enabling policies provide guidelines to
managers and employees regarding the implementation of the positive policy. They often set the
boundaries and establish procedures relating to voluntarism; for example, the policy relating to a leave
of absence to work for a voluntary organization. Overall, enabling policies facilitate the participation
of employees in voluntary activity. The third policy category promotes participation in voluntary
activity. These promoting policies recognize and reward employee achievement in voluntary activities.

Corporate sponsorship: is defined as "a partnership, which has been established for mutual
benefit between a business sponsor and an event or a non-profit." A distinction should be made
between corporate donations and sponsorship. A donation is a gift that goes one way, from a
corporation to a charity, while a sponsorship, whether a single event or a series of events, confers
benefits on both parties. Sponsorship covers a wide range of sport, cultural, and educational events.
There are also examples of extending corporate sponsorship programs to such social concerns as
literacy, race relations, drug abuse, and environmental issues. Sponsorship provides a definite link
between business and social issues.

6.3 Social venture philanthropy (SVP)

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Social venture philanthropy is the investment of human and financial resources by corporations in
non-profit community development agencies to generate a social return instead of only a financial one.
This approach is also known as social venturing, the new philanthropy, and high-engagement
philanthropy. Sometimes it is used interchangeably with social enterprise, but there is a distinction.
Social venture philanthropy applies venture capital management practices to social responsibility.
Investments are made, but a social return is expected rather than a financial one. There is a high
engagement with the non-profit agency that provides leadership, bold ideas to address social problems,
and strong teams with an active board involvement. Whereas venture capitalists plan an exit strategy,
the social venture capitalist focuses on long-term funding and sustainability of the recipient.

6.4 Social auditing and reporting

Social auditing is a systematic assessment that identifies, measures, evaluates, reports, and monitors
the effects an enterprise has on society that are not covered in the traditional financial reports. The
purpose of social auditing is to provide information to management and to various stakeholders about
the impact of the enterprise on society, and to provide a basis of accountability for the social
consequences of corporate activities. Such audits can be used to assess existing performance, to
evaluate the performance of managers in relation to social objectives, to provide an information base
for planning, and to serve as a measure for assessing future performance.

There are many social auditing approaches. The main ones are:
Inventory-a listing of social activities without any evaluation.
Program management-a statement describing particular programs or initiatives, including an
indication of the resources committed.
Process-a more elaborate approach incorporating the inventory and program management
approaches. It includes an assessment of how each social program came into being, a statement
of each program's objectives and the rationales behind each activity, and a description of what
has been accomplished.
Cost or outlay-a social-economic operating statement that tabulates the expenditures an
enterprise makes on social objectives less the negative costs for social objectives not addressed.
The approach is to measure the total social impact, positive and negative.
Social responsibility accounting-a system of accounting that tabulates social costs and benefits
with the objective of the best social return for the social investment made.

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Social indicators-an audit of the community is conducted using social indicators to provide
data on the most pressing needs. Corporate social performances are compared or related to
community or social indicators.
Corporations have moved beyond the social auditing approaches listed above. The following is a
representation of the trend to the more sophisticated social auditing necessary for sustainability
reporting:
 Social objective setting-In addition to economic objectives, corporations are establishing social
and environmental objectives and reporting on their accomplishments in corporate annual reports.
•
 Triple bottom line reporting-Corporations prepare and publicize reports outlining economic,
social, and environmental criteria and the extent to which they have been satisfied. Examples of
such bottom lines are economic, ethical, and environmental, and people, planet, and prosperity.
 Social reports-Quite often the objectives and triple bottom line criteria are presented in
comprehensive social reports prepared by the corporations themselves.
 Sustainable guidelines-Comprehensive sets of economic, social, and environmental criteria and
performance indicators are being developed by organizations independent of corporations such as
business research institutes, consultants, and non-governmental organizations (NGOs). These
criteria and indicators are also referred to as guidelines or benchmarks and are being used in the
preparation of social reports.
 Externally verified social reports-The corporations are using outside, independent organizations
not only to develop the guidelines, but also to verify the corporation's performance relating to the
guidelines. This independent verification is a major turning point in social reporting, or
sustainability reporting. Although this practice is not widespread, it is gaining acceptance.
 Consultation with stakeholders-Some corporations are consulting stakeholders on the preparation
of CSR or sustainability reports. Such consultation obtains the views of relevant stakeholders and is
another approach to evaluating the corporation's CSR program.
Social reporting is a management function that documents the corporation's economic, ethical/social,
and environmental responsibilities and initiatives, and communicates this information to relevant
stakeholders. It is also known as sustainability reporting. Managers and businesspersons must now be
familiar with this trend and its implications. Traditionally they worried about financial audits, but now

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many corporations are performing audits or developing reporting mechanisms that measure how well
the corporation is achieving its social responsibilities as well as its economic responsibilities.
Three reasons why reporting is necessary are:
o To maintain the corporation's reputation
o To meet the demands of stakeholders
o To sustain corporate profitability
6.5 Corporate reputation and CSR
Corporate reputation is a perceptual representation of a corporation's past actions and future
prospects that describes the corporation's overall appeal to all of its key constituents [stakeholders]
when compared with other leading rivals. It is often associated with corporate image, especially as
promoted through public relations. The problem is that a corporate image has a temporary effect and
is not an enduring solution to the relationship between business and society. Today corporate
reputation is related more to the "character" of the corporation and involves corporate credibility,
trust, and responsibility. Corporate reputation is an asset, though an intangible one. It is difficult to
measure, although surveys attempt it. Reputation is measured by being able to do the right thing, and
through CSR reporting corporations hope to convince stakeholders that they are indeed behaving this
way. A distinction should be made between CSR and corporate reputation. CSR involves the way in
which a corporation interacts with its stakeholders, whereas corporate reputation focuses on the
perceptions that stakeholders have about the corporation as a result of the interactions. Thus,
stakeholders' impressions are most often formed by a corporation's CSR performance. The drivers of
corporate reputation include customer service, ethical conduct, community involvement, employee
relations, quality of products and services, innovativeness, and environmental stewardship. A
connection exists not only between corporate reputation and stakeholders but also to issues
management and strategy. Stakeholders determine the issues that affect reputation, and managers
must address stakeholders and the issues that concern them. Because reputation is good for business,
responsibility for it lies with all managers, starting with the chief executive officer (CEO). A corporate
reputation builds trust with stakeholders, might enable the corporation to command higher prices,
attracts qualified people, and minimizes the risk of damage from a crisis. Corporate reputation rather
than image has become a key to a successful corporate strategy.

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