Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 What is CSR? (Werther & Chandler, 2010)

 Three words, corporate, social, responsibility

 “A view of the corporation and its role in

society that assumes a responsibility among
firms to pursue goals in addition to profit
maximization & a responsibility among a firm’s
stakeholders to hold the firm accountable for its
actions.”
 Corporate philanthropy
 Philanthropy (Oxford English Dictionary): “The
practice of helping people in need”

 Corporate philanthropy: The desire of profit

making organizations to help people in need or
promote welfare of people in need.
 Strategic corporate philanthropy
(Michael Porter & Mark Kramer in Werther & Chandler, 2010)

 “The acid test of good corporate philanthropy

is whether the desired social change is so
beneficial to the company that the organization
would pursue the change even if no one ever
knew about it.”

 A balance between the “… ends of economic

viability and the means of being socially
responsible.”
 The CSR Pyramid
(Carroll, 1991, in Schwartz & Carroll, 2003)

Be a good citizen Desired

Philanthropic

Be ethical Expected
Ethical

Required
Obey the law Legal

Required
Be profitable Economic
 The CSR Hierarchy
(Carroll, 1991, in Werther & Chandler, 2010)

Discretionary
Responsibilities

Ethical
Responsibilities

Legal
Responsibilities

Economic
Responsibilities
 The CSR Hierarchy (Contd.)
(Carroll, 1991, in Werther & Chandler, 2010)

 Economic responsibility: “…to produce an

acceptable return on its owners’ investments”
 Legal responsibility: “… a duty to act within the
legal framework drawn up by the government &
judiciary”
 Ethical responsibility: “… to do no harm to its
stakeholders & within its operating environment”
 Discretionary responsibility: “… proactive, strategic
behaviors that can benefit the firm & society, or
both”
 The culture & context (Werther & Chandler, 2010)

 Rich and poor societies: Who can afford what

 Individualistic and collectivistic cultures:
Different needs, different priorities, different
agendas for CSR
 A moral argument for CSR
(Werther & Chandler, 2010)

 The existence of an organization and the

expectations of the community and wider
society it functions in.
 The iron law of social responsibility
(Davis & Blomstrom, 1966, in Werther & Chandler, 2010)

“In a democratic society, power is taken away

from those who abuse it.”
 CSR and profits (Werther & Chandler, 2010)

“While CSR does not increase profits, higher

profits lead to greater CSR.”
 Why is CSR important?
(Werther & Chandler, 2010)

 Growing affluence
 Ecological sustainability
 Globalization
 The free flow of information
 The public image of an organization
Thank You
Theories of CSR
 Legitimacy Theory
(Fernando & Lawrence 2014)

 The society gives organizations their resources.

So, the organizations are expected to fulfil the
expectations of the society they function in

 “Organizations can only continue to exist if the

society in which they are based perceives the
organization to be operating to a value system that
is commensurate with the society’s own value
system.” (Gray et al., 2010, in Fernando & Lawrence, 2014)
 How do organizations legitimize
their operations? (Fernando & Lawrence, 2014)

 “To educate relevant stakeholders about their actual

performance”: Reporting
 Change the perceptions of the relevant stakeholders
about the underlying issue without changing the
organization’s behavior”: Public impression management
 “Distract or manipulate the attention away from the
issue of concern and seek to divert the attention to a
favorable issue”: CSR Activities and advertising
 “Seek to change external expectations about the
organization’s performance”
 Limitations of Legitimacy Theory
(Gray et al., 2010, in Fernando & Lawrence, 2014)

 Legitimacy gap: Dynamic nature of the

expectations of the society versus
organizational objectives
 Legitimization threats: Unexpected occurrences
affecting the organization’s reputation, such as
a financial threat, major accident, scandal, etc.
 Vagueness regarding disclosure: If and why
and how much should organizations disclose
 Stakeholder Theory (Fernando & Lawrence, 2014)

 “… the management of an organization is

expected to perform its accountability towards
its stakeholders by undertaking activities
deemed important by its stakeholders, and by
reporting information”
 Who are stakeholders?
(Florea & Florea, 2013)

“Stakeholders are the persons, institutions,

organizations, formal & non formal groups which
are interested or can be affected or which could
influence the company decisions or actions.” (Freeman,
1980, in Florea & Florea, 2013)

20
 Types of stakeholders (Florea & Florea, 2013)

Based on involvement:
 “Internal stakeholders have a range of interests in
the different parts of the company [or organization
or community] and its activities.”

 “External stakeholders are individuals, companies

or groups outside the companies which are
influenced or could influence company [or
organization or community] decisions and
activities.”
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on how they are influenced by decisions/ actions

 “Primary stakeholders are the people or groups which are directly
affected, in a positive or negative way, by a strategy, decision or
action of a company, organization [or community].”
 “Secondary stakeholders are people or groups that are indirectly
affected, either positively or negatively by a company [or
organization or community] decision or action.”
 “Key stakeholders play an important role in [the] decision making
process & also in its implementation because they are involved in
company management or financing [or management & financing of
the organization or community], [e.g.] policy makers, officials,
important professionals or community personalities having a
strong position or influence.”
22
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on the amount of power and influence they have:

 “Promoters have both great interest in the decision & the
power to help make it successful (or to fail it)”
 “Defenders have a vested interest & can voice their
support in the community, but have little actual power to
influence the decision in any way.”
 “Latents have not particular interest or involvement in
the decision, but have the power to influence it greatly if
they become interested.”
 “Apathetics have little interest & little power, & may not
even know the decision exists.”
 Perspectives of stakeholder theory
(Fernando & Lawrence, 2014)

 Ethical perspective:
 “Irrespective of the stakeholder power, all the
stakeholders have the same right to be treated
fairly by an organization.”
 “”Managers of an organization are expected to
manage the business for the benefit of all
stakeholders, regardless of whether management of
stakeholders leads to improved financial
performance.”
 Limitation: very difficult to manage different
and contradictory interests of stakeholders
 Perspectives of stakeholder theory
(Contd.) (Fernando & Lawrence, 2014)

 Managerial perspective: “ an organization is

expected to be accountable to its economically
powerful stakeholders.” The more powerful or
critical the stakeholder, the more accountable
the organization is to her or him.
 Challenge: Deciding the priority list
 Institutional theory (Fernando & Lawrence, 2014)

 Social acceptance
 “Institutional theory views organizations as
operating within a social framework of norms,
values, & taken-for-granted assumptions about
what constitutes appropriate or acceptable
economic behavior.”
 Dimensions of institutional theory
(Fernando & Lawrence, 2014)

 Isomorphism: “A constraining process that

forces one unit in a population to resemble
other units that face the same set of
environmental conditions.”
 Coercive isomorphism: Pressure from people and
institutions that matter
 Mimetic isomorphism: Copying others’ practices
when one fails to do something unique on one’s
own
 Normative isomorphism: Doing good just like
everyone else…
 Dimensions of institutional theory
(Contd.) (Fernando & Lawrence, 2014)

 Decoupling: “… situation in which the formal

organizational structure or practice is separate
and distinct from actual organizational
practice.”
 Social and environmental disclosures help construct
an image of the organization that may or may not
match the real image.
 Theoretical Framework
(Fernando & Lawrence, 2014)

Convergent predictions Convergent motivations

Integrated of organizational of CSR practice
Theories behavior & motivations

1. An organization seeks 1. To legitimize the business or

Legitimacy survivability & stability of organization (legitimacy
its business motive)
Theory
2. To perform accountability to
2. An organization seeks the organization’s
legitimacy of its business stakeholders, sometimes
based on the extent of the
3. An organization tries to be
stakeholders’ power
Stakeholder accountable to its
(accountability motive)
Theory stakeholders
3. To conform to social norms &
4. An organization tries to beliefs those are largely
conform to procedures & imposed on an organization,
structures of other which ultimately leads to
organizations which are homogeneity in organizations
Institutional in the same field (isomorphic
within a particular
Theory motive)
organizational field
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Theories of CSR
(Contd.)
(Garriga & Mele, 2004)
 Broad categories of theories
(Garriga & Mele, 2004)

 Instrumental theories
 Political theories
 Integrative theories
 Ethical theories
 Instrumental theories (Garriga & Mele, 2004)

 “The corporation is an instrument for wealth

creation & this is its sole social responsibility
 “Any supposed social activity is accepted if, and
only if, it is consistent with wealth creation:
 “CSR is a mere means to the end of profits.”
 Groups of instrumental theories
(Garriga & Mele, 2004)

 Maximising the shareholder value:

 “Any investment in social demands that would
produce an increase of the shareholder value
should be made, acting without deception & fraud”
 “In contrast, if the social demands only impose a
cost on the company, they should be rejected.”
 “… the socio-economic objectives are completely
separate from the economic objectives”
 Groups of instrumental theories
(Contd.) (Garriga & Mele, 2004)

 Strategies for achieving competitive advantage:

 “… focussed on how to allocate resources in order
to achieve long-term social objectives & create a
competitive advantage”
 Approaches:
 “Social investments in competitive contexts
 Natural resource-based view of the firm & its dynamic
capabilities
 Strategies for the bottom of the economic pyramid”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Social investments in a competitive context:

Philanthropic investments are perceived as having
better social value than any other investment (Porter &
Kramer, 2002, in Garriga & Mele, 2004)

