CORPORATE SOCIAL RESPONSIBILITY (CSR)

Application: Reputation Management, Positioning

The Concept

Corporate social responsibility (CSR) is self-imposed responsible behaviour by businesses and other organizations. It is a marketing issue because, first, it is a response to consumers, employees, communities, stakeholders, and other members of society. Secondly, it has a profound effect on reputation, buyers’ willingness to do business with companies and, eventually, profit.

CSR policy ensures that businesses monitor and support law, ethical standards, and international norms. It also prompts them to embrace responsibility for the impact of their activities on the environment. In fact, there is an increasing expectation that businesses will proactively promote the public interest by encouraging community development (particularly in third world nations) and voluntarily cut out dubious practices, regardless of legality (such as the use of child labour by subcontractors). CSR is the deliberate inclusion of public interest in corporate decision making, and the honouring of a “triple bottom line”: people, planet, profit. It is also known as: “corporate conscience”, “corporate citizenship”, “responsible business”, “sustainable responsible business” (SRB); or “corporate social performance”.

Some argue that CSR distracts from the fundamental aim of a business; others that it is nothing more than superficial window-dressing; others, that it is an attempt to pre-empt the role of governments over powerful multi-national corporations. Yet, this is more than fluff, fashion, or a cynical response to activism. Firstly, there is a strong business case for CSR policies and activities because firms benefit from operating with a broader perspective than their own immediate, short-term profits. It can be a positive help to an organization’s reputation as well as a guide to what the company stands for. Secondly, cynics should acknowledge that businesses in a range of sectors have contributed to society for many years. The leaders now coming into power have grown up in a generation concerned with social issues; so business engagement will increase.

There is little doubt that people, particularly in the West, are becoming more aware of the environmental and social implications of their day-to-day consumption and are beginning to adjust their buying decisions to their environmental and ethical concerns. The internet, social networking, and twenty-four hour media are, it seems, creating a consensus on some issues like the treatment of waste. As a result, marketers are having to respond to this even if they are personally cynical toward it.

One common approach to CSR is philanthropy. This includes donations and aid given to local organizations and impoverished communities in developing countries. However, some organizations do not like this approach as it does not help build on the skills of local people. Community-based projects tend to lead to more “sustainable development”.

Another approach is to build CSR priorities directly into the business strategy of an organization. For instance, the use of “fair trade” tea and coffee has been adopted by a number of businesses. Another approach is called “Creating Shared Value”, or CSV. The shared value model is based on the idea that corporate success and social welfare are interdependent. A business needs a healthy, educated workforce, sustainable resources, and adept government to compete effectively. For society to thrive, profitable and competitive businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy. CSV acknowledges the trade-offs between short-term profitability and social goals, but focuses on the competitive advantage that can be gained from building CSR into corporate strategy.

Although many companies are increasingly more socially responsible (because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them) it often takes a crisis to prompt serious, real attention to CSR. These crises can be very costly in terms of money, reputation, and retrospective action. There is a history of major, costly incidents like the Exxon Valdez disaster in Alaska in 1989, the lead poisoning paint used by toy giant Mattel (which required a recall of millions of toys), Shell’s manipulation of oil reserve information in 2004, and BP’s pollution of the Gulf of Mexico in 2010. Each prompted the companies involved to act in both the short term and the long term.

So, there is an argument for marketers to initiate programmes which will, to some extent, obviate costly catastrophes of this kind.

There are several sensible reasons for a CSR programme:

(i) Risk

Reputations that take decades to build can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments, and media. Building a genuine culture of “doing the right thing” within a corporation can offset these risks to some extent. Although there are examples of wilful wrongdoing (e.g. the difficulties at Satyam and Enron), despite the views of conspiracy theorists, most problems with large organizations (like the 2010 BP oil spill in the Gulf of Mexico) are accidents created by a series of organizational cock-ups. Yet these can have a dramatic effect on corporate reputation if mishandled. The public impression created by BP during 2010 was awful but it was exacerbated by a series of public gaffes. The argument for a CSR programme is to create a favourable impression as a foundation for any such eventuality. Those companies with a long, self-evident, commitment to social issues have a better track record of surviving catastrophe or commercial embarrassment of this kind than others.

