Corporate Social Responsibility: A capitalist ideology?

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Corporate Social Responsibility: A capitalist ideology? Samuel O. Idowu London Metropolitan Business School, London Metropolitan University, 84 Moorgate, London EC2M 6SQ, UK E-mail: [email protected] Abstract: The field of Corporate Social Responsibility (CSR) has been embraced globally by modern corporate entities of all shapes and forms. Advocates of the field argue that corporations that are perceived by society as being socially responsible are likely to derive enormous benefits from being so. They argue that most stakeholders whether primary or secondary, internal or external, local or national offer their support of the actions of these socially responsible corporations. Most would agree that corporate responsibility is an excellent idea, but from where did the ideology of CSR originate? An examination of the literature has given no conclusive evidence as to whether CSR is a capitalists’ doctrine; in fact the literature is unusually silent in this respect, perhaps it is assumed that we all know. However, after examining the activities that stem from the ideology and considering the presence of the word ‘social’ in its very name one may deduce that CSR is a socialist doctrine. What history has preceded the evolution of CSR in today’s corporation? Why are multinational corporations from these capitalists’ states now exporting the ideology throughout the world? Is CSR representative of a new form of capitalist ideology? These are some of the issues that this study will explore in depth in order to establish the origins of CSR practiced by capitalist corporations in the 21st century. Keywords: business policy; capitalism; corporate entities; ethics; ideology; social responsibility; stakeholders; strategy. Reference to this paper should be made as follows: Idowu, S.O. (2012) ‘Corporate Social Responsibility: A capitalist ideology?’, Int. J. Social Entrepreneurship and Innovation, Vol. 1, No. 3, pp.239–254. Biographical notes: Samuel O. Idowu is a Senior Lecturer in Accounting at London, UK. He researches in the fields of Corporate Social Responsibility and accounting. He has led several edited books in CSR and is the Editor-in-Chief of two forthcoming Springer reference books – Encyclopedia of Corporate Social Responsibility and Dictionary of Corporate Social Responsibility. One of his edited books was ranked 18th in 2010 Top 40 Sustainability Books by Cambridge University Sustainability for Leadership Programme, UK.

Copyright # 2012 Inderscience Enterprises Ltd.

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Introduction

It is generally acknowledged that modern corporate entities have some social responsibility towards society; even the most adamant opponents of CSR agree with this viewpoint. There are, however, several different opinions on what these responsibilities entail. In truth, there are various paradigms of corporate social responsibility. Some scholars believe and argue fervently that an entity’s sole social responsibility is to increase its profits whilst operating within the confines of the law (Friedman, 1962, 1970). Conversely, in his triple bottom line reporting, Elkington (1997) argues that the social responsibility of a business entity is three-fold: to create Economic value (that is, to be profitable), to create Ecological value (namely, to engage in activities which are beneficial to the natural environment) and to create Social value (which requires it to engage in activities that are beneficial to life and the community). Carroll and Buchholtz (2003) argue that the social responsibility of a business organisation is four fold and can be expressed either as a pyramid or in terms of an equation. When expressed as an equation, it is the sum total of four different responsibilities, which are Economic responsibility (ECR) (which is to make a profit), Legal responsibility (LGR) (to obey the law), Ethical responsibility (ETR) (to do what is right, fair and just at all times) and Philanthropic responsibility (PHR) (to be a good corporate citizen). Expressed mathematically, the equation from Carroll and Buchholtz’s (2003) study is: CSR ¼ ECR þ LGR þ ETR þ PHR: When expressed in terms of a pyramid, the entity’s ECR is at the base and PHR is at the top. CSR is, therefore, depicted in a hierarchical form in the order of ECR, LGR, ETR, and PHR. Friedman (1962, 1970), Elkington (1997) and Carroll and Buchholtz (2003); agree that an important social responsibility of a business is to make a profit. Businesses have successfully delivered this responsibility to societies for centuries, and will hopefully continue to do so in the centuries to come; however, making a profit is generally perceived as a capitalist objective. The responsibility to deliver a profit (ECR) is only 25% of the sum total of what has been depicted in the equation noted above, if they were each given an equal weighting. The activities of a business entity not only affect its owners, but also other members of society, namely those Accounting Standards Committee (1975) recognises as having legitimate interests in its existence, such as employees, customers, suppliers of goods and services and representatives of interest groups. In support of the suggestion that making a profit is a CSR, Suggett and Goodsir (2002) note that 90% of Australians now expects business firms to go well beyond maximising shareholders’ wealth, as shareholders are not the only affected stakeholders in a firm’s operations. In today’s world, a corporate strategy on social responsibility that only acknowledges the needs of one of these many stakeholders is flawed ab initio, and may result in serious economic and social consequences to the entity concerned.