 “When philanthropic activities are closer to a

company’s mission, they create greater wealth
than other kinds of donations.” (Burke & Lodgson, 1996, in Garriga &
Mele, 2004)

 “… philanthropic investments by members of

cluster, either individually or collectively, can have
a powerful effect on the cluster competitiveness &
the performance of all its constituents’
companies.” (Porter & Kramer, 2002, in Garriga & Mele, 2004)
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Natural resource based view of the firm (RBV)

& dynamic capabilities:
 RBV:
 “… the ability of a firm to perform better than its
competitors depends on the unique interplay of human,
organizational, & physical resources over time.”
 Resources for competitive advantage “… should be
valuable, rare, and inimitable, and the organization must
be organized to deploy these resources effectively”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)

 ‘Dynamic capabilities’ approach:

 “drivers behind the creation, evolution, &
recombination of the resources into new sources of
competitive advantage”
 “organizational & strategic routines by which managers
acquire resources, modify them, integrate them, &
recombine them to generate new value-creating
strategies”
 Natural resource-based view of the
firm & dynamic capabilities approach
(Contd.) (Garriga & Mele, 2004)
 Social & ethical capabilities include,
 “process of moral decision making
 process of perception, deliberation & responsiveness or
capacity of adaptation
 development of proper relationships with the primary
stakeholders: employees, customers, suppliers, &
communities”
 Hart (1995): Strategic capabilities model:
 Interconnected capabilities: “pollution prevention, product
stewardship, sustainable development”
 Critical resources: “Continuous improvement, stakeholder
integration, & shared vision”
 Approaches to strategies for achieving
competitive advantage (Contd.)
(Garriga & Mele, 2004)

 Strategies for the bottom of the economic

pyramid:
 Strategies that can “serve the poor & simultaneously
make profits”
 Disruptive innovations: “Products & services that do not
have the same capabilities& conditions as those being
used by customers in mainstream markets; as a result
they can be introduced only for new or less demanding
applications among non-traditional customers, with a
low-cost production & adapted to the necessities of the
population.” (Christensen & Overdorf, 2000; Christensen et al., 2001, in Garriga &
Mele, 2004) e.g. a low cost basic cell phone
 Groups of instrumental
theories (Contd.) (Garriga & Mele, 2004)

 Cause related marketing :

 “… the process of formulating & implementing marketing
activities that are characterized by an offer from the firm to
contribute a specified amount to a designated cause when
customers engage in revenue-providing exchanges that
satisfy organizational & individual objectives.” (Varadarajan & Menon,
1988, in Garriga & Mele, 2004)

 Goal: “… to enhance company revenues & sales or customer

relationship by building the brand through the acquisition of,
& association with the ethical dimension or social
responsibility dimension”
 “… seeks product differentiation by creating socially
responsible attributes that affect company reputation.”
 Political theories (Garriga & Mele, 2004)

 “… the social power of the corporation is

emphasized, specifically in its relationship with
society & its responsibility in the political arena
associated with this power. This leads the
corporation to accept social duties & rights or
participate in certain social cooperation.”
 Political theories (Contd.) (Garriga & Mele, 2004)

 Principles for managing social power (Davis, 1967, in

Garriga & Mele, 2004):

 Social power equation: “… the social responsibilities

of businessmen arise from the amount of social
power that they have”
 Iron law of responsibility: “Whoever does not use
his social power responsibly shall lose it.”
 Corporate constitutionalism
(Davis, 1967, in Garriga & Mele, 2004)

 “The constituency groups of corporations

define conditions of the responsible use of
power by corporations, “… and channel
organizational power in a supportive way and
to protect other interests against unreasonable
organizational power.”
 Groups of political theories
(Garriga & Mele, 2004)

 Integrative social contract theory

 Corporate citizenship
 Integrative social contract theory
(Garriga & Mele, 2004)

 Donaldson & Dunfee (1994, 1999):

 Assumption of a social contract between the society and
business
 “Social responsibilities come from consent”
 Macrosocial contract: “provides rules for any social contracting.
These rules are called the ‘hyper-norms’; they ought to take
precedence over other contracts.”
 Microsocial contract:
 “… show explicit or implicit agreements that are binding within an
identified community, industry, companies or economic systems.”
 “generate ‘authentic norms’.”
 “… based on the attitudes & behaviors of the members of the norm-
generating community and, in order to be legitimate, have to accord
with the hyper-norms.”
 Groups of political theories (Contd)
(Garriga & Mele, 2004)

 Corporate citizenship: Profit making

organizations are responsible citizens of the
community they flourish in
 Integrative theories (Garriga & Mele, 2004)

 “… consider that business ought to integrate

social demands.”
 “… argue that business depends on society for
its continuity & growth & even for the existence
of business itself.”
 “… focused on the detection & scanning of, &
response to, the social demands that achieve
social legitimacy, greater social acceptance &
prestige”
 Groups of integrative theories
(Garriga & Mele, 2004)

 Issues management
 The principle of public responsibility
 Stakeholder management
 Corporate social performance
 Issues management (Garriga & Mele, 2004)

 “… the process by which the corporation can

identify, evaluate & respond to those social &
political issues which may impact significantly
upon it.”
 Social responsiveness: action, the how of CSR
 The principle of public responsibility
(Garriga & Mele, 2004)

 “… public policy includes not only the literal text of law

& regulation but also the broad pattern of social
direction reflected in public opinion, emerging issues,
formal legal requirements, & enforcement or
implementation practices.” (Preson & Post, 1981, in Garriga & Mele, 2004)
 Scope of managerial responsibility:
 Primary: “… essential task of the firm, such as locating &
establishing its facilities, procuring suppliers, engaging
employees, carrying out its production functions, &
marketing products.”
 Secondary: “… come as a consequence of the primary. e.g.
career & earning opportunities for some individuals, etc.”
 Ethical theories (Garriga & Mele, 2004)

 “… the relationship between business & society

is embedded with ethical values.”
 “… firms ought to accept social responsibilities
as an ethical obligation above any other
consideration”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Why CSR?
 Approaches to CSR (Lee, 2011)

 Obstructionist strategy: Ignorance of social

demands for greater responsibility: We do not
care!
 Defensive strategy: Legal compliance only. We will
do only as much as is required.
 Accommodative strategy: Legal compliance and
stakeholder interests. We will do what is required
and try to keep stakeholders happy.
 Proactive strategy: We will actively work for the
welfare of the community whether or not we get
noticed.
 Approaches to CSR (Contd.) (Lee, 2011)

Institutional pressure
Stakeholder Weak Intense
pressure
Weak Obstructionist: Absence of Defensive: Institutional pressure
external pressures without stakeholder support

Intense Accommodative: Stakeholder Proactive: Synchrony in external

pressure without institutional pressures
legitimacy
 Antecedents of CSR (Depending
on conditions) (Campbell, 2007)

 Economic conditions
 Institutional conditions
 Economic antecedents of CSR
(Campbell, 2007)

 Corporations will be less likely to act in socially

responsible ways when
 “they are experiencing relatively weak financial
performance”
 “when they are operating in a relatively unhealthy
economic environment where the possibility for
near-term profitability is limited.”
 if there is either too much or too little competition.”
 Institutional antecedents of CSR
(Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 The regulations and laws mandate it and the
punishment for non-compliance is tangibly
severe, especially if these compliance measures
have been developed collaboratively
 “There is a system of well-organized & effective
industrial self-regulation in place to ensure such
behavior”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 “There are private, independent organizations, including
NGOs, social movement organizations, institutional
investors, & the press, in their environment, who
monitor their behavior, & when necessary, mobilize to
change it.”
 “They operate in an environment where normative calls
for such behavior are institutionalized in important
business publications, business school curricula, & other
educational venues in which corporate managers
participate.”
 Institutional antecedents of CSR
(Contd.) (Campbell, 2007)

Corporations will be more likely to act in socially

responsible ways if:
 “They belong to trade or employer associations
[that] are organized in ways that promote
socially responsible behavior.”
 “They are engaged in institutionalized dialogue
with unions, employees, community groups,
investors, & other stakeholders.”
 Antecedents of CSR based on level of
involvement (Aguilera et al., 2007)

 Individual level
 Organizational level
 National level
 Transnational level
 Individual level Antecedents of CSR
(Aguilera et al., 2007)

Based on a sense of perceived fairness by

employees
 Instrumental motives: If the organization cares
for the environment, it will care for them. So,
they feel more in control.
 Relational motives: Belongingness: CSR fosters
positive social relationships, which in turn lead
to a feeling of belongingness
 Morality based motives: A need to do what is
right
 Individual antecedents of CSR
(Contd.) (Aguilera et al., 2007)

 “Individual employees’ needs for control, for

belongingness, and for a meaningful existence
will lead them to push firms to engage in social
change through CSR”
 Organizational Level antecedents
of CSR (Aguilera et al., 2007)

 “Internal and external organizational actors’ (Shareholders’,

managers’, consumers’) shareholder interests, stakeholder
interests, & stewardship interests will lead them to push
firms to engage in social change through CSR.”

 “A downward hierarchical ordering of motives among insider

organizational actors (i.e., Top Management Teams) will lead
to stronger pressure on firms to engage in social change
through CSR.”

