The Definition of Corporate Social Responsibility

Contents

  • 1 1.0 Chapter 2 Literature Review
  • 2 1.1 2.1 Theoretical Review
  • 3 1.1.1 Models, Concepts, Frameworks
  • 4 1.1.2 Activities not meeting the criteria of CSR in Mauritius
  • 5 1.2 Empirical Review
  • 6 1.2.1 Applied Studies and Findings
  • 7 1.3 2.3 Case Studies
  • 8 A bank with a heart
  • 9 IBL Children
  • 10 1.4 CSR and the tourism Sector
  • 11 1.5 Benefits of Corporate Social Responsibility
  • 12 1.6 Reputation

1.0 Chapter 2 Literature Review

A literature review of research was carried out to put light into the definition of Corporate Social Responsibility (CSR) as this differs from country to country and different authors have modelled different definition for CSR. This makes the study of CSR more complex. Also factors influencing the strategic issues of CSR are also reviewed.

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Electronic database is used such as emerald to select appropriate  articles. This  review of literature is worked out on published research on CSR, CSR strategies and benefits. The first focal point is on the definition of CSR, then the strategies of CSR in business was reviewed and the benefits associated with the strategic management of CSR. The main aim of this review is to sum up the studies in relation to the integration of CSR in its core business to gain advantage to the target group that receive the CSR and also to the business in the long run to place the business at a competitive advantage. Findings on environment have also been taken into consideration.

1.1 2.1 Theoretical Review

1.1.1 Models, Concepts, Frameworks

In the book ‘Corporate Social Responsibility’ by Crowther D and Aras G, 2008, Milton Friedman (1970) stated that “there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud” So we can understand that according to Friedman’s 1970 theory the sole responsibility of the business is to capitalise profit. According to Friedman (1970 cited in  Galbreath 2009, p.111  ), it is the firm responsibility to meet the economic needs and that only leads to the welfare of the society and it is the role of the government, service organizations, educational institution to meet the societal welfare. Galbreath, (2009) cited that after the publication of the thesis of Friedman, (1970)   there was much research on the social responsibilities of the firm. Galbreath, (2009) states that ‘In the late 1970s, Carroll (1979) offered one of the first – and perhaps still the most widely accepted conceptualisations of CSR (Matten and Crane, 2005).’ In Galbreath (2009), Carroll’s (1979) model conceptualises the responsibilities of the firm as:

  1. the economic responsibility to generate profits;
  2. the legal responsibility to comply by local, state, federal, and relevant international laws;
  3. the ethical responsibility to meet other social expectations, not written as law (e.g. avoiding harm or social injury, respecting moral rights of individuals, doing what is right, just, fair); and
  4. the discretionary responsibility to meet additional behaviours and activities that society finds desirable (e.g. philanthropic initiatives such as contributing  money to various kinds of social or cultural enterprises).

The last concept applies to the Mauritian context where NGOs are engaged in the philanthropic activities. They are funded by firms making profit and 1% of the profit after tax is given to the NGOs to look at the vulnerable groups in Mauritius , the other 1% goes to the contribution of programs offered by government, (NEF, 2008). NEF,2008 cited that the economics needs of the firm are met to comply with CSR. The firm has to contribute 2% of its profit after tax in the CSR fund. If the firms make no profit then there is no contribution to CSR. This brings to the circular Mauritian model In Mauritius, the government uses the profit for the welfare of the society.

1.1.2 Activities not meeting the criteria of CSR in Mauritius

The following activities do not fall under the definition of CSR IN Mauritius, NEF (2008):

  1. Contribution for religious activities
  2. Contribution to activities discriminating on the basis of race, place of origin, political opinion, colour or creed.
  3. Contribution to Trade Unions
  4. Sponsorship for marketing purposes
  5. Contribution for political parties
  6. Shareholders and Senior Staff benefits (schemes benefiting staff and/ or their family members and shareholders holding more than 5% of shareholding)
  7. Staff welfare cost (including e.g. current and future staff training costs),
  8. Activities which are against public safety and national interest.