Corporate Social esponsibility: A Capitalist Ideology? Table 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

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Some corporate social responsibility initiatives

Corporate social responsibility initiatives and reporting Corporate citizenship initiatives and reporting Sustainability initiatives and reporting Triple bottom line reporting and initiatives Non-mandatory social, environmental and governance initiatives and reporting Some mandatory social, environmental and governance initiatives and reporting Socially responsible and ethical investment funds reporting Corporate reputation indices National and international corporate governance guidelines Engagement with global initiatives Adoption of new reporting and performance guidelines and standards Strategic community involvement, investment and engagement Long term business=community partnerships Greater stakeholder dialogue and engagement Compliance with legislation and regulation in corporate social responsibility, governance and related Issues Source: Birch (2003 pp.1–2).

Capitalist business enterprises which aspire to be socially responsible are expected to be engaged in the initiatives established by Birch (2003) and noted in Table 1.

1.1 Objectives of the study The literature on corporate social responsibility does not directly address the origins of this forward thinking ideology. The presence of the word ‘social’ in CSR leads to the assumption that the ideology is derived from the socialists’ modus operandi, but this may not be an accurate assumption. This current study, therefore, proposes to examine the literature on CSR to identify the original source of CSR. More exactly, the objectives of this study are: .

to define and explain CSR

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to consider the traditional view of business under capitalism

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to explain both capitalism, socialism and how both ideologies see CSR

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to comment on trends which appear evident from a systematic study of the literature on this subject and some indication as to why CSR has suddenly taken centre stage in societies around the world

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to offer a detailed bibliography as a starting point for those who might wish to explore the area in more detail than this current study.

1.2 Defining and explaining corporate social responsibility Despite the importance, general acceptance and high profile that the idea of corporate social responsibility has received worldwide over the last few decades, there is still no generally acceptable definition, interpretation or guidelines for practical application

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of CSR. According to Crowther and Rayman-Bacchus (2004), who have argued that the term corporate social responsibility – even though it is currently in vogue – means different things to different people, the lack of a definitive definition is to be expected. Crowther and Rayman-Bacchus (2004) argue that to some, CSR is concerned with bioengineering and its effects on biodiversity, and therefore, the future of the planet. In any case, each country faces different social and environmental problems at any given point in time, but occasionally, these problems occur across borders. For instance, the now gradually receding financial recession was worldwide, the problem of global warming and climate change is worldwide and HIV=AIDS is a general problem. Some scholars perceive the field as being concerned with trust in, and legitimacy of, corporate behaviour and the constant tension between economic wealth and social wellbeing (Haw, 2004). Other researchers consider the field to involve changing corporate behaviours by encouraging individuals to behave responsibly themselves; after all, they argue, corporate entities operate through individuals. The actions of the individuals who represent the corporate entity are understandably taken as the entity’s actions (Mahon and McGowan, 2004) On defining, Crowther and Rayman-Bacchus (2004) also argue that it could be defined from two different perspectives. They refer to the first as its broadest definition, which, they suggest, is concerned with ‘‘what is – or what should be the relationship between the global corporation, governments of countries and individual citizens’’. The second, they note, is its more local definition, which is concerned ‘‘with the relationship between a corporation and the local society in which it resides or operates’’ or expressed another way it is concerned ‘‘with the relationship between a corporation and its stakeholders’’. Coelho et al. (2003) put the same argument differently when they suggested that the term CSR means something, but not always the same thing to everybody. They argue that to some, it conveys the idea of legal responsibility or liability, whilst to others, it means socially responsible behaviour in an ethical sense. Still, to others, the meaning transmitted is that of ‘responsible for’, in a causal mode; indeed, many simply equate it with ‘charitable contributions’. There are some who perceive it as being socially ‘aware’ or ‘conscious’, or as a synonym for ‘legitimacy’ in the context of ‘belonging’ or being proper or valid, or as a fiduciary duty that imposes higher standards of behaviour on corporations than on individual citizens. Votaw and Sethi (1973) observe that even the antonyms socially ‘irresponsible’ or ‘non-responsible’ also have different interpretations for different people. Coelho et al. (2003) conclude that the field of CSR is ‘‘so vague and ambiguous that it can be interpreted in almost any way to accomplish anything’’; the absence of a consensus on what CSR means and how it should be practiced perhaps is its charm, Coelho et al. (2003) note. In Table, Idowu and Filho (2009) provide a few definitions of CSR which scholars and some international organisations around the world have employed to explain how they perceive, understand and interpret the ideology: To complicate issues further, some scholars around the world use different terms in reference to CSR. For instance, Jackson (2003) calls it corporate citizenship=sustainability; he argues that it is an expanded notion of corporate accountability rooted in stakeholder relationships. Jackson (2003) goes further to suggest that without the continued participation of its key stakeholders, the corporation would not survive, it would collapse and fail.

