© 2018 Cengage 1
Chapter 2
Corporate Social
Responsibility,
Citizenship, and
Sustainability
© 2018 Cengage 2
Learning Outcomes (1 of 3)
1. Describe some early views of corporate social
responsibility (CSR). Explain how CSR evolved and
encompass economic, legal, ethical, and philanthropic
components. Explain the Pyramid of CSR.
2. Articulate the traditional arguments both against and
for CSR. Explain how the business case for CSR has
strengthened the concept’s acceptance.
3. Describe how the concept of corporate social
responsiveness differs from CSR.
4. Explain how corporate social performance (CSP)
became more popular. Describe how it is different than
CSR. Elaborate on how it differs from corporate social
responsiveness. © 2018 Cengage 3
Learning Outcomes (2 of 3)
5. Describe how corporate citizenship is a valuable way of
thinking about CSR. Explain its broad and narrow views.
Explain how corporate citizenship develops and
proceeds in stages.
6. Summarize the three perspectives on the relationship
between corporate social performance (CSP) and
corporate financial performance (CFP).
7. Explain how sustainability is a broad concept that
embraces profits, people, and the planet. Describe how
the triple bottom line is a vehicle for implementing
sustainability.
© 2018 Cengage 4
Learning Outcomes (3 of 3)
8. Elaborate on the ages and stages of CSR. Define CSR
Greenwashing and how it may lead to misleading
reputational profiles of companies.
9. Describe and characterize the socially responsible
investing movement. Differentiate between negative and
positive screens that are used in investments decisions.
© 2018 Cengage 5
Chapter Outline
• The Corporate Social Responsibility (CSR) as a Concept
• Traditional Arguments against and for CSR
• Ages and Stages of CSR
• CSR Greenwashing
• Political CSR
• Corporate Social Responsiveness
• Corporate Social Performance
• Corporate Citizenship
• The Social Performance and Financial Performance
Relationship
• Sustainability—Profits, People, Planet
• Socially Responsible, Sustainable, Ethical Investing
• Summary
© 2018 Cengage 6
Allegations Against Business -
Business -
• Has little concern for the consumer
• Exploits employees
• Cares nothing about the deteriorating
social order
• Has no concept of ethical behavior
• Is indifferent to the problems of
minorities and the environment
• These claims have generated an
unprecedented number of pleas for
companies to be more socially
responsible. © 2018 Cengage 7
Corporate Social Responsibility
As a Concept
Early Definitions -
• CSR means seriously considering the
impact of a company’s actions on society.
• CSR requires the individual to consider his
or her acts in terms of a whole social
system, and holds him or her responsible
for the effects of his or her acts anywhere
in that system.
• These definitions provide useful insights
into the concept of Corporate Social
Responsibility.
© 2018 Cengage 8
Business Criticism-
Social Response Cycle
Factors in the Societal Environment
Criticism of Business
Increased Concern A Changed
for the Social Environment Social Contract
Business Assumption of
Corporate Social Responsibility
Social Responsiveness, Social
Performance, and Corporate Citizenship
A More Satisfied Society
Fewer Factors Leading to Increased Expectations
Business Criticism Leading to More Criticism
© 2018 Cengage 9
Corporate Social Responsibility Related
Concepts
Traditional CSR Patterns
Newer Terms with Similar Meanings
Emphasize:
Corporate Social Responsibility
Corporate Citizenship (CC) - Views
Emphasizes Obligation,
companies as citizens and all this implies
Accountability
Corporate Responsibility (CR) – Broadly
Corporate Social Responsiveness
Focuses on all categories of corporate
Emphasizes Action, Activity
Responsibility
Corporate Social Performance Sustainability (SUS) –
(CSP) Emphasizes Outcomes, Emphasizes longer-term concern for people,
Results planet and profits
© 2018 Cengage 10
Historical Perspective on CSR
Economic Model
Legal Model
Social Model
Stakeholder Model
© 2018 Cengage 11
Adaptations of the Economic Model
Philanthropy
Community obligations Paternalism
Motivation:
Keep government at arm’s length
© 2018 Cengage 12
Evolving Meanings of CSR
• CSR:
• …is seriously considering the impact of
the company’s actions on society.
• … is the obligation of decision makers to
take actions which protect and improve
the welfare of society as a whole, along
with their own interests.
• …supposes that the corporation has
economic and legal obligations as well as
responsibilities to society that extend
beyond these obligations.
© 2018 Cengage 13
A Four-Part Definition of CSR
While each definition is valuable, we will
focus on the types of social responsibilities
business has. Corporate social responsibility
encompasses the:
Economic
Legal
Ethical, and
Philanthropic
expectations that society has of organizations
at a given point in time.
© 2018 Cengage 14
The Four Components of CSR
Societal
Responsibility Examples
Expectation
Be profitable. Maximize sales,
Economic Required
minimize costs.
