MODULE 13

INTERNATIONAL
CORPORATE SOCIAL
RESPONSIBILITY
 KEY AIMS
The aims of this chapter are to:

● Introduce the concept of corporate social responsibility (CSR);

● Provide reasons why companies should engage with this idea and
explore how they can do this;
● Examine how CSR differs between countries and why;
● Discuss the implications of the rise of CSR for HRM.
 INTRODUCTION
• Many companies today explain on their website how they see their relationship
with their wider society. For example, Marks and Spencer, headquartered in
London, writes in its ‘Plan A’: ‘We believe that sustainability is both a moral and
commercial imperative. Unless we respond to the social, environmental and
economic pressures of the future, not only will we struggle to compete, we may
also struggle to survive as a business.

• CSR has become a key part of modern business discourse, but what are we to
make of this phenomenon? What is CSR? Why should companies engage with
this idea? How can a company do this? Does CSR differ between countries and,
if so, how and why? What implications does the rise of CSR have for HRM?
THE CONCEPT OF CORPORATE SOCIAL
RESPONSIBILITY
 CSR is often defined as voluntary commitments that go beyond a company’s
legal requirements. McWilliams and Siegel (2001: 117) define CSR as ‘actions
that appear to further some social good, beyond the interests of the firm and
that which is required by law’. This definition highlights that CSR is about
companies proactively engaging with the needs of employees, customers,
suppliers, local communities or other stakeholders.

 As an alternative, the European Commission (2011: 6) defines CSR as ‘the

responsibility of enterprises for their impacts on society’, which requires
companies to ‘have in place a process to integrate social, environmental,
ethical, human rights and consumer concerns into their business operations
and core strategy in close collaboration with their stakeholders’. This definition
is somewhat formulaic, as there is, for example, no indication how far a
company needs to go to address the concerns of its consumers.
 Defining CSR is made more difficult as there are competing concepts that seek
to capture the role of business in society from related but slightly different
angles, not least the concepts of corporate sustainability and corporate
citizenship. Corporate sustainability is a translation, to the level of the company,
of the concept of sustainable development.
 Sustainable development stresses that a more sustainable future can only
come about through the interaction of a wide range of societal actors, such as
businesses, consumers, regulators, NGOs and so on. Applying the system-level
concept of sustainable development to the level of the individual organization
then leads to the concept of corporate sustainability (Dyllick and Hockerts
2002).
 Corporate citizenship takes the same starting point as CSR, namely, that
companies are members of society, with obligations as well as privileges. Using
the concept of citizenship to clarify what these obligations and privileges are,
scholars have applied the distinction in the political science literature between
liberal and communitarian versions of citizenship (Marshall 1950).
Core stakeholders are essential to the survival of the firm; employees and providers of capital are
likely to be in this category. Peripheral stakeholders are those groups and individuals who are not
engaged in transactions with the company and who are not necessary for its survival. The media or
local community groups may fall into this category. Mitchell, Agle and Wood (1997) distinguish
between stakeholders in terms of:

● Legitimacy: how valid is the stakeholder’s claim in the eyes of the wider public?
● Power: to what extent is the stakeholder able to produce an effect?
● Urgency: to what degree does their claim need immediate attention?

The manager should focus on those stakeholders who have a legitimate claim that is urgent and who
also have the ability to potentially inflict damage on the company. When Nike was criticized for poor
labour conditions in its supplier plants in South-East Asia during the 1990s, few would disagree that
the right of employees to decent working conditions constituted a legitimate claim. Information
gathered by non-governmental organizations (NGOs) showed the widespread nature of these
malpractices, giving urgency to the legitimate claim. Finally, the sustained campaign by several
NGOs led to a great deal of publicity for the case with the attendant threat of consumer boycotts –
the urgent and legitimate claim had become a powerful one too.
The reasons why a company might want to engage with CSR fall into three broad categories:
(1) the business case;
(2) societal pressure; and
(3) ethical arguments

The business case for CSR suggests that ‘a company can “do well by doing good”: that is, it
can perform better financially by attending not only to its core business operations, but also to
its responsibilities towards creating a better society’ (Kurucz et al. 2008: 84). The business
case can take several forms (Carroll and Shabana 2010):