 “An upward hierarchical ordering of motives among outsider

organizational actors (i.e. consumers) will lead to stronger
pressure on firms to engage in social change through CSR.”
 Antecedents of CSR at the
national level (Aguilera et al., 2007)

 Instrumental motives: Promotion of

international competitiveness
 Relational motives: Promotion of social
cohesion and social partnership between
different strata of society and marginalized
groups
 Moral motives: Collective responsibility to the
betterment of society
 Antecedents of CSR at the
national level (Contd.) (Aguilera et al., 2007)

 “Governments’ interests in establishing

competitive business environments, promoting
social cohesion, & fostering collective
responsibility for the betterment of society will
lead them to push firms to engage in social
change through CSR.”

 “A compensatory relationship of motives in

governments will lead to stronger pressure on
firms to engage in social change through CSR.”
 Antecedents of CSR at the
transnational level (Aguilera et al., 2007)

 Instrumental motives:
 Power to facilitate NGOs and social welfare groups
 Promotion of competitiveness among businesses
 Relational motives:
 Collaborative relationships among Inter Government
Organizations (IGOs)
 Moral motives: Altruism: “…trying to make the
world a better place to live in”
 Antecedents of CSR at the
transnational level (Contd.) (Aguilera et al., 2007)

 “NGOs need for power for alignments/ collaborations, &

for altruism will lead them to push firms to engage in
social change through CSR”

 “IGOs interests in promoting competition, social

cohesion, & collective responsibility will lead them to
push firms to engage in social change through CSR.”

 “The existence of a multiplicative relationship of motives

among transnational actors will lead to stronger firm
pressure to engage in social change through CSR,
depending on the density & intensity of positive NGO,
governmental, & intergovernmental action.”
 CSR Motives at multiple levels
of analysis (Aguilera et al., 2007)

Transnational
Motives Individual Organizational National Intergovernment Corporate
al entities interest groups &
NGOs
Instrumental Need for control Shareholder interests Competitiveness Competitiveness Power (obtain
(Short Term) scarce
resources)
Relational Need for •Stakeholder interests Social cohesion Social cohesion Interest
belongingness •Legitimation/ alignment,
collective identity collaboration &
(long term) quasi-regulation
Moral Need for •Stewardship interests Collective Collective Altruism
meaningful •Higher-order values responsibility responsibility
existence
Interactions Upward •Insider downward Compensatory Compensatory Multiplicative
hierarchical hierarchical
•Outsider upward
hierarchical
 Why CSR? (Carroll & Shabana, 2010)

 “Reducing cost & risk

 Strengthening legitimacy & reputation
 Building competitive advantage
 Creating win-win situations through synergistic
value creation”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Evolution of CSR
(Carroll, 1999)
 1953: Howard R. Bowen
Father of CSR
 Social Responsibilities of the Businessman:
 “… several hundred largest businesses were vital
centers of power and decision making & that the
actions of these firms touched the lives of citizens at
many points.”
 “What responsibilities to society may businessmen
reasonably be expected to assume?”
 “[Social responsibilities of businessmen refer] to the
obligations of businessmen to pursue those policies, to
make those decisions, or to follow those lines of action
which are desirable in terms of the objectives & values
of our society.”
 1960: Keith Davis
 Iron Law of Responsibility:
 “Social responsibilities of businessmen need to be
commensurate with their social power.”
 “… the avoidance of social responsibility leads to
gradual erosion of social power”
 1963: Joseph McGuire
 Business and Society
 “The idea of social responsibilities supposes that the
corporation has not only economic & legal
obligations but also certain responsibilities to
society which extend beyond these obligations.”
 1967: Clarence C. Walton
 Corporate Social Responsibilities:
 “... The new concept of corporate social
responsibility recognizes the intimacy of the
relationships between the corporation and society
and realizes that such relationships must be kept in
mind by top managers as the corporation and the
related groups pursue their respective goals.”
 1971: Harold Johnson
 “A socially responsible firm is one whose
managerial staff balances a multiplicity of
interests. Instead of striving only for larger
profits for its stakeholders, a responsible
enterprise also takes into account employees,
suppliers, dealers, local communities, & the
nation.”
 “Social responsibility states that businesses
carry out social programs to add profits to their
organization.”
 1971: Harold Johnson (Contd.)
 “Utility maximization […] the enterprise seeks
multiple goals rather than only maximum
profits.”
 “Lexicographic view of social responsibility […]
stongly profit motivated firms may engage in
socially responsible behavior. Once they attain
their profit targets, they act as if social
responsibility were an important goal – even
though it isn’t.”
 1971: Committee for Economic
Development
 Social Responsibilities of Business Corporations
 “business functions by public consent and its
basic purpose is to serve constructively the
needs of society – to the satisfaction of
society.”
 1971: Committee for Economic
Development (Contd.)
 Concentric circles definition of social responsibility:
 “Inner circle includes the clear-cut basic responsibilities
for the efficient execution of the economic function –
products, jobs & economic growth
 “Intermediate circle encompasses responsibility to
exercise this economic function with a sensitive
awareness of changing social values & priorities, e.g.
fair treatment of employees, environmental concerns,
etc.”
 “Outer circle outlines newly emerging and still
amorphous responsibilities that business should assume
to become more broadly involved in actively improving
the social environment.”
 1972: Manne & Wallich
 “To qualify as socially responsible action, a
business expenditure or activity must be one
for which the marginal returns to the
corporation are less than the returns available
from some alternative expenditure, must be
purely voluntary, and must be an actual
corporate expenditure rather than a conduit for
individual largesse.”
 Purely voluntary expenditure vs. expenditure in
response to social norms
 1972: Prof. Wallich in Manne
& Wallich
 Elements of the exercise of CSR:
 “Setting of objectives
 Decision whether to pursue given objectives
 Financing of these objectives”
 1970s
 Increasing mention of Corporate Social
Performance (CSP)
 1973: Keith Davis
 “It is the firm’s obligation to evaluate in its
decision-making process the effects of its
decisions on the external social system in a
manner that will accomplish social benefits
along with the traditional economic gains which
the firm seeks.”
 Moving beyond the law
 1973: Eilbert & Parket
 Good neighborliness:
 “… not doing things that spoil the neighborhood”
 “… the voluntary assumption of the obligation to
help solve neighborhood problems”
 1974: Eells & Walton
 “… the corporate social responsibility
movement represents a broad concern with
business’s role in supporting & improving that
social order”
 1975: S. Prakash Sethi
 “Social obligation is corporate behavior ‘in
response to market forces or legal constraints’.”
 “… social responsibility implies bringing
corporate behavior up to a level where it is
congruent with the prevailing social norms,
values, & expectations of performance”
 1975: Preston and Post
 Public responsibility: “… the scope of
managerial responsibility is not unlimited, as
the popular conception of ‘social responsibility’
might suggest, but specifically defined in terms
of primary and secondary involvement areas.”
 1976: H. Gordon Fitch
 “Corporate social responsibility is defined as the
serious attempt to solve social problems caused
wholly or in part by the corporation.”
 We take responsibility for our actions!
 1979: Abbott & Monsen
 Social Involvement Disclosure (SID) Scale: 28
issues categorized under
 Environment
 Equal opportunity

 Personnel

 Community involvement

 Products

 Other

Measured by the number of times they were

mentioned
 1979: Archie B. Carroll
 “For managers to engage in Corporate Social
Performance, they needed to have:
 “A basic definition of CSR
 An understanding/ enumeration of the issues for
which a social responsibility existed (or in modern
terms, stakeholders to whom the firm had a
responsibility, relationship, or dependency),
 A specification of the philosophy of responsiveness
to the issues”
 1980: Thomas M. Jones
 CSR is a process not an outcome
 CSR, when engaged in as a process of decision
making, should constitute CSR behavior
 1983: Rich Strand
 Systems paradigm of organizational social
responsibility, responsiveness, and responses
 How social policies and activities within the
organization are affected by the organization and
the outer environment, and in turn affect the
activities within and outside the environment
 1983: Archie B. Carroll
 Four constituent parts of CSR:
 Economic
 Legal
 Ethical
 Voluntary or philanthropic
 1985: Wartrick & Cochran
 Corporate Social Performance Model:
 Principles: Corporate Social Responsibilities
 Processes: Corporate Social Responsiveness
 Policies: Social issues management
 1991: Archie B. Carroll
 CSR Pyramid
 “The CSR firm should strive to make a profit,
obey the law, be ethical, and be a good
corporate citizen”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
CSR: Global Timeline
(Katsoulakos, 2004)
 1946 – 1958: Fair Trade
(http://wfto.com/about-us/history-wfto/history-fair-trade)

 1946: Self Help Crafts began buying

needlework from Puerto Rico
 1958: First formal Fair Trade shop opened in
USA
 1960
 OECD (Organization for Economic Cooperation &
Development) created in Paris (came into force on
30/09/61) to:
 “achieve the highest sustainable economic growth &
employment & a rising standard of living in Member
countries, while maintaining financial stability, & thus to
contribute to the development of the world economy
 “contribute to sound economic expansion in Member as
well as non member countries in the process of
economic development”
 “contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
international obligations”
 1961: George Goyder
 The Responsible Company
 First mention of social auditing: “… a social audit
can act as both a useful management tool & offer
stakeholders a platform for challenging &
influencing companies”
 1961: World Wildlife Fund
 WWF created at Morges, Switzerland
 1962: Rachel Carson
 Silent Spring, by Penguin Books:
http://www.rachelcarson.org/SilentSpring.aspx
 “... bringing together research on toxicology,
ecology, & epidemiology to suggest that
agricultural pesticides are building to catastrophic
levels.”
 1966
 International Covenant on Economic, Social &
Cultural Rights (ICESCR) adopted by the UN
(http://www.ohchr.org/Documents/ProfessionalInterest/cescr.pdf):

