Corporate Social Responsibility and Ethics

An Overview of CSR: What is CSR and how is it applied to core functions and activities of a company.
Individual

Vrullim Buja 3/29/2013

Table of Contents Introduction ...................................................................................................................................................................3 Levels of CSR ..................................................................................................................................................................4 Theories of CSR ..............................................................................................................................................................5 Utilitarian theories ................................................................................................................................................6 Managerial theories ..............................................................................................................................................6 Relational theories ................................................................................................................................................7 CSR in practice ...............................................................................................................................................................7 Responsibility to customers ..................................................................................................................................8 Responsibility to suppliers ....................................................................................................................................8 Responsibility to employees .................................................................................................................................8 Responsibility to society .......................................................................................................................................8 Conclusion .....................................................................................................................................................................9

Introduction

In the late 60's and early 70 is shown the term Corporate Social Responsibility after the formation of the term stakeholder, this term is presented for the first time in book Strategic management: a stakeholder approach of R. Edward Freeman, in 1984. Recent years Corporate Social Responsibility (CSR) has taken a wide range of use in businesses. Moreover, CSR has become the essential need to operate a successful business, this is happening for economic reasons therefore for monetary benefit also for the benefit of society and other benefits to companies in general. Being based on the breadth of this term yet there is not a concrete definition that represents and describes what actually the term CSR is. There are many different definitions made by different institution but none of these do not completely describe the term CSR. CSR has been discussed by many authors and institutions that have given their definitions for this term that we will present below. Three of the definitions that will be presented have been selected as definitions, frequently used in internet. (Dahlsrud, 2008) Commission of the European Communities defines CSR as follows: A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a v oluntary basis ( Comission of the European Communities, 2009) This definition is the most frequented one in the use of internet because it is categorized in five dimensions of the CSR: voluntariness, stakeholder, social, environmental and economic. Using these dimensions this definition is the first on the list of 37 most frequented definitions of CSR. Commission of the European Communities is using this definition since 2001 without any changes; this definition is used in many commission reports. (Dahlsrud, 2008) Otherwise, the CSR definition of World Business Council for Sustainable Developments is: CSR 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 at large (Holme,et al, 2000) From the research made, we have seen that the definition of CSR is understood differently in different locations. For example, there are differences between USA and Europe, in United States the CSR is defined and understood as philanthropic model, in that way that companies make profit and fulfill their duties by paying taxes and donating to charity events, in this way they try to

profit by giving. On the other hand, CSR in Europe is focused more in core business and they are more socially responsible, they prefer to invest in communities to create solid businesses by integrating society. (Baker, 2004) Moreover, we have another definition made by Business for Social Responsibility: Business decision making linked to values, compliance with legal requirements and respect for people, communities and the environment (Dahlsrud, 2008) Furthermore, one can say that CSR have many definitions which are different but all of them are focused on how we manage our core businesses, therefore is in everyone's consciousness that how much of the CSR he/she wants to apply in a company.

Levels of CSR
Levels are shown on Archie Carrolls Pyramid of Corporate Social Responsibility.

(GEVA, 2008) Economic Responsibility is the first CSR level; it can be explained as a level of selling goods and services with the return of profit.

Legal Responsibility is a level of a fair manner that a corporation should apply by competing with other businesses, and it means regulations and laws. Ethical Responsibility is the third level of CSR and has to do with operations in which corporations has to obey the law and operates according to ethics and norms of the society where the firm operates. Philanthropic Responsibility is the level of donating money to people in need, and giving voluntary help in natural or other disasters. According to these levels below we will use examples of the different companies. (GEVA, 2008)

Theories of CSR

The issue of CSR theories for many years has been fierce debate among many scholars who have tried to present this issue through theories. To classify CSR theories initially first steps made Preston in 1975, many scholars pursuing his ideas have tried to raise several theories regarding the issue. First division of CSR theories is made by Garriga and Mele in 2004, who divided these theories into four groups: Instrumental theories, political theories, integrative theories and ethical theories (Garriga,E. et al, 2004) Scholars after several attempts to define and to simplify CSR theories have managed to create three groups of theories which are: Utilitarian, Managerial and Relational theories. Furthermore, major contribution to the development of these three groups of theories has given Scott and Klonoski (Secchi, 2007) Moreover, Scott has given his contribution following three ideas of systems theory: natural, rational and open, and on the other hand essential source for these theories has been Klonoski by presenting three CSR approaches: amoral, personal and social. (Secchi, 2007)