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Definitions of CSR – by researchers and organisations promoting the field

Author

Definition





CSR is the ethical behaviour of a company towards society; management acting responsibly in its relationship with other stakeholders who have a legitimate interest in the business, and it is the commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large CSR is the overall relationship of the corporation with all its stakeholders . . . . Elements of CSR include investment in community outreach, employee relations, creation and maintenance of employment, environmental responsibility, human rights and financial performance CSR is the obligation of businessmen to pursue policies, to make those decisions, or to follow those lines of action which are desirable in terms of objectives and values of our society CSR is the obligations of the firm to its stakeholders – people and groups who can affect or who are affected by corporate policies and practices. These obligations go beyond legal requirements and the company’s duties to its shareholders. The fulfilment of these obligations is intended to minimise any harm and maximise the long run beneficial impact of the firm on society CSR are actions that appear to further some social good, beyond the interests of the firm, and those that are required by law. CSR is the overall relationship of the corporation with all its stakeholders . . . . Elements of corporate social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental responsibility, human rights and financial performance CSR is concerned with what is – or should be – the relationship between the global corporation, governments of countries and individual citizens CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis CSR is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources CSR is how companies address the social, environmental and economic impacts of their operations and so help to meet our sustainable development goals

WBCSD (1999)

Conference Board of Canada (1999)

Carroll (1999)

Bloom and Gundlach (2001)

McWilliams and Siegel (2001) and Jackson (2003)

Crowther and Rayman-Bacchus (2004) European Union (2004)

Kotler and Lee (2005)




BIS (2009)


BIS stands for Department for Business, Innovation and Skills (a UK Government Department).

WBCSD stands for World Business Council for Sustainable Development. Source: Idowu and Filho (2009) p.15 – extended

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Attempts have been made by international organisations and governments to define and put in place an acceptable framework that corporate entities may use as a working reference. For more on this, see the European Commission’s Green Paper entitled ‘Promoting a European Framework on CSR of July 2001’ published by the Labour government of Tony Blair. The UK government under Labour leaders Tony Blair and Gordon Brown (1997–2010) played vital roles in establishing CSR. In fact Tony Blair’s administration was the first government administration anywhere in the world to appoint a Minister for CSR in March 2000. The International Standards Organisation (ISO) has recently issued its ISO 26,000, which encourages organisations to go beyond legal compliance when practicing CSR. Having said all this, it should be noted that remarkable achievements have thus far been made without organisations being coerced to adopt a prescriptive framework on CSR. Indeed, corporate entities around the world have realised that there are some strategic benefits inherent in being socially responsible. It has in fact been argued that coercing organisations into taking a route like this could inhibit creativity and impede stakeholder dialogues, which are two important ingredients to the successful implementation of an effective policy on CSR (Kakabadse and Rozuel, 2006). Implementing an effective policy should enable CSR to become the foundation upon which the principles of a company should operate. This would also enable the company to become a key element of sustainable development at local, national and international levels (Maignan and Ferrell, 2004).