 Part 1: Right to self determination: People are free to

“determine their political status and freely pursue their
economic, social and cultural development”, and
dispose off their natural wealth, and the State has a
responsibility to facilitate this
 Part 2: Right to be recognized without discrimination
 Part 3: Rights to fair and respectful treatment at work,
and the responsibility of organizations to facilitate the
balancing of work and personal life of their employees
 1968: Club of Rome
 “…commissioned a study […] to model and
analyze the dynamic interactions between
industrial production, population, environmental
damage, food consumption & natural resource
usage.” – published as Limits to Growth in 1972
(https://www.clubofrome.org/report/the-limits-to-growth/)
 1969: UNESCO
 “Provided a forum Conference for Rational Use
& Conservation of Biosphere for early
discussions of the concept of ecologically
sustainable development.”
 1969: US Congress
 Passed the National Environmental Policy Act
(NEPA) creating the first national agency for
environmental protection (EPA)
(https://www.epa.gov/nepa)
 1969: Commonwealth
Arbitration Commission
 “Adopted the principle of equal pay for equal
work regardless of gender”
(http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/
Browse_by_Topic/employmentlaw/Historyemploymentlaw)
 1970
 “The first Earth Day was held as a national
awareness campaign on the environment. An
estimated 20 million (2 crore) people
participated in peaceful demonstrations all
across the USA.”
 1971
 “Man and Biosphere program founded by
UNESCO (http://www.unesco.org/new/en/natural-sciences/environment/ecological-
sciences/man-and-biosphere-programme/)

 Henderson Poverty Index developed in

Australia
 In France, companies with more than 300
employees required by law to produce an
employee report: The Bilan Social.”
 1970s
 “Germany engaged in the social model of
corporate management
 Council on Economic Priorities and others in USA
began to rate companies publicly on their social &
environmental performance”
 “United Nation’s Code of Conduct for Transnational
Corporations was an early attempt to define
principles of CSR for businesses in terms of ethics,
product standards, competition, marketing, &
disclosure of information.”
 1972
 “United Nations Conference on the Human
Environment considered the need for a
common outlook and for common principles to
inspire & guide the peoples of the world in the
preservation and enhancement of the human
environment”
 United Nations Environment Program established
 1972
 Nordhaus and Tobin: Is growth obsolete?
Article in Economic Research: Retrospect and
Prospect, Volume 5 – developed the Measure of
Economic Welfare as an alternative to crude
GDP as a measure of economic progress
(http://www.nber.org/chapters/c7620.pdf)
 1974
 “Rowland & Molina release a seminal work on
Chloro Fluoro Carbons in Nature magazine
calculating that if use of CGC gases is to
continue at an unaltered rate, the ozone layer
will be depleted soon.”
 1979: Tata Steel
 Chairman asks “audit committee to report on
‘whether, and the extent to which the company
has fulfilled the objectives … regarding the social
and moral objectives”

Advertisements: “We also make steel”

https://www.youtube.com/watch?v=qYBkbYaCUuw
https://www.youtube.com/watch?v=Iw4CQIeWGHo
https://www.youtube.com/watch?v=AnXUJXApoNc
 1980: International Union for
the Conservation of Nature
 “World Conservation Strategy released by IUCN
as ‘the modification of the biosphere & the
application of human, financial, living & non-
living resources to satisfy human needs &
improve the quality of human life’.”
(https://portals.iucn.org/library/efiles/documents/
wcs-004.pdf)
 1982
 “Business in the Community is founded by UK
based business organizations focussed on CSR”
http://www.bitc.org.uk/
 1984
 Edward Freeman: Strategic Management: A
Stakeholder Approach: Classic textbook
integrating CSR with mainstream management
theory
 1986: USA
 “Toxics Release Inventory established under
the Emergency Planning and Community Right
to Know Act”
https://www.epa.gov/toxics-release-inventory-
tri-program
 1987: United Nations
 “Brundtland Commission appointed by the United
Nations to study the connection between
development & the environment publishes report:
‘Our Common Future’. The report introduces the
term ‘sustainable development’ defining it as
‘development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.”
 http://www.un-documents.net/our-common-
future.pdf
 1988
 “The Co-Operatives UK publishes its first Social
Report”
 Ben & Jerry’s in USA produces its first Social
Performance Assessments”
 1989: UK
 Profs. David Pearce, Anil Markandya & Edward
Barbier: Blueprint for a Green Economy.
Earthscan Publishers
 “Introduction of the concept of natural capital and
definition of sustainable development as non-
declining per capita human well-being over time.”
 1989: Netherlands
(http://wfto.com/about-us/history-wfto)

 International Federation of Alternative Trade

established (IFAT)
 1993: “… aim of IFAT was to ‘improve living
conditions for the poor’ through ‘promoting fair
trade internally/ externally’ with the ‘anticipated
result’ of ‘a higher level of trust and
cooperative among members thus achieving
the aim of IFAT’. ”
 1991
 “IUCN/UNEP/WWF publish “Caring for the
Earth: 2nd World Conservation Strategy’
focussing on ‘sustainable society’, ‘sustainable
living’, & ‘sustainability’ itself”
 1992: USA
 Business for Social Reponsibility founded
 https://www.bsr.org/en/
 1994
 “European Universities Charter for Sustainable
Development agreed to promoting University
education for the training of decision-makers &
teachers, oriented towards sustainable
development & fostering environmentally aware
attitudes, skills & behavior patterns, as well as a
sense of ethical responsibility.”
 Currently adopted as Copernicus Guidelines by United
Nations Economic Commission for Europe (UNECE):
http://www.unece.org/fileadmin/DAM/env/esd/informati
on/COPERNICUS%20Guidelines.pdf
 1994: INSEAD (Institut Européen d'Administration des

Affaires)/ European Institute of Business Administration) France

 Caux Round Table Principles for Business

adopted: “The CRT Principles for Business
articulate a comprehensive set of ethical norms
for businesses operating internationally or
across multiple cultures. ”
http://www.cauxroundtable.org/index.cfm?&menuid=28&parentid=2
 1995
 World Business Council for Sustainable
Development (WBCSD) established with a view
to “… provid[ing] business leadership as a
catalyst for change toward sustainable
development, & to promot[ing] the role of co-
efficiency, innovation, & CSR”
 http://www.wbcsd.org/
 1995: United Nations Framework
on Climate Change (UNFCC)
 Conference of Parties (COP) constituted in
Berlin, Germany
 Article 3.1: "The Parties should protect the climate
system for the benefit of present and future
generations of humankind, on the basis of equity
and in accordance with their common but
differentiated responsibilities and respective
capabilities. Accordingly, the developed country
Parties should take the lead in combating climate
change and the adverse effects thereof;”
(https://unfccc.int/resource/docs/cop1/07a01.pdf)
 1996: Organization for Economic
Cooperation & Development (OECD)

 “Introduced the concept of Environmentally

Sustainable Transportation (EST)”
 1996: European Commission
 57 European companies got together and
established CSR Europe “… to help companies
achieve profitability, sustainable growth &
human progress by placing CSR in the
mainstream of business practice”
 http://www.csreurope.org/
 1996: USA
 “… Social Accountability International (SAI)
Advisory Board was created to establish a set
of workplace standards in order to ‘define and
verify implementation of ethical workplaces’.”
 Source:
http://www.history.ucsb.edu/labor/sites/secure.lsit.ucsb.edu.hist.d7_labor/files/sitefiles/CSR_Re
search_Files/SAI%20and%20SAAS%20Summary.pdf
 1997: Framework Convention
on Climate Change
 Kyoto Protocol negotiated: Clear directions
regarding active measures to reduce in
greenhouse gas emissions
 1997: USA
 Social Accountability International launched the SA8000
standard to ensure accountability of social performance
in the following areas:
 “Child Labor
 Forced or Compulsory Labor
 Health and Safety
 Freedom of Association and Right to Collective Bargaining
 Discrimination
 Disciplinary Practices
 Working Hours
 Remuneration
 Management System”
 1997
 John Elkington: Cannibals with Forks- The
Triple Bottom Line of the 21st Century,
Capstone Publishing Limited, Oxford
 Coined the term, ‘Triple Bottom Line’
 Focussed on People, Planet & Profit
 Review of the book available at
http://appli6.hec.fr/amo/Public/Files/Docs/148_en.p
df
 1997
 “Global Reporting Initiative launched to develop
Sustainability Reporting Guidelines”
Focus on
 actively reducing greenhouse emissions,

