Week 1: Perspectives, introduction to CSR and sustainability
Corporate social responsibility (CSR): multiple definitions
- Actions that appear to further some social good, beyond the interest of the firm and
what is required by law.
- A concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary
basis and in a context specific way.
- The responsibility of enterprises for their impacts on society.
Corporate sustainability (CS):
- Managing a firm in such a way that its activities meet the need of the present,
without compromising the ability of future generations to meet their needs.
CSR and CS: refer to company activities – voluntary by definition – demonstrating the
inclusion of social and environmental concerns in business operations and in interactions
with stakeholders. Main elements:
- Triple bottom line: economic, social and environmental dimensions.
- Stakeholder.
- Voluntary.
- Context-specific.
- Managing externalities/impacts.
- Rooted in values and ethics (morality).
Key issues in the literature this week:
1. Dealing with ethical decisions in business.
2. Why companies go green.
3. Contrasting perspectives on CSR/sustainability.
Business ethics: Crane & Matten (2006)
Business ethics: concerned with business situations, activities and decisions where issues of
right or wrong are addressed → there is no objective right thing to do, it is about gathering
evidence, analysed this through relevant theories and make better informed decisions.
Two main modes of ethical reasoning:
- Consequentialist reasoning: morality lies in the consequences of the act.
o Egoism: maximize our own utility, pursuing our own interest (but not at the
expense of others) → we will be better off as a society. It’s done by a benefit-
cost analysis.
▪ Sustainability debate: the victims of today’s resource depletion are
the future generation which are not yet present to talk part in any
kind of market → limitation of the egoist theory.
o Utilitarianism: maximize collective utility, pursuing the interests of the
community through benefit cost analysis. The choice with the greatest
collective utility is morally right.
▪ Problems: subjectivity, quantification and distribution.
- Categorical reasoning: morality doesn’t depend on the outcome but on the act itself
(murder=wrong).
, o Duty/Kantian ethics: categorical imperatives → act only according to that
maxim by which you can at the same time apply it as universal law (if
everybody breaks promises all the time it won’t be effective → can’t be a
universal law → lying is bad).
▪ Maxim 1: act only according that that maxim by which you can at the
same time will that it should become a universal law → consistency
▪ Maxim 2: act so that you treat humanity, whether in your own person
or in that of another, always as an end and never as a means only →
human dignity
▪ Maxim 3: act only so that the will through its maxims could regard
itself at the same time as universally lawgiving → universality
(overcome the risk of subjectivity)
o Ethics of rights & justice: respect basic rights and choose under the veil of
ignorance by putting yourself in other persons’ shoes. By putting yourself in
the shoes of the weakest stakeholder, you see if it’s a fair thing to do. Justice
can be defined as the simultaneously fair treatment of individuals in a given
situation with the result that everybody gets what they deserve. But what
does fairness mean:
▪ Fair procedures → equal opportunities.
▪ Fair outcomes → whether consequences are distributed in a just
manner.
Why companies go green? (Bansal & Roth, 2000)
Three main types of motivations:
- Competitiveness: higher profits lower costs, more market share.
o The potential for ecological responsiveness to improve long-term
profitability. Competitive advantage can be gained through environmental
responsibility. Some companies only focus at costs/revenues, not at
ecological impact.
- Ethical or social responsibility: feel-good factors, morale, employee satisfaction.
o Motivation that stems from the concern that a firm has for its social
obligations and values. Firms act out of a sense of obligation, responsibility or
philanthropy instead of self-interest. Satisfaction and high employee morale
are short-term benefits from this ecological response. Firms motivated by
ecological responsibility often choose independent and innovative courses of
actions instead of mimicking firm with legitimation motives.
- Legitimacy: complying to norms and laws to avoid penalties.
o The desire of a firm to improve the appropriateness of its action within an
established set of regulations, norms, values, or beliefs. Aimed at reducing
costs and risks of noncompliance. Avoiding sanctions, fines and penalties.
More focused on reducing risk that proactive ecological decision making.
Meeting standards rather than exceeding them → focus on imitating peers.
Ecological responsiveness: a set of corporate initiatives aimed at mitigating a firm’s impact
on the natural environment.
