CM2 Scope and Challenges of CSR
René DIAZ PICHARDO, PhD, HDR
Associate Professor and Researcher at the Strategy and Entrepreneurship Department
[Link]-pichardo@[Link]
Mohamad Rabih EL JAMMAL, MBA
[Link]-jammal@[Link]
Recent Business Scandals
Year Company Sector Ethical Issue Consequences
2001 Enron, US Energy Financial. Hiding billions of dollars in debt from USD 63 billion bankruptcy.
failed deals and projects by the use of Managers imprisoned.
accounting loopholes, special purpose entities,
and poor financial reporting.
2002 Arthur Auditing and Financial. Ignoring the accounting practices of An excellent reputation was
Andersen, US consulting Enron and destroying (during prosecution) destroyed. Auditing portion went
documents related to those practices. out of business.
2002 WorldCom, US Telecomm Financial. Reporting billions of dollars in Managers were condemned to 65
expenses as if they were capital investment to years in prison because of fraud,
meet profit expectations. conspiracy, and other charges.
Recent Business Scandals
Year Company Sector Ethical Issue Consequences
2015 Volkswagen Automotive Environmental. Incorporating a software that CEO resignation.
Group, detected when the car were being tested Recalling of millions of cars and
Germany changing the performance accordingly to costs of 6.7 billion euros.
improve results in pollutant emissions and
achieve compliance (11 million cars worldwide).
2017 Apple, US Mobile Environmental. Trying to force users to upgrade Customers’ distrust. The company
Telephony by deliberately slowing devices as they aged. offered a discount on battery
replacements.
2018 GlaxoSmithKli Pharma- Corruption. Using a network of travel agencies Head of GSK China deported.
ne, UK ceutical to channel around USD 489 m in bribes to Fine of 3 billion yuans.
health officials in China.
2019 Facebook, US Social Media Social-political. Mishandling of users’ Customers’ distrust.
information in relation to the Cambridge USD 5 billion penalty in the US.
Analytica breach (2016). Repeatedly use of Need for changes to its privacy
deceptive disclosures and settings to undermine practices.
users’ privacy.
Ethical Issues in Business
▪ Ethical issues arise when the interests of one or more stakeholders
are negatively affected by the activities of the business organization.
▪ Ethical issues are not obvious and arise at the individual, group, and
organizational levels… and beyond!
▪ Strategy development has implications for the personal careers of
those concerned; so, managers can find difficulties establishing and
maintaining a position of integrity.
▪ How to know what is good and bad?: normative ethical framework,
consequence-driven decision making, deontology.
Myths and Reality in Business Ethics
MYTH REALITY
Being ethical is simple, everybody can Ethics is very complex, most people (around 80%) are followers when it
distinguish between good and bad, it comes to ethics. When asked by some kind of authority to do something
cannot be taught. unethical, most will do so. Ethics must be developed in adulthood by dealing
with ethical dilemmas.
Unethical behavior is just the result of Most unethical behavior is supported by the culture – reinforce or neglect –
“bad apples”. of the organization in which it occurs.
Ethics can be managed through formal Consistency of both formal and informal systems are necessary: Ethics must
ethics codes and programs. be grounded on culture and the every-day talking and doing of the
organization.
Ethical leadership is mostly about Ethical leaders must demonstrate personal ethics themselves, make their
leader integrity. expectations of others’ ethical conduct explicit and hold all of their followers
accountable for ethical conduct every day.
People are less ethical than they used Business ethics scandals are as old as business itself. But now we have more
to be. access to the media.
Ethical Decision-Making in Business
▪ Individual (cognitive, affective, identity, intentions, focus on the
ends vs. means).
▪ Organizational (leadership, ethical climate, and language,
ethical infrastructure – ethics codes, committee, communications,
Factors training, monitoring systems, rewards/punishment).
Influencing ▪ Industrial (what is considered acceptable or not in an industry
Decisions or sector).
▪ National (what is considered acceptable or not in a
country/region – culture, political stability).
▪ Particular issues (circumstances and consequences).
Cognitive Ethical Decision-Making Process
Moral
• Identification of the moral issue (moral sensitivity).
Awareness
• Is it right or wrong? Three levels:
• Obedience to authority, fear of punishment, or exchange in
relationships.
Moral
Judgment
• Rules or laws, or expectations of significant people.
• Universally held principles of justice and rights.
• Degree of commitment to taking the moral course of action,
Moral
valuing moral values over other values, and taking personal
Motivation responsibility for moral outcomes.
Moral
• Doing wrong, doing right… or doing better.
