Title: Context for developing a CSR strategy
Course: Corporate Social Responsibility online > Section: Part 3: Strategic approch to CSR

/1h 40 minutes/

With videos from Sustainability Illustrated

Why sustainability? Raising awarness

Is sustainability important for our business?
Do we really need to deal with such issues?
Why do we need to take care of CSR and sustainability issues in our business?
Why now?

You may have to ask yourself all these questions as a business owner or a manager responsible for strategic issues in an organization. Therefore, first we will try to find some answers to your doubts:

https://www.youtube.com/watch?v=EbZcQe9J-EE&list=RDCMUCB_yeT6WwVLJjCsZFt2oQfA&index=5

Source: Sustainability Illustrated, Why is sustainability important? A tip to explain it (4:31 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=EbZcQe9J-EE&list=RDCMUCB_yeT6WwVLJjCsZFt2oQfA&index=5

Globalization is one of the main drivers for developing CSR and Sustainability in current economy. Let's have a closer look at different aspects of this influence (Crane and Matten 2010):

Globalization is a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations.

Communication and information aspects. The modern communication infrastructure enables us — regardless of where we are located at the time that something happens — to follow events together with billions of people, no matter where they are: in Milan, Manchester, or Manila. We can also recognize that we all share similar worries regarding our planet and brotherhood ties on the planet.

Cultural issues. Globalization and communication improvement are causing  different cultures to become even closer. Multinational corporations (MNCs) act in diverse cultural environments, where different values and lifestyles come across. Moral values that were take for granted in the home market may get questioned when corporations enter foreign markets. For example, attitudes to racial and gender diversity in Europe may differ significantly from those in Middle Eastern countries.

Legal issues. MNCs presence on different markets enforces handling within diverse legal systems. They enable different interpretations and the application of most gainful solutions, even if these are forbidden in a company's home country. Multinational regulations also may not fit the economic or organizational reality and provide many possibilities for misusing norms and resources.

Accountability issues. MNCs are economically as powerful as many governments. For example, in 2008, the gross domestic product (GDP) of Greece was about the same as the revenue of Wal-Mart (both around US$400bn). Taking a closer look at the scale and possible impact of big international players, the public opinion calls for transparent and accountable information regarding the real impact these organizations have on the economy, environment and society.

Economic aspects. Globalization provides many ways of costs reduction, like functional outsourcing or moving some companies’ parts to other, low-cost, countries; the global market enables decreasing costs through the scale effect, enables access to the cheapest intermediate products and to producers from developing countries. Yet, there are certainly some risks related to global resources allocation (goods, money, people), like investing risk, risk of climate changes or cultural risks.

Ecological aspects, natural resources and energy issues. Global changes interfere with the natural environment, cause pollution resulting from manufacturing processes or the transportation of goods. As we have shown before, the question of externalities is becoming more and more important not only in sectors that have an enormous negative impact on sustainable development. More and more business models are proposed to respond to climate changes, and entrepreneurs use sustainability challenges to establish new solutions for solving these problems. It means that sustainability is also becoming an important driver for economy itself.

Conclusion
There are several areas where globalization has a great influence and offers opportunities as well as controversies and potential threats. This short review of the possible impacts of globalization on the decision-making processes in different areas shows the importance of tracing the ongoing changes and the need to seek ways to handle these problems.  A good summary of the challenges that we face in terms of unsustainable development are the 17 Sustainable Development Goals, which we discussed in the previous sections. We are starting to feel responsible for one another, taking not just local, but also global scope (Crane and Matten 2010).

Sometimes it is fine just to start to take a broader look and reflect on others' needs. Let's watch a video on how sustainability helps to satisfy human needs:

https://www.youtube.com/watch?v=FyT9TMlzC6s

Source: Sustainability Illustrated, Social sustainability: Satisfying human needs (5:48 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=FyT9TMlzC6s

References:

- Crane A., Matten D. (2010) Business Ethics. Managing corporate citizenship and sustainability in the age of globalization, Third Edition, Oxford University Press.