1.3 The traditional view of business in a capitalist society The traditional view of a ‘good’ business manager or an entrepreneur in a capitalist society is that he or she is an individual capable of generating high profits regardless of the effects of his or her actions on jobs, the environment and local, national and international communities, providing no law is broken in the course of these actions. This was probably true some 40 or 50 years ago, when there was limited knowledge of corporate social responsibility. This was perhaps the view some scholars were echoing in their papers (Levitt, 1958) and (Friedman, 1962, 1970). Modern writings on CSR and the increased knowledge of the principles encompassed by it appear to have invalidated the traditional view of good managers, according to Carroll (1999) and Rake and Grayson (2009). Stakeholders, usually productive members of society, contribute in different ways to the success of the firm, which was perhaps why Wood (1991) argued that business and society are interwoven rather than distinct entities: neither could function effectively without the other (Idowu, 2010). Societal pressures are applied to corporations to ensure that they act within a spectrum of social systems. These societal pressures are also applied to hold an organisation responsible for the adverse effects of its actions. It is now no longer acceptable for corporate entities to assume that their obligations to society are only two- – economic and legal. Elkington (1997), Suggett and Goodsir (2002) and Carroll and Buchholtz (2003) have all acknowledged that modern definitions of corporate social responsibility have extended these obligations well beyond these two boundaries. Genuine altruistic responsibility now lies at the heart of what society expects from modern corporations (Lantos, 2001); for example, large organisations can no longer continue to believe that giving back £5,000 in eleemosynary donations from an

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after tax profit of £500 million would suffice. Modern corporate entities are aware that their CSRs go well beyond philanthropic activities (Kotler and Lee, 2005). Most of the actions performed by corporate entities that are perceived as being responsible are ostensibly voluntary, and these entities run the risk of reduced profits in the short term. For example, an entity that invests in capital equipment that alleviates the adverse impact of its production activities on the natural environment or its workforce would perhaps reduce distributable profits to its shareholders, at least in the short term. This is probably not a strategy that would have been embraced by a capitalist some 50 years ago, as the sole objective then of running a business enterprise was to maximise profits. Equally, if the same organisation donated part of its profits for charitable purposes, this would have the same effect on its distributable profits to shareholders – again, in the short term. If the donations were expended by the recipient to save people’s lives, e.g., for cancer research, then the donor entity was indirectly preserving the ‘stocks’ of its potential customers, employees, suppliers, shareholders, etc. These are groups whose actions would consequently affect organisations’ financial performance, whether in the short, medium or long term. Modern corporations have tremendous influence over what goes on in the world around them; stakeholders equally have the power and influence to bring to order corporations which they perceive to act against societal best interests. Both sides have since realised that they cannot function successfully without each other (Wood, 1991). Acknowledging this fact has brought about a debate on CSR that has heightened over the last few decades. To demonstrate an awareness of this, KPMG reported that 52% of the world’s largest corporations published CSR reports in 2005, and Idowu and Towler (2004) observed that 100% of the FTSE 100 companies in the UK now issue their annual CSR reports in one form or the other.

1.4 CSR from the capitalists’ perspective CSR remains a moot ideology, and its legitimacy is linked to a set of fundamental and crucial questions. Lantos (2001) argues that the legitimacy of CSR can be found in the answers to eight crucial questions: .

Why do corporate entities exist?

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Should enterprises also be concerned with their social performance as well as economic results?

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What does it mean to be socially responsible?

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Should economic performance be sacrificed for social performance?

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To whom do businesses owe ‘responsibilities’, ‘duties’ or ‘obligations’?

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What kinds of activities and programmes should CSR include?

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To what extent should social responsibility activities consume the company’s precious resources?

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How can we measure social performance and, thereby, know when companies have fulfilled their societal obligations? Source: Lantos (2001) pp.595–596.