 protecting natural habitats, especially of

endangered species of flora & fauna
 reporting sustainability efforts in a systematic
manner
https://www.globalreporting.org/Information/about-
gri/Pages/default.aspx
 1999: UK
 Quality of Life Counts: Indicators for a Strategy
for Sustainable Development for the UK: A
Baseline Assessment.
 Update in 2004:
http://www.nies.go.jp/db/sdidoc/qolc2004.pdf
 1999
 Paul Hawken, Amory Lovins, Hunter Lovins:
Natural Capitalism: The Next Industrial
Revolution
 1999: US
 Global Sullivan Principles of CSR launched
 “The objectives of the Global Sullivan Principles are to
support economic, social and political justice by companies
where they do business; to support human rights and to
encourage equal opportunity at all levels of employment,
including racial and gender diversity on decision making
committees and boards; to train and advance disadvantaged
workers for technical, supervisory and management
opportunities; and to assist with greater tolerance and
understanding among peoples; thereby, helping to improve
the quality of life for communities, workers and children with
dignity and equality.”
 http://hrlibrary.umn.edu/links/sullivanprinciples.html
 1999: UN
 Global Compact launched with a view to “…
bring companies together with UN agencies,
labor & civil society to support ten principles in
the areas of human rights, labor & the
environment”
 https://www.unglobalcompact.org/
 1999: UK
 “UK Corporations Disclosure Legislation passed.
The Turnbull Report on corporate governance
added reputation, probity, & other non-financial
risks to the necessary criteria for reporting risk
to shareholders.”
 1999
 Meeting held in Bonn to discuss Kyoto
Agreement and penalties associated with non-
compliance
 2000
 “UK Pension Act amended to require the
trustees of occupational pension schemes to
disclose their policy on socially responsible
investment in their Statement of Investment
Principles”
 2001: UK
 Launch of the FTSE4Good Index: Ethical
investment stock market index
 2002: UK
 “Business in the Community launches first
Corporate Responsibility Index”
http://www.bitc.org.uk/services/benchmarking/cr
-index
 2004
 “There are over 60 Government initiatives of
relevance for CSR.
 The UK Parliament has two all-party groups on
corporate citizenship:
 The All-Party Parliamentary Group on CSR
 The All-Party Parliamentary Group on Socially
Responsible Investment”
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
CSR in India
 Evolution of Indian CSR
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Phase 1 (1850 to 1914)

 Phase 2 (1910 to 1960)
 Phase 3 (1950 to 1990)
 Phase 4 (1980 onwards)
 Pase 1 (1850 to1914)
(Deo 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Industrialization

 What did the rulers do in the name of
development?: Colonial time, extraction
 Corporate CSR: Dynastic charity
 Phase 2 (1914-1947)
(Deo, 2017; Sundar 2000, in Dhanesh, 2017)

 Economic Phase: Trade barriers

 What did the rulers do in the name of
development?: Colonial time, exploitation
 Corporate CSR: Support freedom struggle
 Phase 3 (1947-1960)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2017)

 Economic Phase: Socialism, protectionism

 What did the Government do for
development?: Make five year plans
 Corporate CSR: Support new state; launch own
rural initiatives
 Phase 4 (1960-1990)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Heavy regulations

 What did the Government do for
development?: Licensing, failed at development
efforts
 Corporate CSR: Corporate trusts
 Phase 5 (1991 to 2013)
(Deo, 2017; Sundar 2000, in Dhanesh, 2015)

 Economic Phase: Liberalization

 What did the Government do for development?:
Shrinking in production; expanding in social
provision
 Corporate CSR:
 Family trusts, private-public partnerships, NGO
sponsorship
 2009 (Updated in 2011): Ministry of Corporate Affairs:
National Voluntary Guidelines on Social, Environmental
& Economic Responsibilities of Business
 Phase 6 (2013 to Present)
(Deo, 2017; Sundar, 2000, in Dhanesh, 2015)

 Economic Phase: Globalization

 What did the Government do for
development?: Realized the need to manage
inequality; New reforms to liberalize further
 Corporate CSR: Addition of 2% mandatory CSR
spending to Companies Act
 Models of social responsibility
in India (Balasubramaniam et al., 2005, Arevalo & Aravind, 2011)

 Gandhian model/ Ethical model: “Voluntary commitment

to public welfare based on ethical awareness of broad
social needs
 Statist model/ Nehruvian model: “State-driven policies
including state ownership & extensive corporate
regulation & administration”
 Liberal model/ Friedman model: “Corporate
responsibility primarily focused on owner objectives”
 Stakeholder/ Freeman model: “Stakeholder
responsiveness which recognizes direct & indirect
stakeholder interests”
 Discussion points for forum
On the course forum, please list and provide
links to Indian organizations following these
models of social responsibility through their
outreach activities
 CSR drivers in Indian organizations
(Balasubramaniam et al., 2005)

 Genuine concern for the society

 “Concern for social improvement
 Ethics and values
 Need to care for society
 Belief in stewardship (Gandhian philosophy)”
 CSR drivers in Indian organizations
(Contd.) (Balasubramaniam et al., 2005)
 Profit:
 “Corporate reputation
 Employee & customer relations
 Stakeholder impact
 Responsiveness to local communities
 Legal compliance
 Strategic/ corporate planning at board level”
 Discussion points for forum
 On the course forum, please list examples of
Indian corporate organizations whose work
highlights each of these focus areas, i.e.
genuine concern and profits
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
CSR in India
(Contd.)
 National Voluntary Guidelines (2011)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 Applicable to all businesses, irrespective of

sector or size
 Principles of NVG
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Principle 1: Businesses should conduct & govern

themselves with Ethics, Transparency & Accountability
 Principle 2: Businesses should provide goods & services
that are safe & contribute to sustainability throughout
their life cycle
 Principle 3: Businesses should promote the well-being of
all employees
 Principle 4: Businesses should respect the interests of, &
be responsive towards all stakeholders, especially those
who are disadvantaged, vulnerable & marignalized.”
 Principles of NVG (Contd.)
(http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf)

 “Principle 5: Businesses should respect & promote human

rights
 Principle 6: Businesses should respect, protect, & make
efforts to restore the environment
 Principle 7: Businesses, when engaged in influencing
public & regulatory policy, should do so in a responsible
manner
 Principle 8: Businesses should support inclusive growth &
equitable development
 Principle 9: Businesses should engage with & provide
value to their customers & consumers in a responsible
manner
 Principle 1: Businesses should conduct &
govern themselves with Ethics,
Transparency & Accountability

 Core elements:
1. “Businesses should develop governance structures, procedures, & practices
that ensure ethical conduct at all levels; & promote the adoption of this
principle across its value chain
2. Businesses should communicate transparently & assure access to information
about their decisions that impact relevant stakeholders
3. Businesses should not engage in practices that are abusive, corrupt, or anti-
competition
4. Businesses should truthfully discharge their responsibility on financial & other
mandatory disclosures
5. Businesses should report on the status of their adoption of these Guidelines as
suggested in the reporting framework of the NVG document
6. Businesses should avoid complicity with the actions of any third party that
violates any of the principles contained in these guidelines.”
 Principle 2: Businesses should provide goods &
services that are safe & contribute to
sustainability throughout their life cycle

 Core Elements:
1. “Businesses should assure safety & optimal resource use over
the life-cycle of the product – from design to disposal - & ensure
that everyone connected with it – designers, producers, value
chain members, customers & recyclers are aware of their
responsibilities
2. Businesses should raise the consumer’s awareness of their
rights through education, product labelling, appropriate &
helpful marketing communication, full details of contents &
composition & promotion of safe usage & disposal of their
products & services
3. In designing the product, businesses should ensure that the
manufacturing processes & technologies required to produce it
are resource efficient & sustainable.”
 Core elements of Principle 2
(Contd.)
4. “Businesses should regularly review & improve upon
the process of new technology development,
deployment & commercialization, incorporating social,
ethical, & environmental considerations.
5. Businesses should recognize & respect the rights of
people who may be owners of traditional knowledge, &
other forms of intellectual property
6. Businesses should recognize that over-consumption
results in unsustainable exploitation of our planet’s
resources, & should therefore promote sustainable
consumption, including recycling of resources.”
 Principle 3: Businesses should promote
the well-being of all employees
 Core Elements:
1. “Businesses should respect the right to freedom of
association, participation, collective bargaining, & provide
access to appropriate grievance redressal mechanisms
2. Businesses should provide & maintain equal opportunities
at the time of recruitment as well as during the course of
employment irrespective of caste, creed, gender, race,
religion, disability, or sexual orientation
3. Businesses should not use child labor, forced labor, or any
form of involuntary labor, paid or unpaid
4. Businesses should take cognizance of the work-life balance
of its employees, especially that of women”
 Core elements of Principle 3
(Contd.)
5. “Businesses should provide facilities for the wellbeing of its employees
including those with special needs. They should ensure timely payment of
fair living wages to meet basic needs & economic security of the
employees.
6. Businesses should provide a workplace environment that is safe, hygienic,
human, & which upholds the dignity of the employees. Business should
communicate this provision to their employees & train them on a regular
basis
7. Businesses should ensure continuous skill & competence upgrading of all
employees by providing access to necessary learning opportunities, on an
equal & non-discriminatory basis. They should promote employee morale &
career development through enlightened human resource interventions.
8. Businesses should create systems & practices to ensure a harassment free
workplace where employees feel safe & secure in discharging their
responsibilities.”
 Principle 4: Businesses should respect the
interests of, & be responsive towards all
stakeholders, especially those who are
disadvantaged, vulnerable & marginalized.”