Behavior
Business as usual (Neoclassical perspective)
Traditional business
Organisations must Managers
prevent negative are agents
behaviours of shareholders
Men are self-centred Shareholders bear
(Men are opportunistic) most of the risk
Management is a Organisations Shareholders
positive science are amoral own the company
Sustainable business
Sustainable
Traditional business
Organisations
Organisations
must Shareholders
Managers
prevent
benefitnegative
from are
areagents
but a
positive
behaviours
behaviour ofstakeholder
shareholders
Organisations
Men are self-centred Shareholders
Employees bear
bear
are spaces of
(Men are opportunistic) a most
considerable
of the risk
risk
collaboration
Management is also
Management is a Individuals
Organisations
have Shareholders
constrained by
positive science moral
are amoral
identity own
own
thethe
right
company
to profits
individual emotions
Corporate culture
Corporate Instrument
Culture Agency Moralist Altruist
egoist alist
Maximise
Enlightened Moral Intrinsic
Description Amoral short-term
self-interest pragmatism morality
profits
Egoistic at Moral respect Moral respect
Moral Egoistic at
Pure egoism corporate for normative for normative
orientation corporate level
level actors actors
Pragmatic regard
Purely self- Regards Regards Consideration of
Perspective centred shareholders shareholders
for derivative
others
stakeholders
Instrumental Normative and
Relevant Normative
None Shareholders use of derivative
stakeholders stakeholders
stakeholders stakeholders
From shareholders to stakeholders
Government Investors Political groups
Suppliers Company Clients
Professional Employees Community
associations
Stakeholder definitions
▪ Stanford Research Institute:
o “those groups without whose support the organisation
would cease to exist”.
▪ Freeman & Reed, 1993:
o Wide sense: any group or individual that is affected by or
affects the achievement of an organisation’s objectives.
o Narrow sense: any group or individual on which the
organisation is dependent for its continued survival.
Types of Stakeholders
• Economic (customers, suppliers, distributors, banks, and owners /
shareholders).
• Internal (employees and executives).
• Social/political (policy-makers, local councils, regulators, non-for-
profit organizations, and government agencies).
• Technological (key adopters, standards agencies, and suppliers of
complementary products or services).
• Community (neighbors).
• Ecological (animals and plants, and their ecosystems).
Stakeholders
Typology
1 2
4
POWER LEGITIMITY
7
1 – Sleeping
5 6 2 - Discretionary
3 – Demanding
4 – Dominant
URGENCY 5 – Dangerous
6 – Dependent
3 7 - Definitive
Categorizing Stakeholders
The interests of all stakeholders merit consideration
for their own sake, and not merely because of their
ability to further the interest of someone else or
because of their power.
Managers should articulate the shared sense of the
value they create and destroy and what brings the
stakeholders together.
What to do to Reinforce Business Ethics
• Comply with legislation.
• Communicate the importance of ethical standards through adequate
measurements and rewards (punish unethical conduct). They must be
as important as the short-term bottom line.
• Implement ethics programs (including ethics codes) to build employees’
awareness of ethical issues and willingness to report misconduct.
People must know what to do in facing ethical dilemmas.
• Informally reinforce ethical conduct (through role models and
storytelling) and promote ethical leadership.
Corporate Social Responsibility (CSR)
It is the commitment by organizations to behave ethically and
contribute to economic development while improving the quality of
life of the workforce and their families as well as the local community
and society at large while preserving the natural environment.
It is defined and implemented at the organizational level.
It should imply improving the sustainability performance of
companies instead of “greenwashing”.
Visual History of CSR 1/2
Latapí Agudelo et al. (2019).
A literature review of the
history and evolution of
corporate social
responsibility. International
journal of corporate social
responsibility, 4(1), 1-23.
Visual History of CSR 2/2
Latapí Agudelo et al. (2019).
A literature review of the
history and evolution of
corporate social
responsibility. International
journal of corporate social
responsibility, 4(1), 1-23.
CSR within Business Ethics
Business Ethics
Corporate Sustainability
Corporate Approaches
such as CSR and
Environmental
Management Systems
Positions on CSR
Lower commitment Greater commitment
towards CSR towards CSR
Dimensions Laissez-faire Enlightened self- Forum of stakeholder Shaper of society
interest interaction
Reasons Legal compliance Good for business Adoption of the Triple Change the market and
bottom line the society
Leadership Peripheral Supportive Promoter Visionary
Implementation Middle-management Systems to ensure good Board-level issue and Everybody is involved
practice wide monitoring
Mode Defensive Reactive Proactive Defining
Stakeholder Unilateral Interactive Partnership Multi-organization
relationships alliances
Corporate Social Responsibility
The norms ISO 26000 provide guidance on understanding and implementing
socially responsible practices:
• Governance structures and processes to promote ethical behavior,
transparency, and accountability.
• Human rights and labor practices (occupational health and safety, equal
opportunities, development, and training).
• Fair operation practices (integrity, ethical behavior in business, anti-corruption,
fair competition, responsible marketing and advertising)
• Consumer issues (safety, fair treatment, satisfaction, product quality, customer
service, transparent communication).
• Community involvement and development (engaging communities and
stakeholders, contributing to local development, and supporting social
initiatives).
Corporate Social Responsibility
o Economic, social, and environmental
Organizations
accountability.
DO NOT DO
o Promoting human rights, democracy, corporate social
community participation, sustainable
development. responsibility
o Contribution to sustainable economic
development. Organizations
o Going beyond what the law requires of ARE
them.
socially responsible
o Responsibility to contribute to a better
society and a cleaner environment.
Drivers of Corporate Social Responsibility
▪ External pressures
o Globalization of economies and issues.
o Institutional pressures (coercive, mimetic,
and normative).
o Demand for greater transparency.
o Awareness of external stakeholders
(consumers, governments, NGOs).
▪ Internal pressures
o Awareness of internal actors
(employees, middle management).
o Governance mechanisms.
Contact: René DIAZ-PICHARDO, PhD, HDR
[Link]-pichardo@[Link]