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In a capitalist society, quantifying the end results of any given activity by corporate managers matters a great deal; this was so even before CSR became a prominent ideology around the globe. Firms are accountable to a long list of stakeholders to whom any poor performance would need to be justified, particularly those stakeholders who are providers of capital, employees, NGOs, the state, etc. Before CSR rose to prominence in Western capitalist states, the successes or failures of corporate entities were measured on the basis of their bottom line results and the social costs of those successes were nonchalantly passed on to societies. As long as share prices continue to rise on stock exchanges, dividends paid to shareholders continue to increase annually and the amount of corporate taxes paid to the state also continues to increase, all was perceived to be well. However, Friedman (1962) argues that engaging in CSR activities is not one of the roles that shareholders envisaged that their managers would carry out on their behalf. Managerial involvement in CSR- activities is likely to waste cash resources and consequently breach the fiduciary obligations that these managers have to their shareholders (Friedman, 1962). This was purely an old capitalist approach to managing an enterprise, which ignored the interests that several other stakeholders have in what corporations do in society. This was perhaps what Coelho et al. (2003) had in mind when they argued that ‘‘the fiduciary duty to firms’ owners is the bedrock of capitalism, and capitalism will wither without it’’. Corporate social responsibility has changed this idea. Shareholders are voluntarily requesting that their companies behave responsibly. Governments are now prepared to give incentives to encourage companies to engage in socially responsible activities. For instance, capital allowances are available to companies when they buy capital assets which alleviate the adverse effects of their operations on the environment and the health of their employees. Corporate entities are now very keen to voluntarily take different courses of action to demonstrate to the world at large that they are conscious of their responsibility to society. It is now a common practice for organisations in certain industries and in the more industrialised parts of the world to install environmentally friendly machinery; use recyclable raw materials; rehabilitate sites that may have been damaged by their previous actions; treat employees equally regardless of sex, race, religion, etc.; respect conventions on human rights; disassociate themselves from suppliers of products made with child labour; make donations for charitable purposes; and a host of other socially responsible actions which modern corporations in many capitalist states now embark on to demonstrate responsibility (Idowu, 2005). A careful consideration of these so-called environmentally friendly actions taken by corporate entities reveals that they are not influenced by a desire to be environmentally conscious per se, but by some resulting benefits that may flow from them afterwards. For example, Tilt and Symes (1999) argue that Australian mining companies, which rehabilitate mining sites after depleting the mines only do so to legitimise the rehabilitation expenditures that they may have incurred, and claim the resulting tax benefits by including the related rehabilitation expenses in the final accounts; such expenditures are generally of material amounts. There is, therefore, a compelling need for disclosure to occur. Other research studies have supported the view that companies in the mining industry disclose the greatest

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amount of environmental information compared with companies in other industries – see Dierkes and Preston (1977), Gray (1994) and Tilt (1997). These recent actions taken by corporate entities in capitalist societies demonstrate responsibility and are considered ‘good for business’. Many of these corporations have identified the enormous benefits which would result from being socially responsible, and are now formulating what Lantos (2001) refers to as Strategic CSR: activities undertaken by a firm to accomplish its strategic business goals. These are good deeds that are believed to be good for business as well as society.

1.5 Examining the literature on CSR The concept of corporate social responsibility is not a totally new one, as noted by several scholars; Frankental (2001) argues that CSR goes almost as far back as the French Revolution of 1789–1799, which brought about a major turning point in the history of Western democracy – from the age of absolutism and aristocracy to the age of citizenry as a dominant political force. Idowu (2009) notes that altruistic CSR has been in existence in the UK since the 1770s. Cook (2003) argues that the National Insurance Act 1911 of Asquith’s Liberal government in the UK, which required firms to make contributions for unemployment and sickness benefits for all staff, was the first recorded instance of state involvement in CSR anywhere in the world. Idowu and Towler (2004) argue that the Employee Report was the predecessor of the CSR report in the UK in the mid-1970s. The British Institute of Management notes that the use of CSR has been on the corporate scene in the UK since 1947. Crowther (2002) argues that CSR has been in existence in Britain since the Industrial Revolution of the eighteenth century. Maltby (2004) argues that it has been practiced by a number of British manufacturing companies, especially by Sheffield steelmakers during the beginning of the twentieth century. Birch (2003) also argues that some companies in history that have survived over the long term have always engaged in some form of CSR activities. Norris and O’Dwyer (2004) summed it up when they argued that ‘‘the concept has received much attention in the past but this has tended to wax and wane; what we are now witnessing is only a resurgence of interest in corporate social responsibility’’.

1.6 Factors contributing to the recent popularity of CSR around the world Why are we all now talking about corporate social responsibility? Academic researchers, in an attempt to understand the factors that have helped to heighten recent interest in the field of corporate social responsibility, have postulated a number of theories, which they have used to support their arguments and formalise the results of their studies. These are the decision usefulness theory (which argues that investors find the social information disclosed by corporate entities helpful in their decision-making exercise) cf. Spicer (1978), Buzby and Falk (1979), Belkaoui (1980) and Mahapatra (1984); the agency theory (which views the relationship that subsists between the managers and owners of a corporate entity as that of agents and principals) cf. Jensen and Meckling (1976); the stakeholder theory (which assumes that in order for an entity to generate sustainable wealth over a long period of time, good relationships must