● Cost reduction: better management can reduce the exposure of employees, contractors or
customers to environmental hazards;
● Competitive advantage: through environmental proactiveness, a company can develop
environmentally friendlier goods or production processes;
● Reputation: a reputation for being a responsible company can increase customer loyalty;
● Synergistic value creation: through establishing connections with various stakeholders,
companies may be able to tap into novel opportunities for value creation.
CSR IN THE MULTINATIONAL ENTERPRISE
 Having discussed what CSR is, one further complication arises when we consider
multinational enterprises (MNEs): as CSR is shaped by the ways in which business
is embedded in society, different societies are likely to have different expectations
as to what constitutes socially responsible behavior. While MNEs are used to
dealing with different legal requirements at local, national and international levels,
international CSR also requires them to pay attention to differences between
countries in the needs of their stakeholders.
 Differences in stakeholder needs are even more pronounced when we compare
developed with developing countries. In many developing countries governments
are severely handicapped in their ability to address social and environmental needs.
 A global CSR strategy has the advantage that it aids an effective transmission of
CSR priorities across all parts of the company. In particular, in countries where
social and environmental legislation is less stringent than in the MNE’s home
country, such a global CSR strategy may lead to an upward harmonization of CSR
standards.
CSR IN THE MULTINATIONAL ENTERPRISE
 A local CSR strategy can overcome some of these downsides as it is much more
responsive to the local situation, allowing for meaningful dialogue with local
stakeholders. However, under a local strategy a company’s CSR initiatives can
become fragmented and uncoordinated, as they are run by a variety of managers.

 The MNE can try to balance a global CSR strategy with a local one. This promises
to offer the best of both worlds, responding to the needs of local stakeholders while
integrating its CSR activities globally in order to make the provision of CSR cost -
effective while also adequately responding to global, social and environmental
problems.
 MANAGING CORPORATE SOCIAL
RESPONSIBILITY
Having understood what CSR is and why a company might want to engage in such
activities, the next question is how it can do this. In fact, companies have quite a range
of tools at their disposal, both internal ones, such as codes of conduct and social and
environmental reporting, and external ones, such as CSR standards.

• A code of conduct (also called ethical policy, code of ethics, statement of business
practice, business principles, etc.) is a policy document that defines the
responsibilities of the company towards its stakeholders and/or the conduct the
company expects of its employees.
• Codes of conduct have a particular prominence in the United States. An early
example that is still in use today is ‘Our Credo’, a code drafted by Johnson &
Johnson in 1943. During the last two decades, such documents have also become
widespread in other industrialized nations, such as the United Kingdom, Germany
and Sweden.
 MANAGING CORPORATE SOCIAL
RESPONSIBILITY
• In developing countries, significant adoption rates of codes have been reported
for countries as diverse as South Africa, India, Brazil and Mexico. Today most
large companies – 92 per cent of the G250 – have a code of conduct in place
(KPMG 2008).

In addition to the corporate level, codes have also been drawn up by various industry
associations, like the ‘Code of Business Practices’ by the International Council of Toy
Industries (Leipziger 2015).