Motivations to go green are influenced by:
, - Issue salience: The extent to which a specific ecological issue has meaning for
organizational constituents. Salient issues were more highly valued by consumers →
influence on competitive advantage.
o Certainty → degree to which the impact of the issue on the natural
environment can be measured (waste disposal)
o Transparency → issues that are easily attributable to a polluting firm.
o Emotivity → issues that elicit an emotional response from organizational
constituents.
- Field cohesion: Field cohesion influences a firm’s motivations due to its
connectedness of employees, owners and local residents which increases the
frequency of interactions → causing concerns for their legitimacy.
o High cohesion: less motivated by competitiveness and ecological
responsibility (moves imitated and can’t be too good because it makes others
in the industry look bad.
Individual concern: The degree to which organizational members value the
environment and the degree of discretion they possess to act on their environmental
values. Personal values can influence a firm’s ecological response in thee ways:
o Values help decision makers discriminate between important and
unimportant signals.
o Values will induce some organizational members to champion ecological
responses.
o Management is more receptive to change if they fit with their own personal
values.
Critiques on CSR (Friedman, 1970)
The social responsibility of business is to increase its profit. That means:
- Use resources/capabilities to increase profits for stakeholders.
- Stay within the rules of the game.
- Fiduciary responsibility of managers and owners.
Which implies:
- CSR activities are equal to theft or imposing tax.
- Unless there is a business case for it (if it’s going to lead to increased profits).
o Competitive motivation (Bansal & Roth)
o Egoism motivation (Crane & Matten)
Critiques on Friedman:
1. Legal basis
a. Shareholders are beneficiaries, but they do not have dominion on the firm.
b. They are the residual claimants → they get what is left after other parties
take their part of the pie.
c. Managers are expected to make discretionary decisions → not always sure if
these will lead to profits.
2. Incentives aligned
a. Shareholders can sell stock at any point. They have no long-term interests for
the company.
b. They are shielded by limited liability for depts, wrongdoings → what is good
for the stock price isn’t what is good for the company.
3. Other stakeholders?
Corporate social responsibility (CSR): multiple definitions
- Actions that appear to further some social good, beyond the interest of the firm and
what is required by law.
- A concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary
basis and in a context specific way.
- The responsibility of enterprises for their impacts on society.
Corporate sustainability (CS):
- Managing a firm in such a way that its activities meet the need of the present,
without compromising the ability of future generations to meet their needs.
CSR and CS: refer to company activities – voluntary by definition – demonstrating the
inclusion of social and environmental concerns in business operations and in interactions
with stakeholders. Main elements:
- Triple bottom line: economic, social and environmental dimensions.
- Stakeholder.
- Voluntary.
- Context-specific.
- Managing externalities/impacts.
- Rooted in values and ethics (morality).
Key issues in the literature this week:
1. Dealing with ethical decisions in business.
2. Why companies go green.
3. Contrasting perspectives on CSR/sustainability.
Business ethics: Crane & Matten (2006)
Business ethics: concerned with business situations, activities and decisions where issues of
right or wrong are addressed → there is no objective right thing to do, it is about gathering
evidence, analysed this through relevant theories and make better informed decisions.
Two main modes of ethical reasoning:
- Consequentialist reasoning: morality lies in the consequences of the act.
o Egoism: maximize our own utility, pursuing our own interest (but not at the
expense of others) → we will be better off as a society. It’s done by a benefit-
cost analysis.
▪ Sustainability debate: the victims of today’s resource depletion are
the future generation which are not yet present to talk part in any
kind of market → limitation of the egoist theory.
o Utilitarianism: maximize collective utility, pursuing the interests of the
community through benefit cost analysis. The choice with the greatest
collective utility is morally right.
▪ Problems: subjectivity, quantification and distribution.
- Categorical reasoning: morality doesn’t depend on the outcome but on the act itself
(murder=wrong).
, o Duty/Kantian ethics: categorical imperatives → act only according to that
maxim by which you can at the same time apply it as universal law (if
everybody breaks promises all the time it won’t be effective → can’t be a
universal law → lying is bad).
