What is Corporate Social Responsibility?

What is Corporate Social Responsibility (CSR) all about? Companies appear to be adopting new attitudes and activities in the way they identify, evaluate and respond to social expectations. Society is no longer treated as a ‘given’, but as critical to business success. In some cases this is simply for the license to operate that social acceptability grants. In others, companies believe that favorable evaluations by consumers, employees and investors (who are, after all, members of society) will improve business performance. In part these developments also arise from employees, investors and customers taking a greater interest in the social credentials of companies they work for, invest in, and buy from, what I call ‘the socialization of markets’.

Moreover, CSR has travelled from its North American home to become a concept understood and deployed in business worldwide. Yet this is not a ‘one size fits all’. Rather CSR tends to connect with prevalent ethical and legal expectations of business in different societies, often reflecting more ancient and pre-industrial ethical mainsprings of responsible business.

Thus, companies deploy CSR, in communities, in the workplace, in the environment, and markets, and also to address organizational challenges that these new agendas pose.

Whilst CSR presumes that corporations should and can take social responsibility, one of the most interesting developments in recent decades is that CSR has expanded from simple self-regulation by companies to a combination of self- and social regulation (e.g. by civil society, government, international agencies). As a result various CSR systems have emerged to guide companies in all manner of activities, from equal opportunities employment, to ethical sourcing and reporting of social, environmental and governance issues.

Nevertheless, CSR (that ‘ghastly acronym’ according to Virgin founder, Sir Richard Branson) is a source of much skepticism. Academics often dismiss it as ‘an oxymoron’. More serious critiques come from those who, like Milton Friedman, believe that through profit-maximization in free markets business best serves society. Secondly, critiques come from those who believe that the state, not business, is the proper provider of societal welfare.

Regarding the first criticism, it is assumed by most CSR writers that markets too often operate without companies taking proper account of their negative social and environmental impacts or ‘externalities’. So CSR provides systems by which companies can understand these and learn from best practice. It is also assumed by CSR writers that there can be market rewards for identifying social values and meeting them in a company’s products and services. So CSR can be profitable as well as a basis for compliance with social expectations that business should be ethical and legal.

Turning to the view that governments should regulate responsible business, it is assumed by most CSR writers that whilst governmental regulation may be important for responsible business, it can lack sensitivity to business circumstances and social agendas. So, social regulation of business through CSR is regarded as a complement to governmental regulation rather than as an alternative. As a result CSR is not only significant in business to society relations but also in understanding new features of ‘the way we are governed’.

There are, of course dangers and shortcomings in CSR. There is a risk of ‘greenwash’, whereby companies simply ‘talk’ CSR without ‘walking it’ in the expectation that this will be sufficient to win legitimacy and secure their social brand. However, companies that rely on marketing are likely to pay a high reputational price if they are exposed as be exposed as hypocrites. There are also CSR gaps, such as responsibility for political roles that companies perform, ranging from lobbying, to paying taxes, and to the responsibility for the provision of public goods (e.g. water, energy) or critical infrastructure (e.g. information and communications technology). And new social, environmental and governance challenges continually emerge bring the question about the nature and direction of business responsibility. So there is always unfinished CSR business.

This article originally appeared on The Business of Society on 18 March 2015.

Feature image credit: Singapore, by cegoh. Public domain via Pixabay.