Solving sustainability problems

What we need to start working on sustainability problems is to change the way of thinking about the role of business in creating wealth. How can we do this? It is necessary to start not with the past, but with a future vision that a firm wants to achieve. This idea is well explained in the video below:

https://www.youtube.com/watch?v=DeDm-HTFuiY&list=RDCMUCB_yeT6WwVLJjCsZFt2oQfA&index=4

Source: Sustainability Illustrated, Sustainability Strategy: Backcasting from Success (5:11 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=DeDm-HTFuiY&list=RDCMUCB_yeT6WwVLJjCsZFt2oQfA&index=4

Understanding the principles of sustainability

Implementing sustainaiblity requires acknowledging that sustainability goes through the whole value chain, affecting social, environmental and economic aspects of business operations. Let's watch the video below to understand the 4 Principles that are crucial while implementing sustainability in organizations. As you can notice, this is not simply a "what to do" check list. The video explains the design framework for understanding what the rules are while striving for sustainability:

https://www.youtube.com/watch?v=BO9_hQO9nTo

Source: Sustainability Illustrated, 4 Principles to Win the Sustainability 'Game' (conditions of success) (6:22 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=BO9_hQO9nTo

CSR in different organizational contexts

Do you think the organizational context makes any diffenrece for introducing a CSR strategy? Of course - yes! In this section, we will explore diffferent CSR contexts by analysing the role and relevance of CSR in three main sectors of modern economies, i.e.

the private sector,
the public sector,
the civil society or third sector (including nongovernmental organizations, social enterprises and charities).

There is an issue of terminology here: in a literal sense, the ‘corporate’ aspect of CSR does not apply to small businesses, public sector organizations, NGOs and the like, but the acronym is nevertheless commonly used in a generic sense.

The organizational context may determine the specific challenges that organizations from a particular sector may face. Just think for a moment about what kind of ethical issues may appear in large companies, governmental organizations, organizations from the non-profit sector (NGOs), or small and medium enterprises (SMEs).
In general, we may say that while in large corporations the main prioritities adressing ethical issues refer to financial integrity as well as employee and customer issues, in the case of smaller businesses the ethical issues refer mainly to employee concerns, e.g. fair and regular payment. In turn, non-governmental organizations' challenge is to deliver their mission to clients, assure the integrity of tactics, legitimacy and accountability. Public sector organizations often struggle with assuring the rule of law, corruption, conflicts of interests, procedual issues and accountability. Organizsations from different sectors also take diverse approaches towards managing ethical issues. Large organizations and organizations from the governmental sector often take a formal, or bureaucratic, approach to managing ehics, while SMEs and NGOs prefer an informal, trust- or values-based approach. All these organizations differ also in terms of who they need to be accountable to. Large organizations respond mainly to shareholders and stakeholders, SMEs need to be accountable to owners, employees and customers, NGOs respond to donors and clients, and organizations from the public sector respond to higher level organizations and the general public (Crane and Matten 2010).

Now, think about the differences referring CSR and sustainability issues that occur among these sectors. In the next chapters we will explore the different organizational contexts in more detail.

References:

- Crane A., Matten D. (2010), Business Ethics. Managing corporate citizenship and sustainability in the age of globalization, Third Edition, Oxford University Press.

CSR and the privet sector

The main arena of CSR, as indicated by the ‘corporate’ in CSR, is the business world. However, the specific ways of how firms practice CSR differ among small and large firms.

Large corporations with CSR profiles aim at building a corporate brand and managing public legitimacy.

Large corporations are far more visible, and thus far more vulnerable, to criticism from the public than smaller firms. A large company that wants to behave socially responsibly may therefore have formal policies on its responsibilities and how these responsibilities are managed.

CSR in large corporations typically results in a fairly structured and formalized approach. CSR policies are translated into codes of conduct for employees or suppliers; there are usually committees and managers responsible for CSR; also many large companies involved in CSR  document their engagement in a dedicated annual report (Crane, Matten & Spence 2013).

Small and medium-sized entreprises (SMEs) with CSR profile aim at building trust, networks and personal relations.

SMEs are informal in nature, lacking the need for bureaucratic systems and structures due to the advantages of small size and the proximity of business partners and stakeholders. All business systems including CSR are rather informal and ad hoc in nature as opposed to the structured, formalized and codified approach of large corporations.

SMEs are generally rather invisible and fall under the radar of wider society. Their key relationships with society are the personal relations developed between the owner/manager and, for instance, his or her employees, suppliers, customers, or neighbours.

The common owner-managed nature of the small firm means that there is no separation of ownership and control, unlike in publicly traded large firms. Accordingly, managers are not obliged to serve shareholders or seek to maximize their return on investment. Owner-managers typically enjoy the autonomy of running their own firm and are not seeking to maximize profit as their reward. This frees them to invest time and resources according to their, and importantly their employees’ (seen as key stakeholders) interests (Crane, Matten & Spence 2013).

The above information  might be useful while completing Task 8: Different CSR contexts in practice.