 Core Elements:
1. “Businesses should systematically identify their
stakeholders, understand their concerns, define purpose &
scope of engagement, & commit to engaging with them
2. Businesses should acknowledge, assume responsibility, &
be transparent about the impact of their policies, decisions,
product & services & associated operations on the
stakeholders
3. Businesses should give special attention to stakeholders in
areas that are underdeveloped
4. Businesses should resolve differences with stakeholders in
a just, fair, & equitable manner”
 Principle 5: Businesses should
respect & promote human rights
 Core Elements:
1. “Businesses should understand the human rights
content of the Constitution of India, national laws &
policies, & the content of International Bill of Human
Rights. Businesses should appreciate that human
rights are inherent, universal, indivisible, &
interdependent in nature.
2. Businesses should integrate respect for human rights
in management systems, in particular through
assessing & managing human rights impacts of
operations, & ensuring all individuals impacted by the
business have access to grievance mechanisms.
 Core Elements of Principle 5
(Contd.)
3. “Businesses should recognize & respect the
human rights of all relevant stakeholders &
groups within & beyond the workplace, including
that of communities, consumers & vulnerable &
marginalized groups
4. Businesses should, within their sphere of
influence, promote the awareness & realization of
human rights across their value chain
5. Businesses should not be complicit with human
rights abuses by a third party”
 Principle 6: Businesses should
respect, protect, & make efforts to
restore the environment
 Core Elements
1. “Businesses should utilize natural & manmade resources in an
optimal & responsible manner & ensure the sustainability of
resources by reducing, reusing, recycling, & managing waste.
2. Businesses should take measures to check & prevent pollution.
They should assess the environmental damage & bear the cost
of pollution abatement with due regard to public interest.
3. Businesses should ensure that benefits arising out of access &
commercialization of biological & other natural resources &
associated traditional knowledge are shared equitably.
4. Businesses should continuously seek to improve their
environmental performance by adopting cleaner production
methods, promoting use of energy efficient & environment
friendly technologies & use of renewable energy.
 Principle 6: Businesses should
respect, protect, & make efforts to
restore the environment
 Core Elements
1. “Businesses should utilize natural & manmade resources in an
optimal & responsible manner & ensure the sustainability of
resources by reducing, reusing, recycling, & managing waste.
2. Businesses should take measures to check & prevent pollution.
They should assess the environmental damage & bear the cost
of pollution abatement with due regard to public interest.
3. Businesses should ensure that benefits arising out of access &
commercialization of biological & other natural resources &
associated traditional knowledge are shared equitably.
4. Businesses should continuously seek to improve their
environmental performance by adopting cleaner production
methods, promoting use of energy efficient & environment
friendly technologies & use of renewable energy.
 Core elements of Principle 6
(Contd.)
5. “Businesses should develop Environment Management
Systems (EMS) & contingency plans & processes that
help them in preventing, mitigating & controlling
environmental damages & disasters, which may be
caused due to their operations or that of a member of
its value chain.
6. Businesses should report their environmental
performance, including the assessment of potential
environmental risks associated with their operations, to
the stakeholders in a fair & transparent manner
7. Businesses should proactively persuade & support their
value chain to adopt this principle.”
 Principle 7: Businesses when engaged in
influencing public & regulatory policy,
should do so in a responsible manner

 Core Elements
1. “Businesses, while pursuing policy advocacy,
must ensure that their advocacy positions are
consistent with the Principles & Core Elements
contained in these Guidelines.
2. To the extent possible, businesses should
utilize the trade & industry chambers &
associations & other such collective platforms
to undertake such policy advocacy.”
 Principle 8: Businesses should
support inclusive growth & equitable
development
 Core Elements
1. “Businesses should understand their impact on social &
economic development, & respond through appropriate
action to minimize the negative impacts.
2. Businesses should innovate & invest in products,
technologies, & processes that promote the wellbeing of
society.
3. Businesses should make efforts to complement & support the
development priorities at local & national levels, & assure
appropriate resettlement & rehabilitation of communities who
have been displaced owing to their business operations.
4. Businesses operating in regions that are underdeveloped
should be especially sensitive to local concerns.”
 Principle 9: Businesses should engage
with & provide value to their customers &
consumers in a responsible manner
 Core Elements
1. “Businesses, while serving the needs of their customers, should
take into account the overall well-being of the customers & that
of society.
2. Businesses should ensure that they do not restrict the freedom
of choice & free competition in any manner while designing,
promoting, & selling their products.
3. Businesses should disclose all information truthfully & factually,
through labelling & other means, including the risks to the
individual, to society, & to the planet from the use of the
products, so that the customers can exercise their freedom to
consume in a responsible manner. Where required, businesses
should also educate their customers on the safe & responsible
usage of their products & services.”
 Core Elements of Principle 9
(Contd.)
4. “Businesses should promote & advertise their
products in ways that do not mislead or confuse
the consumers or violate any of the principles in
these Guidelines.
5. Businesses should exercise due care & caution
while providing goods & services that result in
over exploitation of natural resources or lead to
excessive conspicuous consumption.
6. Businesses should provide adequate grievance
handling mechanisms to address customer
concerns & feedback.”
 Indian Companies Act (2013)
 Chapter IX, Section 135: Corporate Social Responsibility:
1. CSR Committee
2. CSR Policy
1. Formulation
2. Public disclosure
3. “The Board of every company […] shall ensure that the company
spends, in every financial year, at least 2%, of the average net
profits of the company made during the three immediately
preceding financial years, in pursuance of its CSR policy:
1. Provided that the company shall give preference to the local area &
areas around it where it operates, for spending the amount earmarked
for CSR activities
2. Provided further if the company fails to spend such amount, the Board
shall, in its report […] specify reasons for not spending the amount.”
 Homework
 Please go through the Business Responsibility
Reports of various organizations and spot
examples of these principles and discuss them
on the Forum.
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Stakeholders
&
CSR
 Who are stakeholders?
(Florea & Florea, 2013)

“Stakeholders are the persons, institutions,

organizations, formal & non formal groups which
are interested or can be affected or which could
influence the company decisions or actions.” (Freeman,
1980, in Florea & Florea, 2013)

193
 Who are stakeholders?
 “… those groups without whose support the
organization would cease to exist.” (Stanford Research
Institute, 1963, in Donaldson & Preston, 1995)

 “… those who benefit from or are harmed by, &

whose rights are violated or respected by,
company actions. (Evan & Freeman, 1988, in Shin, 2011)
 “Participants in ‘the human process of joint
value creation’.” (Freeman, 1994, in Shin, 2013)
 “… are or which could impact or be impacted
by the firm/ organization.” (Brenner, 1995, in Shin, 2013)
 Types of stakeholders (Florea & Florea, 2013)

Based on involvement:
 “Internal stakeholders have a range of interests in
the different parts of the company [or organization
or community] and its activities.”

 “External stakeholders are individuals, companies

or groups outside the companies which are
influenced or could influence company [or
organization or community] decisions and
activities.”
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on how they are influenced by decisions/ actions

 “Primary stakeholders are the people or groups which are directly
affected, in a positive or negative way, by a strategy, decision or
action of a company, organization [or community].”
 “Secondary stakeholders are people or groups that are indirectly
affected, either positively or negatively by a company [or
organization or community] decision or action.”
 “Key stakeholders play an important role in [the] decision making
process & also in its implementation because they are involved in
company management or financing [or management & financing of
the organization or community], [e.g.] policy makers, officials,
important professionals or community personalities having a
strong position or influence.”
196
 Types of stakeholders (Contd.)
(Florea & Florea, 2013)

Based on the amount of power and influence they have:

 “Promoters have both great interest in the decision & the
power to help make it successful (or to fail it)”
 “Defenders have a vested interest & can voice their
support in the community, but have little actual power to
influence the decision in any way.”
 “Latents have not particular interest or involvement in
the decision, but have the power to influence it greatly if
they become interested.”
 “Apathetics have little interest & little power, & may not
even know the decision exists.”
 The company & its stakeholders (Shin, 2013)

On-line Info-System Providers

Hardware Providers Software Providers Network Providers Service Website
Corporate Citizen
Community Community Member
Shareholders
Administration
Creditors Government Supervision
Laws & Regulations
Employee Friendship
Foreign Government
Conflicts Relationship

Non-Market
Company

Supplier Consumer Association

Social activity groups Environmental Protection
Market

Retailer Internet
Media Broadcast & TV
Consumer Newspapers, Magazines
Positive Opinions
The Public
Competitor Negative Opinions
Industry & Business Associations
Supportive Groups University, Research Institute
Industry Associations

On-line Consumer Info Broadcaster Online Regulation Online Competitor

Formulator
Online Stakeholders
 Benefits demanded by stakeholders
(Shin, 2013)

 Offline stakeholders:
 Shareholder: High investment returns, sustainable
development
 Employee: Stable income, good corporate image, good
benefits, congenial work environment, fair treatment,
sustainable development
 Creditor: Capital recovery rate, capital recovery period,
credit scope
 Supplier: Loan recovery rate, level of difficulty of access to
raw materials, supply price
 Retailer: Supply assurance, commodity market conditions,
adaptability of existing company facilities
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)
 Offline stakeholders (Contd.):
 Consumer: High quality goods, good service, low price,
easy to use
 Competitor: Price level, conditions of commodity
production & competitiveness
 Government: Require the company to abide by the law,
timely & full payment of taxes
 Foreign Government: Protect the interests of domestic
enterprises, access to foreign exchange earnings
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)