In Galbreath (2009), Friedman’s (1970) social responsibilities, stakeholder theory and corporate social responsibility, Carroll (1979) are normative: they give a description of what the dos and don’ts of the firm in terms of their societal responsibilities (Rodriguez et al., 2002) Katamba D and Gisch-Boie (2008) made a study with regards to CSR in Uganda a developing country. They stated that CSR is a new concept in Uganda and the study was carried out to know the perceptions of CSR, approaches and needs of companies in the matter of CSR.  The CSR defined by company managers in Uganda as stated by Katamba D and Gisch-Boie (2008)  are

  1. “when companies consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stkaholders as well as the environment.”
  2. “how companies manage their business processes to produce on overall positive impact on society.”
  3. “considering all stakeholders while making business decisions that manage stakeholders relationships
  4. “giving back to society and cementing the bond of the company to society through demonstrating the caring heart of the company”

Katamba D and Gisch-Boie (2008) made the observations that large companies in Uganda do not have a CSR strategy and they cannot satisfy all the requests of communities and NGOs. The Government of Mauritius has catered for the approved programmes relating to socio economic development, Health, leisure and sport, environment, education and training and catastrophe, (NEF, 2008). The NEF has an important role to play to drive firms to CSR strategies. The Government of Mauritius stated in NEF (2008)  has set up a guiding principle with the general purpose of  directing registered companies to give 2% of their book profit to programmes contributing to the social and environmental development of the country. NEF (2008) stated the objectives of the fund  to:

  • Support firms to administer their own agenda, resulting in the triple reporting aspect, that is, the economic, social and environmental development.
  • Ease the involvement of the companies to sustain existing Approved National Programmes applied by Companies, national agencies or NGOs
  • support a serviceable society to NGOs working with the approved national development program

1.2 Empirical Review

1.2.1 Applied Studies and Findings

Research gaps In Sidsel Grimstad (2011) pp. 73-74, Shrivastava and Hart (1994) suggested green politics will be among the powerful forces of economic, social, and political change,  businesses and managerial theory have to change them drastically to hold environmental distress. In the same paper In Sidsel Grimstad (2011) pp. 73-74, stated that after more than ten years, Kallio and Nordberg (2006)  there are still questions that have not been answered regarding firms and their link with the natural environment. These questions are : “ what is the organisation’s relationship with the natural environment? Why does integration of concerns for the natural environment happen within organisations? Where does it happen? Who does it happen to? How does it happen? What are the consequences of an integration of the organisation and the natural environment? “ (Sidsel Grimstad 2011 stated by Kallio and Nordberg  (2006 )) They also found that while considerable empirical research had been done, there were few development of theory conbining organizational and management theories with natural environment. Sidsel Grimstad (2011) stated that few research has been carried out to assess how prolonged actions affects firm’s or clusters competitiveness and the way natural environment is bonded to the involved firms of organisations’ (businesses, government, non-profit, or others)  day to day activities (Gladwin et al., 1995; Kallio and Nordberg, 2006). Little has been done to judge against framework, local formal and informal institutions while looking at business-driven environmental action (Gjølberg, 2009; Halme et al., 2009; Hart, 1995 cited in Sidsel Grimstad (2011) ) Sidsel Grimstad (2011) found from the above literature review comes up many knowledge gap. He states that more study  examining how firms operates and implements environmental action, the insight of environmental action, the reason they are doing it, what they see as main factors for the environment and business to mutually develop and benefit each other, the way they carry out environmental action, the way they organize and the short and long term consequences for the environment and society.  Sidsel Grimstad (2011),More concept is required the forming of  the relationships between the natural environment business organizations and competitive advantage. Sidsel Grimstad (2011) cited that “ More comparative research is required analysing how businesses deal with environmental issues within different contexts and different national institutional frameworks.” Sidsel Grimstad (2011)  cited that “When faced with serious environmental issues, it would be expected that the way/mode and means a business, a business cluster or society will respond to the environmental challenge will differ according to the country’s formal and informal institutions.” Sidsel Grimstad (2011) stated that these matters would be more outstanding in areas where the natural environment and landscape encompasses basis for tourism as an additional strategy for earning income for businesses based on agriculture. Sidsel Grimstad (2011) also found that “.. it would be expected that agriculture based tourism businesses would have a vested interest in going beyond compliance with the environmental regulatory systems. In addition such clusters would also perceive the natural landscape as a prerequisite for value-adding for their tourism businesses in the future and are therefore worth taking care of.” Sidsel Grimstad (2011) found that the two countries chosen, Norway and Australia have clearly different situations and organizational frameworks when dealing with environmental management in rural areas. He chose two business-driven green initiatives have been identified and there are still on-going research. Sidsel Grimstad (2011)  cited that re “They are self-defined or self-organised clusters, in as such they do not follow administrative or geographical borders, but rather are based on a common business focus – agriculture-based tourism – in a geographical area where the borders have been defined by the business community itself through formal organisations such as local chambers of commerce.” He also stated that they hold the definition of clusters given by Porter (1998), that describes these geographic clusters of interrelated firms and institutions in a specific field. Sidsel Grimstad (2011) also stated that the clusters include both suppliers of provider of inputs, services, and education( universities, training), and later stage of businesses centered on customers that both compete and work together. In Australia the associating organisation is a Chamber of Commerce in a wine tourism region, and in Norway is a farming of apple and tourism region, a shareholding firm has been set up with the objective of promoting continuing improvement in the area, (Sidsel Grimstad 2011). In Norway, the area in agriculture has received much subsidy to cater for both self-sufficiency in essential foods and secondly in sustaining the rural population. the subsidies in agriculture have been drastically reduced in the last decade, but they have been turned towards subsidies for farm-based ecological protection and preservation. These have led to new ventures in tourism sector for a new value-adding strategy. The above extract is from (Sidsel Grimstad 2011). Sidsel Grimstad 2011 also found in his study that traditional farming has been drifted towards  a mix of farming and agri-tourism, preceded by the principles of geo-tourism. In Sidsel Grimstad ( 2011) the definition of  Geo-tourism is given by “ tourism that sustains or enhances the geographical character of a place – its environment, culture, aesthetics, heritage, and the well-being of its residents (National Geographic Society, 2009).” Sidsel Grimstad ( 2011) stated that small agricultutal sector tourism clusters have been founded by the concepts of  geo-tourism that they call landscape parks that are natural and cultural regions described by the natural landscape and by the identification of local population.  The development of home agro and tourism have to undertaken in an sensitive way Taking care of the environment that must be attractive to both local people and the tourist (Sidsel Grimstad, 2011). From the above extract this leads to the creating of strategies to look after the issues of sustaining and preserving environment. Mauritius being a tourism industry can give importance to the environmental programs for maintaining and preserving it keeping in mind the problems that are the world is facing towards natural ecological change.