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817

Additional resources:

- Smith C. (2013, August 14), When It Comes to CSR, Size Matters, Forbes, https://www.forbes.com/sites/insead/2013/08/14/when-it-comes-to-csr-size-matters/#5a1e886952a2 (Accessed 4.06.2020)

CSR and the public sector

Of course, the public sector plays an important role in promoting CSR among businesses. You can, for example, check Irleand's National plan to raise public awarness and enhance an action. CSR: https://dbei.gov.ie/en/Publications/Publication-files/Towards-Responsible-Business-Ireland%E2%80%99s-National-Plan-CSR-2017-2020.pdf (Accessed 4.06.2020)

Thus, we know that CSR refers to the private sector, but what about the public sector?
One would not necessarily expect CSR to be an issue for public sector organizations, such as government ministries, agencies or local administrative bodies.

Yet, public sector organizations face similar environmental demands, similar claims for equal opportunities for employees, and similar expectations for responsible sourcing as do private companies. Consequently, the public sector is increasingly found as adopting CSR policies, practices and tools very similar to those found in the private sector (Crane, Matten & Spence 2013).

Public organizations, such as schools, hospitals, or universities, by definition have social aims and are mostly run on a not-for-profit basis. This establishes the social dimension of their responsibility at the core of their operations. Let's check the example of CSR at the University of Manchester:
Policy: https://www.manchester.ac.uk/discover/social-responsibility/

https://youtu.be/TQfBg7bldPE

Source: Social Responsibility at The University of Manchester, Measuring the Difference 2018 - social responsibility at the University of Manchester (2:35) [access 13.06.2020]. Derived from Youtube: https://youtu.be/TQfBg7bldPE

You can also check an example of a CSR Policy from Lakeshore Hospital, India: https://www.vpslakeshorehospital.com/csr-policy

The claim for responsible behaviour on the part of public bodies has grown, as has the demand for greater accountability to society in the public sector. As organizations from the public sector already have their missions that are mostly not connected to increasing profit, it might be challenging for some of them to distinquish between what is obligatory, and what an organization undertakes on a voluntary basis. An interesting insight was provided by Dr. Adalsteinn Brown, Director of the Institute of Health Policy, University of Toronto, who discussed the CSR role in advancing hospital management:

https://www.youtube.com/watch?v=lpkzMRIp2U4

Source:  HealthLeadersCanada, Corporate social responsibility and hospital (2:37 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=lpkzMRIp2U4

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817

CSR and civil society organizations

What are civil society organizations (CSOs)?
These are pressure groups like non-governmental organizations (NGOs), charities, religious groups, community organizations, social enterprises, or other groups that are neither business nor governmental organizations. CSOs have primarily social goals, promote certain interests and causes, like animal rights, social welfare, regeneration, child protection, development, famine relief or health promotion (Crane, Matten & Spence 2013).

Many of them also strive for more responsible business behaviour, such as the protection of the environment, improvements in working conditions in sweatshops in the developing world, or prevention of human rights violations in countries with oppressive regimes.

Can you think about any international NGOs? And do you know any NGOs from your country or region?
Think what the core missions of these organizations are. And do you think these organizations can be seen as approaching CSR values?

Well, the answer isn't easy, because it depends on how precisely we define NGOs' role in promoting CSR.
Traditionally, the role of CSOs and, especially, NGOs in the CSR arena has been more that of a police officer or watchdog, a constant critic exposing corporate misbehaviour and mobilizing pressure against  irresponsible practices, e.g. by provoking consumers' boycotts .

NGOs actively promote  their causes and seek recogniton. Therefore, they use  different tactics, including some law braking, e.g. braking into animal testing labs to release animals.
NGOs whose role is raising awareness and publicly exposing corporations can  generate a big reputational risk for irresponsible companies. In fact, this might be also threat for companies that brand themselves as CSR driven, as the CSR label calls for much more attention and encouarages critics (Crane, Matten & Spence 2013).

Increasingly, however, companies are responding to these challenges and trying to take on board the criticism of NGOs. This has resulted in a changing relation between business and NGOs: rather than being an opponent, NGOs are trying to build partnerships with businesses in order to contribute to more socially responsible business behavior of their partners.

Another type of civil society organization that has attracted more attention in recent years is the social enterprise. Social enterprises and social entrepreneurs vary in type and form, but have a clear primary goal of social or environmental benefit (Crane, Matten & Spence 2013).