Obey laws, adhere to
Legal Required
regulations.
Avoid questionable practices.
Ethical Expected
Do what is right, fair, and just.
Desired/ Be a good corporate citizen.
Philanthropic
Expected Give back.
© 2018 Cengage 15
16 © 2018 Cengage
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.
The Pyramid of CSR
The CSR Equation
Economic Responsibilities Total
+ Corporate
Legal Responsibilities =
+ CSR
Ethical Responsibilities
+
Philanthropic Responsibilities
A stakeholder perspective focuses on the CSR
pyramid as a unified whole.
17
© 2018 Cengage
Top 20 Activities or Characteristics of
a Socially Responsible Company
• Makes products that are safe. • Responds quickly to customer
• Does not pollute air or water. problems.
• Obeys the law in all aspects of business. • Maintains waste reduction program.
• Promotes honest or ethical employee • Provides or pays portion of medical
behavior. costs.
• Commits to safe workplace ethics.
• Promotes energy conservation
• Does not use misleading or deceptive
program.
advertising.
• Upholds stated policy banning
• Helps displaced workers with
discrimination. placement.
• Utilizes “environmentally friendly” • Gives money toward charitable or
packaging. educational causes.
• Protects employees against sexual • Utilizes only biodegradable or
harassment. recyclable materials.
• Recycles within company. • Employs friendly or courteous or
• Shows no past record of questionable responsive personnel
activity.
• Tries continually to improve quality.
© 2018 Cengage 18
Arguments against CSR -
• Classical Economics: The classical economic
view is that business’s only goal is the
maximizing of profits for owners.
• Business Not Equipped: Business is not
equipped to handle social activities.
• Dilutes Business Purpose: It dilutes the
primary purpose of business.
• Too Much Power Already: Businesses have
too much power already.
• Global Competitiveness: It limits the ability
to compete in a global marketplace.
© 2018 Cengage 19
Arguments in Support of CSR -
• Enlightened self-interest: Businesses must
take actions to ensure long-term viability.
• Warding off government regulations. This is
one of the most practical reasons.
• Resources Available: Business has the
resources and expertise. Let it try.
• Pro-action is better than Reaction. Pro-
action is also less costly.
• Public supports: the public strongly supports
CSR.
© 2018 Cengage 20
Business Responses to calls for CSR Make
the Business Case for CSR
Defensive approach
Cost-benefit approach
Strategic approach
Innovation and learning approach
© 2018 Cengage 21
The Business Case for CSR
6 Reasons for Embracing CSR 4. Attract, retain, and maintain a
1. Innovation happy workforce and be an
2. Cost savings Employer of Choice
3. Brand differentiation 5. Save money on energy and
4. Long-term thinking operating costs and manage risk
5. Customer engagement 6. Differentiate oneself from
6. Employee engagement competitors
7. Improve business reputation and
Business Benefits of CSR
standing
7. Win new business 8. Provide access to investment and
funding opportunities
8. Increase customer retention
9. Develop and enhance relationships 9. Generate positive publicity and
with customers, suppliers, and media opportunities due to
networks media interest in ethical business
activities.
© 2018 Cengage 22
Ages and Stages of CSR
Visser’s Five Stages of CSR
• Age Of Greed – CSR practices are undertaken when
companies’ shareholder value needs to be protected.
• Age of Philanthropy – Emphasizes charitable CSR
when companies support social causes through
donations and sponsorship.
• Age of Marketing – CSR is used as a public relations
approach to enhance the company’s brand, image, or
reputation.
• Age of Management – CSR activities are linked to
the company’s core business (e.g., Coca-Cola and water
quality/management).
• Age of Responsibility – Identifying and remedying
the root causes of irresponsibility and unsustainability.
© 2018 Cengage 23
CSR Greenwashing
Some companies convey an image of responsibility
when in fact they are conducting business as usual.
Companies attempt to make the public believe they
are “green”—environmentally friendly—when they
are not.
CSR Greenwashing is intentionally seeking to
convey the image of a socially responsible firm when
the evidence of their practices does not support this
conclusion.
© 2018 Cengage 24
Political CSR
Gaining attention and application especially in
European or similar contexts where the
government historically has assumed a larger role
in providing societal benefits.
“PCSR entails those responsible business activities
that turn corporations into political
actors, by engaging in public deliberations,
collective decisions, and the provision of
public goods or the restriction of public bads in
cases where public authorities are
unable or unwilling to fulfil this role.”
© 2018 Cengage 25
Corporate Social Responsiveness
Corporate Social Responsiveness -
• An action-oriented variant of CSR.
Responsibility -
• Implies a state or condition of having
assumed an obligation.
Responsiveness -
• Connotes a dynamic, action-oriented
condition.