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exist between that entity and its critical stakeholders) cf. Carroll (1989), Freeman (1984), Clarkson (1995) and Waddock (2002) (who both distinguish between two classes of stakeholders – namely, primary and secondary stakeholders); the sustainable development theory (which argues that the future of mankind lies in its ability to build sustainable business enterprises and an economic reality which connects industry, society and the environment) cf. Hart (1997), Senge and Carstedt (2001) and Ricart et al. (2005); the social and political theory (which describes society as operating under ‘‘a series of social contracts between members of society and society itself’’) (Gray et al., 1996); and finally, the legitimacy theory (which postulates that ‘‘the actions taken by an entity are assumed to be desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions’’) – Lindblom (1994), Suchman (1995) and Gray et al. (1995). Vogl (2003) takes a slightly different approach to the theories cited above. He argues that four factors contribute to the rise of corporate entities tackling social responsibility. He argues that these factors are tightening regulatory pressures, changing demographics, absorbing pressure from Non-Governmental Organisations (NGOs) and witnessing an increase need for greater transparency. This, therefore, explains why the following events are happening in the world around us today. Stock exchanges and other financial institutions around the world are compelling listed companies to provide information on their CSR activities. For example, in France all companies listed on the Paris Stock Exchange are required to include, in addition to their financial statements, information about their social and environmental performance. In South Africa, the Johannesburg Stock Exchange requires that all listed companies comply with a CSR-based code of conduct. In the USA, the Dow Jones Sustainability World Indexes are used by investors and lenders around the world to screen for social and environmental performance of corporate entities. In the UK, there are a host of important organisations requiring information about corporate entities’ CSR activities. The Association of British Insurers (ABI) has issued guidelines that set out information on social, environmental and ethical matters that institutional investors now expect to see disclosed in the annual reports of listed companies. The ICAEW’s guidelines of 1993 encourage companies to provide information on their environmental objectives in a form which allows their performance in the area to be easily measurable. The Welfare and Pensions Act 1999 has made it mandatory for pension funds to disclose whether they took social, ethical and environmental matters into consideration in the selection and management of funds. The Business in the Community’s Corporate Responsibility Index needs information on what corporate entities are doing in the area of CSR. In addition, the FTSE4Good Index is increasingly becoming a major index used when screening for good corporate citizenship. Lately, the London Stock Exchange’s Corporate Responsibility Exchange (CRE) – a data platform which requires information on corporate responsibility, is another factor which compels listed corporate entities in the UK to be active in the area of CSR. Corporate entities in the UK that are not currently active in the area of CSR are compelled by the Operating and Financial Review (OFR) requirement, which became effective in 2005. OFR requires all listed companies to report on the impact of their environmental and social actions and how they are addressing these issues. The Global Reporting Initiative (GRI), an international organisation based in Amsterdam that was launched in 1997 as a joint initiative of the US NGO

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Coalition for Environmentally Responsible Economies (CEREs) and the United Nations Environment Programme, has developed uniform guidelines for CSR reporting. These guidelines have the objectives of improving the quality, rigour and usefulness of CSR reporting, and permit inter-company comparability. Twenty-first century stakeholders are more sophisticated, well educated and better informed. They are now demanding that those companies they do business with in their various capacities as members of society (consumers, suppliers, investors, employees, etc.) conform to a very high standard in all respects, including good citizenship. Invariably, when making decisions on where to invest their ‘hard earned’ cash, some stakeholders consider whether or not a company is socially responsible. Recent experiences which have occurred over the last few years have confirmed that equity investors are likely to suffer the most following irresponsible behaviour on the part of a corporate entity. See, for example, the explosion at Union Carbide in Bhopal, India in December 1984; the Exxon Valdez Oil Spillage at Prince Edward Sound in Alaska in March 1989; the collapse of BCCI UK in 1991, of Enron USA in 2001, of WorldCom USA in 2002, of Parmalat Italy in 2003 and a host of other similar incidents. Equity investors are, therefore, more likely to want to ensure that their companies are behaving responsibly in this area, since past events have proved that they are likely to suffer most if their companies behave irresponsibly. The world today has witnessed a massive increase in the number of NGOs which are interested in different aspects of our lives, such as Friends of the Earth (FoE), Green Peace, Amnesty International and the World Wildlife Fund, to mention a few which come into the category of such organisations. They represent a range of interests (human rights, trade, environmental, and social) and consider CSR as part of the broader context of sustainable development. They favour the need to identify what is expected of corporations based on international agreements, use of regulatory means such as an obligation on the part of corporate entities to report on their social and environmental performance, and the establishment of efficient policy initiatives to promote responsible business behaviour. The advent of the internet and a marked improvement in modern communications has made our world a smaller place today – it is now a ‘global village’, as some authors have described it. Most corporate entities would prefer ‘no publicity’ to ‘bad publicity’, as they are aware of the immense damage that results from bad publicity. These NGOs have laid down a set of expected standards with which corporate entities and governments are required to comply. Corporate entities and governments in the more developed parts of the world strive to comply with these standards. Actions which they may have taken or intend to take to comply are included in their CSR activities; again, a need to portray ‘good citizenship’ arises in an attempt to stay within the expected norms of these NGOs – in other words ‘stay out of trouble’.