One of the most readily recognized social enterprises globally is the Grameen Bank, which is a community development bank that gives very small loans (microcredits) to those at the very bottom of the economic scale, usually women, initially in Bangladesh but now further afield.
The founder, Mohammad Yunus of Grameen Bank, has had such an impact globally that he was awarded the Nobel Peace Prize in 2006:

http://www.youtube.com/watch?v=MgYes4bA7oM

Source: Muhammad Yunus, Grameen Bank at a Glance (5:30 min) [access 13.06.2020]. Derived from Youtube: http://www.youtube.com/watch?v=MgYes4bA7oM

You will find a few more examples of how social entrepreneurship can develop new markets in the section related to Task 9: CSR as a driver for market development

If you want to get more information about social entrepreneurship or you are not really sure how a social entrepreneur is different form a traditional entrepreneur, we invite you to read the following article:

- Martin, R.L. & S. Osberg (2007) Social Entrepreneurship: The Case for Definition, Standford Social Innovation Review,
https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition (Accessed 5.06.2020)

Maybe you have got interest in microfinance and would like to find more information on this topic? Read the article:

- Datar, S. M. Epstein, M.J. & K. YuthasIn Microfinance, Clients Must Come First, Standford Social Innovation Review,
https://ssir.org/articles/entry/in_microfinance_clients_must_come_first (Accessed 5.06.2020)

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817
- https://www.ethicalconsumer.org/ethicalcampaigns/boycotts

CSR in different regions of the globe

CSR relates to the concept of the role of business in society, its obligations, and its impact on stakeholders. Therefore, the meaning of CSR  differs quite substantially from country to country. To put CSR ‘in a global context’, it is essential to understand the specific regional and national contexts in which companies practise CSR. (Crane, Matten & Spence 2013)

"For example in the USA, enterprises are perceived as social actors who play the role of citizens and (...) a good citizen is characterized above all by the attitude of a “philanthropist”, who actively supports society, including private individuals and entire enterprises. In turn in Europe, social responsibility resulted from the role attributed to entrepreneurs as part of the socioeconomic system. It was perceived as a fundamental value embedded in the system." (Klimkiewicz 2020)

In the developed countries, the existing civil society is responsible for articulating social values and preferences by which business is obliged to perform. The impact of cultural settings in the developing countries requires, therefore, a distinct perspective.

CSR in the developing countries is oriented much more toward socioeconomic priorities necessitated by underdeveloped infrastructures, such as poverty alleviation, supporting and increasing awareness of healthcare and environmental issues, and providing education and empowerment to marginalized groups. (Klimkiewicz 2020)

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817
- Klimkiewicz K. (2020) Cross-Cultural Attitudes to CSR. In: Idowu S., Schmidpeter R., Capaldi N., Zu L., Del Baldo M., Abreu R. (eds.) Encyclopedia of Sustainable Management. Springer, Cham.

CSR in the developed countries

In the institutional context, political, educational and labour, cultural, and financial system, coordination and control mechanisms, as well as the organization of market processes - all these factors play an important role in CSR practices in different countries.

For example, the American society is characterized by fairly unregulated markets for labour and capital, low levels of welfare state provision, and a high appreciation of individual freedom and responsibility. Consequently, many social issues, such as education, healthcare, or community investment, have traditionally been at the core of CSR. In turn in  Europe, the Far East, and Australasia, there has always been a stronger tendency to address social issues through governmental policies and collective action. Many issues that US companies would typically boast about as CSR on their websites, such as the provision of healthcare or fighting climate change, have not appeared until recently on the screens of continental European companies. The reason for this is that these issues have traditionally been considered a task for governments (Crane, Matten & Spence 2013).

Despite the differences, in general we may say that the US understanding of CSR as a separate policy has dominated the discussion in the developed countries. So currently, when considering CSR in the developed regions, many firms adopt similar polices, recognizing to some extent the regional differences and demands.

Let's have a look at the example of the CSR Policy in Capgemini, an international organization: https://www.capgemini.com/our-company/our-corporate-social-responsibility-program/#

https://youtu.be/Cue1-ZGmLMI

Source: Capgemini, Architects of Positive Futures: Capgemini's CSR program (3:02 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?time_continue=149&v=Cue1-ZGmLMI&feature=emb_logo

You can think about specific values that Capgemini stresses in the CSR Policy. What do you think - what are the motives that drive this kind of policy, how can the firm benefit from these initiatives? Please keep your thoughts in mind so that you can share them later in the section Task 11: CSR in the Workplace.