1.3 2.3 Case Studies

Added on17/04/11 Volker Turk (2003) has worked in a paper e-business and CSR- the business case for the new economy. The paper looked at the major significance  for corporations working in the ICT and e-business sector concerning environmental and social issues. Volker Türk (2003) developed an essential finding from the research that is e-business is not entirely virtual but it is related to the use of natural resources. Volker Türk (2003), identified key factors influencing the ecological consequences of environmental ICTs and e-application. He identified them as “Monitoring the environmental impacts of ICT and e-business, greening the hardware, shifting to e-services, enabling transport efficiencies, raising awareness and changing habits, recognize and extent the (digital) responsibility, acknowledge the technologies limitations and risks, Improve sustainability and accountability along supply-chains. social responsibilities are different from social issues but closely linked (Galbreath 2009). The society have expectations on the firm and these are social responsibilities. These responsibilities are related to factors. These are social issues. These factors can have an effect on the ability of the firm to meet objectives , and can also affect the social responsibilities. This view has been supported in the work of Galbreath (2009). ELABORATE HERE………………………………………????? Galbreath (2009) states that ‘In this sense, these definitions help to describe what the “firm side” of the social contract (Donaldson and Dunfee, 1994, 1999) between business and society consists of. On one hand, the “formal” social contract defines a firm’s explicit responsibilities, including generating returns for shareholders, obeying laws and regulations, creating jobs, paying taxes, and honouring private contracts. On the other hand, the “semiformal” social contract reflects society’s implicit expectations. Here, society’s unspoken expectations of firms include responsibilities such as adherence to global labour and environmental standards (e.g. SA 8000, AA 1000, ISO 14031) that are not required by law, triple bottom-line reporting, following industry norms and codes of conduct, fulfilling brand promises and contributing philanthropically to the community.’ Scholars have looked at the social issues concept, mainly through the life-cycle approach (cited in Galbreath (2009), Lamertz et al., 2003). Although several definitions exist, a widely accepted definition in the life-cycle tradition describes social issues as: ‘Social problems that may exist objectively but become “issues” requiring managerial attention when they are defined as being problematic to society or an institution within society by a group of actors or stakeholders capable of influencing either governmental action or company policy (Mahon and Waddock, 1992, p. 20; emphasis added).’ Galbreath (2009) expressed this view. The definition implies that social problems exist at the societal level (but not necessarily at the organizational level)  and these problems are  elevated to the “status” of a social issue by the actions of various actors, including stakeholders. However, such a definition does not address how these social problems and issues might be an opportunity for the firm and thus, is problematic with respect to the concept of strategy. Galbreath (2001) cited that ‘some firms signal that CSR is a fundamental purpose – mission – of their existence. As part of its mission, The Body Shop makes cosmetics that do not hurt animals. Here, The Body Shop has addressed a social issue – animal cruelty – through the very core of their business: developing the highest quality, innovative, effective and safe cosmetic products.