2

Discussion

Corporate social responsibility is a capitalist ideology. In fact, Vogl (2003) describes the advent of CSR as ‘the dawning of a new era of capitalism’; Thurow (1966) also argues that the demise of social competitors to capitalism necessitated that the ideology had to undergo a profound metamorphosis. According to Birch (2003),

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the one-sided face of capitalism which laid too much emphasis on profit and economic success with no provision for the sustainable future of societies in the capitalist world was what triggered Elkington’s concept of the triple bottom line. Capitalism has plenty of scope to innovate and develop. Modern organisations are aware that demonstrating a high degree of responsibility in all areas of their activities and having a competitive edge over their competitors, and thereby, deriving enormous benefits economically, socially and environmentally is too good an opportunity to miss. Scholars have posited that corporate entities have operated responsibly for well over 50 years, cf. Bowen (1953), and have thrived globally over the last thirty years. This success was in consequence of the realisation that businesses can achieve more economically, socially and environmentally by inculcating socially responsible actions in their day-to-day activities. Indeed, CSR has modernised and transformed capitalism. There are several reasons why corporate entities in the capitalist world have embraced CSR (Patten, 1992; Deegan et al., 2000). Danastas and Gadenne (2005) suggest that it was an attempt to placate NGOs and others who continue to criticise large corporations for not doing enough for society, the environment, their staff and less advantaged people – especially those in the third world. But Hall and Rieck, 1998, Tsoutsoura (2004) and Van de Velde et al. (2005) have argued that it might also be an attempt to improve a company’s financial performance – that is profit, earnings per share, share prices, etc. Becchetti and Ciciretti (2006) suggest that being socially responsible is an attempt to be successful in financial terms. Frankental (2001) argues that it is a public relations invention; otherwise, the following characteristics would not have become apparent: .

a commonly understood definition (within and across companies)

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a common set of benchmarks to measure the attainment of CSR

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established processes in place to achieve these benchmarks

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a system of internal auditing

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a system of external verification by accredited bodies.

Findings from studies have also supported the view that the stock market reacts positively to general disclosures of CSR information (cf Belkaoui, 1976; Ingram, and Frazier, 1980; Anderson and Frankle, 1980) and those that focus on market reaction to specific categories of social responsibility reporting (Freedman and Jaggi, 1982, 1986 and 1988; and Shane and Spicer, 1983). Deegan and Gordon (1996) and Adams et al. (1998) have noted an increase in the use of CSR reports to disclose information about their operations by some corporate entities as a result of the risks inherent in the industries in which they operate. Some scholars and organisations working on CSR are choosing to refer to the field as corporate responsibility with the word ‘social’ absent in the title. Some corporate entities are now referring to their CSR reports as Corporate Responsibility Reports (CRRs). It has been suggested that the word ‘social’ be removed. Idowu (2009) argues that the presence of the word ‘social’ misconstrues the origins of the ideology.

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Conclusion

Birch (2003) calls for contemporary capitalism to be environmentally and socially responsible by being accountable, transparent, inclusive, ethical, stable, more equitable and sustainable, and undertaking some other CSR-related initiatives that have acted collectively to reshape the practice of modern capitalism in terms of corporate responsibilities Delivering a profit is a social responsibility of any business enterprise; both opponents and advocates of CSR agree with this view. In the past, this responsibility was wrongly ascribed to include only capitalism when in fact, an enterprise which fails to deliver a profit to its owners is in effect failing to meet one of its social responsibilities. This study argues that any enterprise which adequately meets this and other social and environmental responsibilities to society would be successful and survive even during a global financial downturn. The indication is that if all businesses, whether large or small, new or old, met all the responsibilities encompassed in CSR, these businesses would deliver higher profits and stakeholders around the world would derive enormous benefits from these actions.

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