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817

CSR in the developing countries

The developing countries are characterized by various features, like low standards for working conditions and environmental protection, high corruption, oppressive regimes with low regard for human rights, poor provision of healthcare and education, as well as low levels of per capita income and foreign direct investment. Also because many multinational companies (MNCs) use developing countries as a source of cheap raw materials and, in particular, cheap labour, that  offers  considerable scope for the exercise of CSR (Crane, Matten & Spence 2013).

The main challenge for MNCs from the developed world when they are faced with such circumstances in the developing countries lies in conducting their business in a way that would be considered socially responsible in their respective home countries.

Therefore, the role of CSR in the developing countries is twofold (Klimkiewicz 2020):

CSR must support political reforms in order to cover governance gaps that occur due to corruption or lack of resources in order to provide efficient social services, provide access to basic goods and services, and respond to economic or social crises and catastrophes that cannot be managed by local services.

In the developing countries, the role of CSR is to monitor and control investment initiatives in order to ensure their economic, social, and environmental value and assess company activities according to their compatibility with international standards, e.g. managing the global supply chain.

A growing number of domestic companies in the developing countries have also got interested in CSR. The main CSR concerns include contributions to enhance the health, education and transport infrastructure, and to serve as examples of good governance.

Let's revisit our case of Capgemini and have a look at how this firm is doing in India:

https://www.youtube.com/watch?v=2fIrfyxe2IU

Source: Capgemini, Corporate Social Responsibility at Capgemini in India (10:03 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=2fIrfyxe2IU

What kind of activities that this company undertakes are specific for the developing countries?
What kind of similarities and differences can you observe compared to its global CSR policy?
You will be able to discuss these question later in the section: Task 11: CSR in the Workplace .

CSR initiatives undertaken in MNCs in the developing countries also evoke some criticism. Critics argue that corporations are mainly interested in profit-maximization and have only  limited interest in more political goals. According to the sceptics, responsible corporate behaviour in the developing world shouldn't be left to the voluntary discretion of business people but needs to be addressed by more stringent regulation in their home countries in the global North (developed countries).

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817
- Klimkiewicz K. (2020) Cross-Cultural Attitudes to CSR. In: Idowu S., Schmidpeter R., Capaldi N., Zu L., Del Baldo M., Abreu R. (eds.) Encyclopedia of Sustainable Management. Springer, Cham.

CSR in the emerging/transitional economies

Between those two major categories of the developed and developing countries there is a third category that deserves attention from a CSR perspective: the emerging or transitional economies.

While there is a range of different approaches to CSR in these countries, one might argue that in some respects, Russia and China represent  more extreme cases.

In the Russian context there is mutual suspicion between business, the state and the people, and large corporations are often tainted by an image of fraud and corruption. Research has found that many Russian managers do not see CSR as a relevant topic for business or for other stakeholders. Russian managers are more likely to perceive CSR in terms of responsibilities that are taken for granted elsewhere, such as abiding by the law, paying taxes and providing employment (Crane, Matten & Spence 2013).

Let's have a look at the video below. What kind of CSR initiatives does it show?

https://www.youtube.com/watch?v=G7vfw5_LKt8

Source: KinrossGold, Developing a Skilled Workforce in Russia - 2013 Corporate Responsibility case study (2:30 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=G7vfw5_LKt8

In turn, in China, the CSR movement has emerged in the context of a legal framework for companies to abide by ethical and socially responsible codes, and a wave of CSR reports. China  plays a crucial role in the global supply chain  and the importance of CSR to supply chain demands is constantly increasing. So China is striving to match the international standards as this may be attributed to the appropriate national image in terms of social responsibility.

Let's listen to Richard Brubaker, expert in Asia’s sustainability, innovation and responsible leadership, the founder of Collective Responsibility, based in Shanghai, https://www.coresponsibility.com/

https://www.youtube.com/watch?v=zXqCvKOdpgU

Source: Collective Responsibility, Do Chinese Firms Invest in CSR & Sustainability? | AsktheCollective 029 (8:00 min) [access 13.06.2020]. Derived from Youtube: https://www.youtube.com/watch?v=zXqCvKOdpgU

How has the CSR approach among Chinese firms changed in the last years according to Brubaker?
What motives is he pointing out to for this kind of change?
What is  characteristic about the CSR approach in Chinese firms?
Is the Chinese CSR approach more similar to the European or US approach?

References:

- Crane, A., Matten, D. and Spence, L. J. (2013), Corporate Social Responsibility in a Global Context. In: A. Crane, D. Matten, and L.J. Spence (eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, 2/e. Abingdon: Routledge, pp. 3-26 . Available at SSRN: https://ssrn.com/abstract=2322817