CORPORATE SOCIAL RESPONSIBILITY (CSR)

AND ETHICS

By Isha Aggarwal

Definitions and Definitions and RelationshipsRelationships

Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society

In the business world, ethics is the study of morally appropriate behaviors and decisions, examining what "should be done”

Although the two are linked in most firms, CSR activities is no guarantee of ethical behavior

Recent Evidence of CSR Recent Evidence of CSR InterestInterestAn Internet search turns up

15,000 plus response to “corporate citizenship”

Journals increasingly “rate” businesses (and NGOs) on socially responsive criteria:◦Best place to work◦Most admired◦Best (and worst) corporate

reputation

Reasons for CSR ActivitiesReasons for CSR ActivitiesCSR activities are important to and even expected by the public◦And they are easily monitored

worldwideCSR activities help organizations

hire and retain the people they want

CSR activities contribute to business performance

Maximize firm’s profits to the exclusion of all else

Balance profits and social objectives

Do what it takes to make a profit; skirt the law; fly below social radar

Social responsibility initiatives

Comply; do what is legally required

Integrate social objectives and business goals

Lead the industry and other businesses with best practices

Do more than required; e.g. engage in philanthropic giving

Articulate social value objectives

Corporate Social Responsibility Continuum

CSR are Grounded by Opposing CSR are Grounded by Opposing Objectives (Maximize Profits to Balance Objectives (Maximize Profits to Balance Profits with Social Responsibility) and so Profits with Social Responsibility) and so Activities Range WidelyActivities Range Widely

Do what it takes to make a profit; skirt the law; fly below social radar

Fight CSR initiativesComply with legal requirementsDo more than legally required, e.g.,

philanthropyArticulate social (CSR) objectives Integrate social objectives and business goalsLead the industry on social objectives

Businesses CSR ActivitiesBusinesses CSR ActivitiesPhilanthropy◦ give money or time or in kind to charity◦ Integrative philanthropy—select

beneficiaries aligned with company interests

Philanthropy will not enhance corporate reputation if a company ◦ fails to live up to its philanthropic image or ◦ if consumers perceive philanthropy to be

manipulative

IIntegrate CSR ntegrate CSR GloballyGloballyIncorporate values to make it part of an articulated belief system

Act worldwide on those values ◦Cause-related marketing◦Cause-based cross sector

partnershipsEngage with stakeholders

◦Primary stakeholders◦Secondary stakeholders

Business Ethics Business Ethics Development Development The cultural context influences

organizational ethicsTop managers also influence

ethicsThe combined influence of

culture and top management influence organizational ethics and ethical behaviors

The Evolving Context for The Evolving Context for EthicsEthics

From domestic where ethics are shared

To international where ethics are not shared when companies:◦Make assumptions that ethics are

the same◦Ethical absolutism—they adapt to us ◦Ethical relativism—we adapt to them

To global which requires an integrative approach to ethics

Emergence of a Global Emergence of a Global Business Ethic Business Ethic

Growing sense that responsibility for righting social wrongs belongs to all organizations

Growing business need for integrative mechanisms such as ethics◦ Ethics reduce operating uncertainties◦ Voluntary guidelines avoid government impositions

Ethical conduct is needed in an increasingly interdependent world—everyone in the same game

Companies wish to avoid problems and/or be good public citizens

Ways Companies Integrate Ways Companies Integrate EthicsEthics

Top management commitment in word and deed

Company codes of ethicsSupply chain codesDevelop, monitor, enforce ethical

behaviorSeek external assistance

Johnson & Johnson’s CredoJohnson & Johnson’s Credo

We believe our first responsibility is to the doctors, nurses and patients,To mothers and fathers and all others who use our products and services.In meeting their needs everything we do must be of high quality.We must constantly strive to reduce our costs in order to maintain reasonable prices.

Johnson & Johnson’s Credo Johnson & Johnson’s Credo (contd...)(contd...)Customers’ orders must be serviced

promptly and accurately.Our suppliers and distributors must have an opportunity to make a fair profit.We are responsible to our employees, the men and women who work with us throughout the world.Every one must be considered as an individual.We must respect their dignity and recognize their merit.They must have a sense of security in their jobs.

Johnson & Johnson’s Credo Johnson & Johnson’s Credo (contd...)(contd...)Compensation must be fair and adequate,

And working conditions clean, orderly and safe.We must be mindful of ways to help our employees fulfill their family responsibilities.Employees must feel free to make suggestions and complaints.There must be equal opportunity for employment, development and advancement for those qualified.We must provide competent management, and their actions must be just and ethical.

Johnson & Johnson’s Credo Johnson & Johnson’s Credo (contd...)(contd...)

We are responsible to the communities in which we live and work and to the world community as well.We must be good citizens – support good works and charities and bear our fair share of taxes.We must encourage civic improvements and better health and education.We must maintain in good order the property we are privileged to use, protecting the environment and natural resources,

Johnson & Johnson’s Credo Johnson & Johnson’s Credo (contd...)(contd...)

Our final responsibility is to our stockholders.Business must make a sound profit.We must experiment with new ideas.Research must be carried on, innovative programs developedAnd mistakes paid for.New equipment must be purchased, new facilities provided and new products launched.Reserves must be created to provide for adverse times.When we operate according to these principles, the stockholders should realize a fair return

External Assistance with External Assistance with EthicsEthics

Industry or professional codesCertification programs, e.g., ISO

9000Adopt/follow global codes

◦Caux Round Table Principles

Reasons for Businesses to Engage Reasons for Businesses to Engage in Development of a Global Code of in Development of a Global Code of

Business EthicsBusiness Ethics

Create the same opportunity for all businesses if there are common rules

Level the playing fieldThey are needed in an interconnected

worldThey reduce operating uncertaintiesIf businesses don’t collaborate, they may

not like what others develop

Four Challenges to a Global Four Challenges to a Global EthicEthic

◦ Global rules emerge from negotiations and will reflect values of the strong

◦ Global rules may be viewed as an end rather than a beginning

◦ Rules can depress innovation and creativity

◦ Rules are static but globalization is dynamic