• Codes of conduct have a number of advantages. They clarify what the company
expects of its employees and hence may offer encouragement and support for
moral behavior.
 MANAGING CORPORATE SOCIAL
RESPONSIBILITY
Another widely applied CSR tool is social and environmental reporting (also called sustainability
reporting, accounting for sustainability or social and environmental disclosure), which is an extension
of financial reporting.
• Financial reporting seeks to generate information about the financial performance of a firm so
that managers can take decisions regarding the firm’s future strategy, shareholders can assess
the risk of their investment, while suppliers and customers can assess the creditworthiness of the
firm.
The Global Reporting Initiative (GRI) has developed a comprehensive Sustainability Reporting
Framework that allows companies to report on their economic, environmental and social performance
through a common format. The GRI framework stipulates generic principles for both the process of
compiling a sustainability report and its actual content.
Research by accounting firm KPMG found that, by 2013, 93 per cent of the world’s largest 250
companies were engaging in social and environmental reporting, with particular growth in reporting
among companies from South and East Asia and Latin America.
• A third important group of CSR tools are CSR standards. In general terms, a
standard involves a standard-setting organization defining the characteristics of a
product (or service). Products that meet the requirements of the standard can be
marked with a logo so that customers can make appropriate buying choices.
• CSR standards have a number of advantages. They send a clear signal to
consumers, NGOs and regulators that the certified company takes its social and
environmental responsibilities seriously. They are hence part of a self-regulatory
approach to CSR that aims to address social and environmental externalities
through the activities of businesses themselves.
• Another key actor is the trade union movement. Unions have been pushing for
companies to sign International Framework Agreements (also called Global
Framework Agreements) between MNEs and international union federations. Such
agreements contain binding clauses on adherence to international labor standards
across all the plants of a company.
CORPORATE SOCIAL RESPONSIBILITY
AND HUMAN RESOURCE MANAGEMENT
In this final section of this chapter will investigate the relationship between CSR and HRM, both in terms of what the
implications of the rise of CSR are for HRM as a corporate practice and how HR managers can support companies in
becoming more socially responsible. Public disquiet over the exploitation of children, for example, led to a long series of
Factory Acts in the United Kingdom throughout the nineteenth century. While the Cotton Mills and Factories Act 1819
stipulated a minimum age of 9, over the course of the century it was eventually raised to 12, with the Factory and
Workshop Act 1901.

Today, the range of CSR issues that have an impact on HRM is greater than ever. Green-wood (2002) and Ehnert
(2009) see the following challenges in more socially responsible HRM:

● fair reward systems based on the concepts of equity, distributive justice, autonomy and respect;
● health and safety in the workplace in order to avoid accidents and maintain employee health;
● investment in developing workforce skills, in particular in critical competencies and lifelong learning;
● support for work-life balance, work-family balance and an ageing workforce;
● due process in the treatment of employees, following the principles of respect, transparency,
honesty and long-term nature of changes; and
● respect for employee privacy, and, as a consequence, freedom and autonomy as organizational
values.
 HOW CAN HRM AS A CORPORATE FUNCTION
SUPPORT COMPANIES IN BECOMING MORE SOCIALLY
RESPONSIBLE?
First, the HRM function should hire employees who are willing to engage with CSR
through concrete activities. Where appropriate, this may require the inclusion of CSR
criteria in job specifications. HRM should also engage in employee training to develop
the environmental and social abilities of the firm’s staff.
Second, HRM can contribute to motivating employees to engage with the CSR
challenges their company faces. This could be achieved through making social and
environmental issues part of the company’s appraisal and performance management
system.
Third, HRM can provide opportunities for employee involvement in socially responsible
actions, rather than restricting involvement to CSR managers and specialists. As
employees are often a source of pressure for organizations to address environmental
and social issues, companies can tap into this potential.
AWESOME
WORDS
 CONCLUSION
CORPORATE SOCIAL
RESPONSIBILITY
RISE OF CSR
The rise of CSR tallies with many wider
Corporate social responsibility may be
themes in this book. As globalization is
somewhat difficult to explain as there is
driven in particular by the 'state-less' MNE,
no commonly accepted definition of the CSR shows clearly that MNEs are a
term, yet attention to the needs of wider particular category of social actor. After
stakeholders than just shareholders is assessing its stakeholders in terms of
increasingly expected of business. CSR power, legitimacy and urgency, a company
can take a number of forms, ranging may well find that its most salient
from codes of conduct through social stakeholders reside far away on different
and environmental reporting to CSR continents, yet still have the ability to
standards influence its operations
CSR, and neighboring concepts like
sustainability, have the potential to serve
as new paradigm for HRM (Ehnert et al.
2014). CSR and sustainability stress the
need to rethink the way companies
manage and use their resources, including
their human resources. Companies need to
consider not just resource consumption but
also resource regeneration.
 REMINDER
The role of HRM in developing responsible and sustainable
business organizations then centers on the function’s ability
not only to produce but also to regenerate resources and to
ensure that resource holders are willing and able to supply
their resources over and over again.
 Thank
You!
THANK
YOU!
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