Utilitarian theories

Utilitarian theories or known as traditional or mechanicist are defined as a part of the economic system. Utilitarian theories have traditional approach and the cooperations that follow these theories are profit maximizations, these theories are accepted by Liberals or neo classicists and Keynesians. Separation of this group of theories into two sub-categories makes more clear and understandable the basis of these theories: 1. The Theory of Social Costs and 2. The Theory of Functionalists Additionally, utilitarian theories are known as external economies and the two sub-categories has to deal with external factors, the theory of social cost has achieve social performance by solving economic and social problems. (Secchi, 2007) The other theory is the theory of making profit, the functionalists. Many authors call supporters of this theory integralist or productivist. (Klonoski,R.J, 1991) Managerial theories Theories that make managerial view different from the utilitarian are theories that consider social responsibility from the other point of view, from inside the firm. These theories are concentrated inside the firm and are firm centered. Managerial theories are divided in three sub-groups: 1.Corporate Social Performance (CSP); 2. Social Accountability, Auditing and Reporting (SAAR); 3. Social Responsibility in International Business (Secchi, 2007) The first managerial theory scholars emphasize the study of social performance inside the corporation and try to quantify the contribution of the social to develop economic performance. Hereupon, managerial theories try to manage together the social and economic variables and struggle to draw the best. Into this theory scholars attempt to crate tools for managers to organize social responsibility using social performance. The second managerial theory is strictly connected with social performance because through accounting, auditing and reporting practices measure the social performance, moreover these theories are divided. The scholars of this strategy explain that this theory provide practical tools to promote CSR, making based on facts and reports. Social Responsibility in International Business is publicized for the reason that numerous corporations carry different operation activities in foreign countries by facing and increasing

global market. Furthermore this theory explains that every corporation has to study social responsibility in multinationals. (Secchi, 2007) Relational theories Relational theories are combination of firm and environment relationships. Scholars who follow this theory on the basis of analyzes have relations. Likewise, this theory tries to define itself by combining and creating relation between two other theory groups: utilitarian and managerial. This theory is divided into four sub-theories which are: 1. Business and society; 2. Stakeholder approach; 3. Corporate citizenship and 4. Theory of social contract. Business and society sub-theory is that theory in which scholars analyze society, and the role of the organizations and corporations playing in it. This theory can be called as well business in society. Stakeholder approach is can be explained as a model for studying relationships and a way to foster social responsibilities. Corporate citizenship means what corporations do and their results and the processes through they reached to do it. Theory of social contract is analyzing the social relation between corporation and society by justifying the morality of economic activities. (Secchi, 2007)

CSR in practice
CSR is not defined by the rules and obligations, but has to do with the opportunities that companies add to the value of their activities being concerned about society and the environment. Furthermore, CSR take into account values, feelings and perceptions, it search for win -win game by adding value to all participants on activities, moreover it is open and transparent. (Anchorage Web site, 2010) Below will present the use of CSR in the companies like Casio and Daikin (one produces different technology products, the other is air condition and chemical production technology) which are applying CSR in their operations activities. (Daikin Industries, 2013) (Casio Corporation, 2013)

Responsibility to customers Any company that has to plan the application of CSR should have responsibilities in relation to the customer; this liability represents the introduction of safer products offered to consumers, product development initiatives, activities to maintain customer satisfaction, responsible advertising and fair competition by preventing corruption. (CSR WeltWeit, 2012) Responsibility to suppliers Through various surveys carried out in different companies we have seen that the application of the responsibility to suppliers is great. Responsibility to suppliers brings: fair transactions, compliance with the law from both sides, protecting the environment, strengthening the relationship with the supplier, (CSR WeltWeit, 2012) Responsibility to employees Based on the conditions of work offered in a company obviously influenced the development of the company in general. High-quality organization of human resources in the company has a special role in the company's achievements. Contribution to the development of the corporation through creation of opportunities for challenge and improvement using human recourses is the base application of responsibility to employees into Casio Corporation. Hence, some of these responsibilities are: favorable working condition, healthy conditions, ability to promotion, etc. (Casio Corporation, 2013) Responsibility to society Both our companies that we have taken as examples of good application of CSR definitely show great responsibility to society and social welfare. Hence, Casio has five priority areas where they apply the responsibility to society; in education of the next generation, environment, community service, study and research and culture and arts. Furthermore, in education for the next generation it applies the responsibility in many ways; organizing classes in the company, factory tours, school visits etc. They represent a greater responsibility for the environment organizing tree planting events and reducing gas emission in their factories. Moreover, they meet and increase their value in this aspect with the sponsorship of different cultural and artistic events, also by expressing their willingness for voluntary emergency assistance to the society. (Casio Corporation, 2013)

Conclusion

Bearing in mind what we have discussed above one can draw a conclusion that companies should apply CSR in order to have benefits for the company and obviously to repair the company's image in society. Moreover, caring and be concerned for the benefit of society and those who surround a company where it operates, the company has undoubtedly unwritten responsibilities and obligations to society. Furthermore, based on research done we found that the company except that makes profits for personal gain they are very committed to society and their surroundings. Furthermore, following CSR has greatly influenced the well company known Coca Cola, which is recognized worldwide and operates in different countries. The opening of factories in different countries without having the information necessary for the environment where they have opened their manufacture caused Coca Colas problems with society. The conflict between Coca Cola and an NGO in India in 2003 was arising when the NGO reported the presence of pesticides into the Coca Cola can. This conflict has been completed with the report that the content of pesticides in Coca Cola has not been the fault of the company but the problem was showed for the reason of a water pollution and greater use of groundwater. (Cedillo Torres, C. et al, 2012) On the other hand, one can find companies operating in different countries using the resources of that respective country and carried no social responsibility. One such example is Shell and other oil and gas firms that exploit the resources of Nigeria by destroying the environment and society around. Considering all the examples that were mentioned one can conclude that using CSR is essential for the wellbeing of the company, it also increases the responsibility of every corporation, and this way causing the corporation to have increase in profits.

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