© 2018 Cengage 26
Corporate Social Performance:
Carroll’s Model
© 2018 Cengage 27
Corporate Social Performance:
Wartick & Cochran’s Model Extensions
© 2018 Cengage 28
Corporate Citizenship (1 of 2)
Corporate citizenship -
• Embraces all the facets of corporate
social responsibility, responsiveness,
and sustainability.
• Corporate citizenship is not a new concept,
but one whose time has come.
• Corporate citizenship serves a variety of
stakeholders.
© 2018 Cengage 29
Corporate Citizenship (2 of 2)
Broad View
• A reflection of shared moral and ethical
principles.
• A vehicle for integrating individuals into the
communities in which they work.
• A form of enlightened self-interest that
balances stakeholders’ claims and enhances a
company’s long-term value.
Narrow View
• Corporate community relations
© 2018 Cengage 30
Stages of Corporate Citizenship
© 2018 Cengage 31
Global Corporate Citizenship -
• …and Global CSR are topics in which there has been
an explosion of interest.
• Multinational enterprises are expected to:
• be good corporate citizens in the countries in which
they do business.
• tailor their initiatives to conform to the cultural
environment.
• International academics and business people around
the world are now researching and advocating CSR
and corporate citizenship concepts.
• Convergence in global CSR approaches will continue
as the world economic stage becomes the common
environment within which businesses function.
© 2018 Cengage 32
Corporate Citizenship Awards
by Business Press
• Fortune's ranking of “Most Admired” and
“Least Admired” corporations
• Conference Board’s Ron Brown Award
for Corporate Leadership
• CRO Magazine Awards
• Chamber of Commerce of the U.S.
Corporate Citizenship Awards
© 2018 Cengage 33
The Social and Financial Performance
Relationship
Perspective 1: Socially Responsible firms are more financially profitable.
Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance
Perspective 2: A firm’s financial performance drives its social performance.
Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance
Perspective 3: There is an interactive Relationship Among CSP, CFP, and CR.
Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance
© 2018 Cengage 34
One Bottom Line, or Many?
• The stakeholder-bottom line perspective -
• Impacts or benefits of social
performance cannot be fully measured
or appreciated by considering only the
impact on the firm’s bottom line.
• CSP cannot be fully comprehended
unless it includes impacts and measures
on consumers, employees, the
community and other stakeholder
groups.
© 2018 Cengage 35
Sustainability—Profits, People,
Planet
Sustainability derived from sustainable
development—a pattern of resource use that aims
to meet human needs while preserving
environment so that these needs can be met not
only in the present but also for future generations.
Earlier versions of sustainability focused only on
the environment. Recently it has become clear
that it pertains to the natural environment, and
other business environments as well.
© 2018 Cengage 36
The Triple Bottom Line Perspective
Business Must Attend to Three Key
Spheres of Sustainability –
• Economic
• Social
• Environmental
The goal is corporate sustainability.
© 2018 Cengage 37
Creating Shared Value and Conscious Capitalism
CSV (Creating Shared Value)
• Business and society could be brought back
together if business redefined the basic
purpose as creating shared value—generating
economic value in a way that also produces
value for society.
Conscious Capitalism
• A more complex form of capitalism that reflect
and leverages the interdependent nature of
life and all of the stakeholders in business.
• Higher purpose, Stakeholder orientation,
conscious leadership, conscious culture.
© 2018 Cengage 38
Socially Responsible, Sustainable,
Ethical Investing
Socially Responsible Investing -
• Emerged in the 1970s
• Nearly $7 trillion in socially
responsible investments in the U.S.
Social Screening -
• A technique used to screen firms for
socially-responsible investment
purposes.
© 2018 Cengage 39
Socially Responsible,
Sustainable, Ethical Investing
• Total dollars invested in SRI has grown
exponentially over past twenty years.
• Council on Economic Priorities suggests 3
reasons:
1. More reliable research on CSP
2. Investment firms using social criteria have
solid track record
3. The socially conscious 1960s generation is
making investment decisions
© 2018 Cengage 40
Key Terms
• business for social • environmental, social, and
responsibility governance investing
• conscious capitalism • ethical responsibilities
• global corporate citizenship
• community obligations • impact investing
• corporate citizenship • legal responsibilities
• corporate social • mainstream adopters
performance model • paternalism
• corporate social • philanthropic responsibilities
• philanthropy
responsibility • pyramid of CSR
• corporate social • social entrepreneurship
• social intrapreneurship
responsiveness • socially responsible,
• corporate sustainability sustainable or ethical
• CSR exemplar firms investing
• stages of corporate
• CSR Greenwashing citizenship
• created shared value • stockholder-bottom line
• sustainability
• economic responsibilities • sustainable development
© 2018 Cengage • triple bottom Line 41