 Online stakeholders:
 Hardware provider: Company scale, commodity
price
 Software provider: Company scale, commodity
price, capital
 Network provider: Facilities to enhance speed,
supply price, demand requirements
 Service website: The content the company
demands, function, price
 Benefits demanded by stakeholders
(Contd.) (Shin, 2013)
 Offline stakeholders (Contd.):
 On-line consumer: Business to assure data security &
personal privacy of the consumers, providing information
truly, accurately, and in a timely manner, provide timely
delivery of product, low cost
 Online regulation formulator: Internet [presence of the]
company to abide by the law, protection of intellectual
property rights
 Online competitor: Exchange business information, fair
competition
 Information broadcaster: Timely & accurate broadcast
abundant information
How do stakeholders
influence firm
performance?
(Frooman, 1999)
 Resource Dependence Theory
(Frooman, 1999)

 “… a firm’s need for resources provides

opportunities for others to gain control over it.”
 Why control resources? (Frooman, 1999)

 To convince/ persuade the firm to change some

behavior
 Resource control strategies
(Frooman, 1999)

 Withholding strategies:
 “… determining whether a firm gets the resources”
 Stakeholder’s “… ability to articulate a credible
threat of withdrawal.” (Pfeffer & Leon, 1977, in
Frooman, 1999)
 Usage strategies:
 “… determining whether it can use the resources in
the way it wants”
 “… attach[ing] conditions to the continued supply of
that resource.”
 Basis for resource control
(Frooman, 1999)

 Withholding strategy:
 “Stakeholder is prepared to shut off the flow of resources”,
implying that the stakeholder is able to “… simply walk away
from the relationship with no harm to itself” -> “firm is
unilaterally dependent on the stakeholder.”
 Major portion of the cost of changing behavior to be paid by
firm
 Usage strategy:
 Stakeholder is not prepared to shut off the flow of
resources.
 Mutual dependence between firm & stakeholder
 Cost of changing behavior to be shared by stakeholder &
firm
 Types of influence pathways
(Frooman, 1999)

 Direct strategies: “…stakeholder itself manipulates flow of

resources to the firm”
 Indirect strategies: Indirectly weakening the position of the
firm by influencing others to take advantage of the firm’s
vulnerabilities.
e.g. “stakeholder informs a potential ally about:
1. “a firm’s behavior
2. why the stakeholder perceives that behavior to be undesirable
3. what the ally ought to do (i.e. initiate a resource strategy
against the firm or a communication strategy directed at an ally
of the ally)”
 Typology of resource relationships
(Frooman, 1999)

Is the stakeholder dependent on the firm?

Is the firm dependent
on the stakeholder?

No Yes

No Low interdependence Firm power

Yes Stakeholder power High interdependence

Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 What is the stakeholder approach
(Freeman & McVea, 2001)

 “… managers must formulate & implement

processes which satisfy all & only those groups
who have a stake in the business.”
 Characteristics of the stakeholder
approach (Freeman & McVea, 2001)

 “… intended to provide a single strategic

framework, flexible enough to deal with
environmental shifts without requiring managers to
regularly adopt new strategic paradigms.”
 Strategic management process: “… actively plots a
new direction for the firm & considers how the firm
can affect the environment as well as how the
environment may affect the firm.”
 Directed towards the survival of the firm, and in
doing so “… direct[ing] a course for the firm not
merely optimiz[ing] current output.”
 Characteristics (Contd.)
(Freeman & McVea, 2001)

 “… encourages management to develop

strategies by looking out from the firm &
identifying, & investing in, all the relationships
that will ensure long-term success.”
 “… both a prescriptive & descriptive approach,
rather than purely empirical & descriptive.”
 “… stakeholder relationships can be created &
influenced, not just taken as given.”
 Characteristics (Contd.)
(Freeman & McVea, 2001)

 “… about concrete ‘names & faces’ for

stakeholders rather than merely analyzing
particular stakeholder roles.”
 Not the whole society, but specific stakeholders
 “… calls for an integrated approach to strategic
decision making […] managers must find ways
to satisfy multiple stakeholders
simultaneously.”
 Why pay so much attention to
stakeholders? (Freeman & McVea, 2001)

 Normative theory:
 The definitions of right and wrong.
 “above & beyond the consequences of stakeholder
management, is there a fundamental & moral
requirement to adopt this style of management?”
 “… managers should make corporate decisions
respecting stakeholders’ well being rather than treating
them as means to a corporate end.”
 “… an ethics of care emphasizes the primacy of the
network of relationships that create the business
enterprise.”
 Why pay so much attention to
stakeholders? (Contd.)
(Kochan & Rubenstein, 2000, in Freeman & McVea, 2001)

 “… stakeholder firms will emerge when the

stakeholders hold critical assets, expose these
assets to risk & have both influence & voice.”
 Along the lines of Frooman’s paper regarding
influence exerted by stakeholders.
 Managing stakeholders
(Freeman & McVea, 2001)

 Buffering: “… aimed at containing the effects of

stakeholders on the firm. Includes activities
such as market research, public relations, &
planning.”
 Bridging: “… involves forming strategic
partnership […] requires recognizing common
goals & lowering the barriers around the
organization. Partnering is proactive & builds
on interdependence.”
Thank You
Stakeholders
&
CSR
(Clarkson, 1995)
 Stakeholder issues vs. social issues
(Clarkson, 1995)

 Identification of boundaries between stakeholders and

the society in general
 “… necessary to distinguish between stakeholder issues
& social issues because corporations & their managers
manage relationships with their stakeholders & not with
society.”
 “… necessary to conduct analysis at the appropriate
level: institutional, organizational, or individual.”
 Analysis & evaluation of “… both, the social performance
of a corporation & the performance of its managers in
managing the corporation’s responsibilities to, &
relationships with, its stakeholders.”
 Typical corporate & stakeholder
issues (Clarkson, 1995)

1. Company:
1. Company history
2. Industry background
3. Organization structure
4. Economic performance
5. Competitive environment
6. Mission or purpose
7. Corporate codes
8. Stakeholder & social issues management systems
 Typical corporate & stakeholder
issues (Contd.) (Clarkson, 1995)

2. Employees
1. General policy 11. Dismissal & appeal
2. Benefits 12. Termination, layoff, & redundancy
3. Compensation & rewards 13. Retirement & termination counseling
4. Training & development 14. Employment equity & discrimination
5. Career planning 15. Women in management & on the board
6. Employee assistance 16. Day care & family accommodation
program
7. Health promotion 17. Employee communication
8. Absenteeism & turnover 18. Occupational health & safety
9. Leaves of absence 19. Part-time, temporary, or contract employees
10. Relationships with unions 20. Other employee or human resource issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

3. Shareholders:
1. General policy
2. Shareholder communications & complaints
3. Shareholder advocacy
4. Shareholder rights
5. Other shareholder issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

 4. Customers:
1. General policy
2. Customer communications
3. Product safety
4. Customer complaints
5. Special customer services
6. Other customer issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

5. Suppliers:
1. General policy
2. Relative power
3. Other supplier issues
 Typical corporate & stakeholder issues
(Contd.) (Clarkson, 1995)

6. Public stakeholders:
1. Public health, safety, & protection
2. Conservation of energy & materials
3. Environmental assessment of capital projects
4. Other environmental issues
5. Public policy involvement
6. Community relations
7. Social investment & donations
 Difference between stakeholder &
social issues (Clarkson, 1995)

 Social issue: Enactment of legislations or

regulations developed over a period of time by
a particular society (Municipal, state, or
national)
 Stakeholder issue: No such legislation or
regulation, but organization identifies it and
considers it necessary
 Groups of stakeholders (Clarkson, 1995)

 Primary
 Secondary
 Primary stakeholder group
(Clarkson, 1995)

 “… one without whose continuing participation the

corporation cannot survive as a going concern
 “…typically comprised of shareholders & investors,
employees, customers, & suppliers, together with
what is defined as the public stakeholder group:
the governments & communities that provide
infrastructures & markets whos laws & regulations
must be obeyed, & to whom taxes & other
obligations must be due.”
 “high level of interdependence between the
corporation & its primary stakeholder groups.”
 Secondary stakeholder group
(Clarkson, 1995)

 “… those who influence or affect, or are

influenced or affected by the corporation, but
they are not engaged in transactions with the
corporation & are not essential for its survival.”
e.g. media, special interest groups
 “… may be opposed to the policies or programs
that a corporation has adopted to fulfill its
responsibilities to, or to satisfy the needs &
expectations of, its primary stakeholder
groups.”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder theory
perspectives
 Bases for stakeholder theory
 “The very purpose of the firm is […] to serve as
a vehicle for coordinating stakeholder
interests.” (Evan & Freeman, 1993, in Donaldson & Preston, 1995)
 Based on Social Contract Theory: i.e. The
expectations of the society that we live in are a
result of the contract that binds us to that
society. The context decides what the society
expects us to do in exchange for letting us be a
part of it.
 Social contract, stakeholders & CSR
(Secchi, 2007)

 “The analysis of corporation-stakeholder

relations leads to the definition of hypernorms,
macro- & micro-social contracts.”
 “Social responsibility is expressed through
stakeholder relations & defines corporate
existence.”
 CSR Perspectives based on
stakeholder-firm relationship (Secchi, 2007)

 Utilitarian
 Managerial
 Relational
 Utilitarian perspective (Secchi, 2007)