(ii) Employee Motivation

As a series of common ethics and values (for example toward global warming or the environment in general) are evolving across the globe, a CSR programme can be an aid to recruitment and retention, particularly within the graduate market. Many recruiters have learnt, for instance, that the current graduate crop, particularly in the West, tends to value self actualization and green issues. They are stressing their charitable work in order to attract them. Potential recruits often ask about a firm’s CSR policy during interview, so having a comprehensive policy is an advantage. CSR can also help improve the perception of a company among its employees, particularly when they can become involved through pro bono work, payroll giving, fundraising activities, or community volunteering.

(iii) Brand Distinction

CSR can play a role in building customer loyalty based on distinctive ethical values. Several major brands, such as The Co-operative Group and The Body Shop are closely aligned to ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.

(iv) Interference

By taking substantive voluntary steps, marketers can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously. As good “corporate citizens” with respect for employment standards and impacts on the environment, they might avoid harsh interference in their business through taxation or regulation.

In response to CSR there are a number of emerging practices; measurement for instance. Taking responsibility for its impact on society means that a company must account for its actions. So “social accounting”, a concept describing the communication of social and environmental effects of a company’s economic actions to particular interest groups, and to society at large, is an element of CSR. There is also an increase in CSR-related regulation and law at both national and international level. Yet regulation in itself is unable to cover every aspect of a corporation’s operations. So, another trend is the rise of “ethics training” inside corporations, some of it required by government regulation. The aim of this type of initiative is to guide employees in ethical decisions when the answers are unclear. There is evidence that, like racial or sexual equality initiatives of the past, this is a force which is changing the behaviour and culture of corporations because it helps to diffuse the idea amongst modern workers.

History, Context, Criticism, and Development

There has, it seems, been a philanthropic and social engagement aspect to business for a very long time. One of the early social action programmes in the West was the anti-slavery campaign in Britain at the end of the 1700s. At that time, sugar was a much appreciated, recent luxury which gave flavour to bland food. The voluntary boycott of it by informed people (becuase slaves were used to produce it) was a powerful statement which influenced the debate. Yet it was a CSR programme by the ever market-orientated Josiah Wedgwood which added significant momentum to the campaign. He created a fashionable medallion of a slave raising his hands and saying “Am I not also a man and a brother” (see Figure C.5). As Wedgwood was such a fashion item and a desirable brand it had a powerful impact which added momentum to the anti slavery-campaign.

Figure C.5: Wedgwood’s anti-slavery badge

Lord Lever (founder of Lever Brothers) was a market-orientated business leader of the late 19th century. He pondered who his profit belonged to, despite the fact that he owned the company. As his company boomed he is quoted as saying: “Whose was that money? We had the same works, the same manager, the same soap boiler and the same staff. … I want to give it to the man who ought to have it” (Maqueen, A., 2004). This led him to build his “Sunlight” town for his workers. He was typical of the philanthropic approach of many business leaders of the time in both America (like Hershey) and the UK (like Cadbury).

Corporate Social Responsibility has been redefined throughout the years. The term itself came into common use in the early 1970s, after many multi-national corporations formed. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. Today most major corporate web sites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of ethical considerations (e.g. BP’s “beyond petroleum”).

There is even the beginning of thought about international standards which will give grit to these issues; for instance, a draft international IOS standard for CSR (ISO, 26000). A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing, and reporting. For instance, some countries (like France and Denmark) have developed legal requirements for CSR-related reporting, although international or national consensus on meaningful measurements of social and environmental performance is at the time of writing, still a long way off. Many companies now produce externally audited annual reports that include and CSR issues but the reports vary widely in format, style, and methodology (even within the same industry).

Voices and Further Reading

• Porter, M.E., The Link between Competitive Advantage and Corporate Social Responsibility.
• “Philanthropy and cause marketing have been gaining popularity in recent years. A global survey by Edelman suggests that 85% of consumers prefer socially responsible brands, 70% will pay more for the brands, and 55% will even recommend the brands to their family and friends. Companies are aware of this fact. They are increasingly recognizing that their employees, consumers, and the public at large develop a view of a company not only based on the quality of its products and services but also on its degree of social responsibility.” Kotler, P, et al., 2010.
• “Whether intentionally or not, some marketers do violate their bond of trust with consumers … Faced with the rising phenomenon of the political consumers – a consumer who expresses his or her political and ethical viewpoint by selecting and avoiding products from companies which are anti-ethical to those viewpoints – the industry is increasingly coming to realize that ethical behaviour is also good business in the long run, since the trust and satisfaction of consumers translates into years of loyalty from customers.” Solomon, M. et al., 2006.

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