▪ Maxim 1: act only according that that maxim by which you can at the
same time will that it should become a universal law → consistency
▪ Maxim 2: act so that you treat humanity, whether in your own person
or in that of another, always as an end and never as a means only →
human dignity
▪ Maxim 3: act only so that the will through its maxims could regard
itself at the same time as universally lawgiving → universality
(overcome the risk of subjectivity)
o Ethics of rights & justice: respect basic rights and choose under the veil of
ignorance by putting yourself in other persons’ shoes. By putting yourself in
the shoes of the weakest stakeholder, you see if it’s a fair thing to do. Justice
can be defined as the simultaneously fair treatment of individuals in a given
situation with the result that everybody gets what they deserve. But what
does fairness mean:
▪ Fair procedures → equal opportunities.
▪ Fair outcomes → whether consequences are distributed in a just
manner.
Why companies go green? (Bansal & Roth, 2000)
Three main types of motivations:
- Competitiveness: higher profits lower costs, more market share.
o The potential for ecological responsiveness to improve long-term
profitability. Competitive advantage can be gained through environmental
responsibility. Some companies only focus at costs/revenues, not at
ecological impact.
- Ethical or social responsibility: feel-good factors, morale, employee satisfaction.
o Motivation that stems from the concern that a firm has for its social
obligations and values. Firms act out of a sense of obligation, responsibility or
philanthropy instead of self-interest. Satisfaction and high employee morale
are short-term benefits from this ecological response. Firms motivated by
ecological responsibility often choose independent and innovative courses of
actions instead of mimicking firm with legitimation motives.
- Legitimacy: complying to norms and laws to avoid penalties.
o The desire of a firm to improve the appropriateness of its action within an
established set of regulations, norms, values, or beliefs. Aimed at reducing
costs and risks of noncompliance. Avoiding sanctions, fines and penalties.
More focused on reducing risk that proactive ecological decision making.
Meeting standards rather than exceeding them → focus on imitating peers.
Ecological responsiveness: a set of corporate initiatives aimed at mitigating a firm’s impact
on the natural environment.
Motivations to go green are influenced by:
, - Issue salience: The extent to which a specific ecological issue has meaning for
organizational constituents. Salient issues were more highly valued by consumers →
influence on competitive advantage.
o Certainty → degree to which the impact of the issue on the natural
environment can be measured (waste disposal)
o Transparency → issues that are easily attributable to a polluting firm.
o Emotivity → issues that elicit an emotional response from organizational
constituents.
- Field cohesion: Field cohesion influences a firm’s motivations due to its
connectedness of employees, owners and local residents which increases the
frequency of interactions → causing concerns for their legitimacy.
o High cohesion: less motivated by competitiveness and ecological
responsibility (moves imitated and can’t be too good because it makes others
in the industry look bad.
Individual concern: The degree to which organizational members value the
environment and the degree of discretion they possess to act on their environmental
values. Personal values can influence a firm’s ecological response in thee ways:
o Values help decision makers discriminate between important and
unimportant signals.
o Values will induce some organizational members to champion ecological
responses.
o Management is more receptive to change if they fit with their own personal
values.
Critiques on CSR (Friedman, 1970)
The social responsibility of business is to increase its profit. That means:
- Use resources/capabilities to increase profits for stakeholders.
- Stay within the rules of the game.
- Fiduciary responsibility of managers and owners.
Which implies:
- CSR activities are equal to theft or imposing tax.
- Unless there is a business case for it (if it’s going to lead to increased profits).
o Competitive motivation (Bansal & Roth)
o Egoism motivation (Crane & Matten)
Critiques on Friedman:
1. Legal basis
a. Shareholders are beneficiaries, but they do not have dominion on the firm.
b. They are the residual claimants → they get what is left after other parties
take their part of the pie.
c. Managers are expected to make discretionary decisions → not always sure if
these will lead to profits.
2. Incentives aligned
a. Shareholders can sell stock at any point. They have no long-term interests for
the company.
b. They are shielded by limited liability for depts, wrongdoings → what is good
for the stock price isn’t what is good for the company.
3. Other stakeholders?