 Social cost
 Functionalism
 Managerial perspective (Secchi, 2007)

 Corporate social performance

 Social accountability, auditing, & reporting
 Social responsibility of multinationals
 Relational perspective (Secchi, 2007)

 Business & society

 Stakeholder approach
 Corporate global citizenship
 Social contract theory
 Facets of stakeholder theory
 Convergent stakeholder theory
 Divergent stakeholder theory: Proposal
 Convergent stakeholder theory
(Jones & Wicks, 1999)

 “Managerial maxim: Managers should strive to

create & maintain mutually trusting & cooperative
relationships with corporate stakeholders.
 Normative core: Relationships characterized by
mutual trust & cooperation are morally desirable.
 Supporting instrumental theory: Firms whose
managers establish & maintain mutually trusting &
cooperative relationships with their stakeholders
will achieve competitive advantage over those
whose managers do not.”
 Divergent stakeholder theory:
Proposal (Freeman, 1999)

 Acknowledging that:
 “There is more than one way to be effective in
stakeholder management.”
 “There is more than one vision for creating value or
for what consequences count as valuable.”
 Requirement: Conversation encouraging
divergent views & discarding views “… that are
not useful, not simple, & that do not show us
how it is possible to live better.”
 Types of stakeholder theories
(Freeman, 1999)

 “Descriptive stakeholder theory: Describe[s]

how organizations manage or interact with
stakeholders”
 “Normative stakeholder theory: Prescribe[s]
how organizations ought to treat their
stakeholders.”
 “Instrumental theory:[…] ‘If you want to
maximize shareholder value, you should pay
attention to key stakeholders’.”
 What stakeholder theory is not
(Phillips, Freeman & Wicks, 2003)

 “… an excuse for managerial opportunism” (Jensen,

2000; Marcoux, 2000; Sternberg,2000, in Phillips, Freeman & Wicks, 2003)

 Unable to “… provide a sufficiently specific

objective function for the corporation” (Jensen, 2000, in
Phillips, Freeman & Wicks, 2003)

 “… primarily concerned with distribution of

financial outputs” (Marcoux, 2000, in Phillips, Freeman & Wicks, 2003)
 insistent on treating all stakeholders equally (Gioia,
1999; Marcoux, 2000; Sternberg, 2000, in Phillips, Freeman & Wicks, 2003)
 What stakeholder theory is not
(Contd.) (Phillips, Freeman & Wicks, 2003)

 Insistent on “… changes to current law” (Hendry, 2001

a, b; Van Buren, 2001, in Phillips, Freeman & Wicks, 2003)

 “… socialism, and refers to the entire economy”

(Barnett, 1997; Hutton, 1995; Rustin, 1997, in Phillips, Freeman & Wicks, 2003)

 “… a comprehensive moral doctrine” (Orts & Strudler,

2000, in Phillips, Freeman & Wicks, 2003)

 Applicable only to corporations (Donaldson & Preston, 1995, in

Phillips, Freeman & Wicks, 2003)
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder theory in
action
 Steps in ethical decision making:
PASCAL (Goodpaster, 1991)

 Perception
 Analysis
 Synthesis
 Choice
 Action
 Learning
 PASCAL (Contd.) (Goodpaster, 1991)

 “Perception: Or fact gathering about the options

available & their short & long-term implications.

 Analysis of these implications with specific

attention to affected parties & to the decision-
maker’s goals, objectives, values, responsibilities,
etc.

 Synthesis of this structured information according

to whatever fundamental priorities obtain in the
mindset of the decision-maker.”
 PASCAL (Contd.) (Goodpaster, 1991)

 “Choice among the available options based on the

synthesis.
 Action or implementation of the chosen option
through a series of specific requests to specific
individuals or groups, resource allocation,
incentives, controls, & feedback.
 Learning from the outcome of the decision,
resulting in either reinforcement or modification
(for future decisions) of the way in which the
above steps have been taken.”
 Stakeholder analysis (Goodpaster, 1991)

 Perception
 Analysis
 Stakeholder synthesis (Goodpaster, 1991)

 “… offers a pattern or channel by which to

move from stakeholder identification to a
practical response or resolution.”
 Synthesis, Choice, Action & Learning from
PASCAL
 Strategic stakeholder synthesis
(Goodpaster, 1991)

 “The essence of a strategic view of

stakeholders is not that stakeholders are
ignored, but that all but a special group
(stockholders) are considered on the basis of
their actual or potential influence on
management’s central mission. The basic
normative principle is fiduciary responsibility
(organizational prudence) supplemented by
legal compliance.”
 Process of strategic stakeholder
synthesis (Goodpaster, 1991)

 “… defining ethical behavior partly in terms of

the nonstrategic decision-making values behind
it.”
 “…recognizing that too much optimism about
the correlation between strategic success &
virtue runs the risk of tailoring the latter to suit
the former.”
 Multi-fiduciary stakeholder synthesis
(Goodpaster, 1991)

 Balancing the (often conflicting) fiduciary needs

of and commitments to multiple stakeholders of
the organization: Where and how does one
draw the line?
 Stakeholder paradox: It is the obligation of the
managers to make money for investors/
shareholders. However, if the organization does
that, it could be disadvantaging other stakeholders
who are affected but may not have invested.
 Stages of corporate moral
development (Reidenback & Robin, 1991, in Iamandi, 2007)

 “Amoral organization
 Legalistic organization
 Responsive organization
 Emerging ethical organization
 Ethical organization”
 Amoral organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Win at all costs’

 “Driven by greed & short term orientation”
 “It is ethical as long as we don’t get caught”
 “Ethical violations, when caught, are considered
to be a cost of doing business.”
 “No meaningful code of ethics or other
documentation”
 Legalistic organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Obey the law’

 “Driven by concern for economic performance”
 “Uses damage control through public relations
when social problems occur”
 “Reactive approach to ethics”
 “If it is legal, it is okay”
 “Avoids writing codes of ethics, as this can create
legal problems later on; however, if a code of
ethics exists, this is an internal document.”
 Responsive organization (Iamandi, 2007)

 ‘Ethics pays’
 “Characterized by a growing concern for balance
between profits & ethics, taking also into account
corporate stakeholders other than owners.”
 “Management […] understands the value of not
acting solely on a legal basis”
 “Approach to ethics […] based on the profits that
ethics may [bring].”
 “Codes of ethics are more externally oriented &
reflect a concern for other publics.”
 Emerging ethical organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Do the right thing’

 “Demonstrates an active concern for ethical outcomes,
providing support & measures of ethical behavior,
although it lacks organization & long-term planning.”
 “Shared ethical values provide corporate guidance in
some situations”
 “Corporate culture is less reactive & more proactive to
social problems when they occur.”
 “Codes of ethics become action documents.”
 Ethical organization
(Reidenback & Robin, 1991, in Iamandi, 2007)

 ‘Integrate ethics with economics’

 “Thoroughly integrates questions of ethical behavior
with developing strategy & mission, thereby addressing
the fundamental issue of organizational integrity.”
 “Totally ethical profile, with carefully selected core
values”
 “Corporate culture is planned & managed to be ethical.”
 “Corporate codes focus on the ethical profile & core
values.”
 Business ethics without
stakeholders (Heath, 2006)

 Dilemmas:
 What is ethical behavior when it comes to profit
making organizations?
 Who are stakeholders and how responsible should
the corporation be to them?
 Stakeholder paradox in the context of multi-
fiduciary stakeholder theory:
 Business ethics without
stakeholders (Contd.) (Heath, 2006)

 Stakeholder paradox in the context of multi-fiduciary

stakeholder theory:
 Blurring of “… traditional goals in terms of entrepreneurial
risk-taking”
 Slowing down decision making “… because of the dilemmas
posed by divided loyalties”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 Stakeholder
identification
 Basis for stakeholder identification
(Mitchell, Agle & Wood, 1997)

 Stakes in the organization

 Claimants vs. influencers
 Actual vs. potential relationship
 Claimants vs. influencers
(Mitchell, Agle & Wood, 1997)

 Claimants: “… may have legitimate claims or

illegitimate ones, & they may or may not have any
power to influence the firm.”

 Influencers: “… have power over the firm, whether

or not they have valid claims or any claims at all &
whether or not they wish to press their claims.”
 Actual vs. potential relationship
(Mitchell, Agle & Wood, 1997)

 Actual: Current, existing, relationship

 Potential: “… stakeholders who ‘are or might be

influenced by, or are or potentially are
influencers of some organization’.” (Clarkson, 1994, in
Mitchell, Agle & Wood, 1997)
 Sorting of rationales for stakeholder
identification
(Mitchell, Agle & Wood, 1997)

 A relationship exists
 Power dependence: Stakeholder dominant
 Power dependence: Firm dominant
 Mutual power dependence relationship
 Basis for legitimacy of relationship
 Stakeholder interests: Legitimacy not implied
 A relationship exists
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are in relationship:

 “… having some legitimate, non-trivial relationship
with an organization (such as) exchange
transactions, action impacts& moral responsibilities”
 “… interact with & give meaning & defintion to the
corporation”
 The stakeholder exercises voice with respect to
the firm: ‘Can and are making their actual
stakes known’.”
 Power dependence: Stakeholder
dominant
(Mitchell, Agle & Wood, 1997)

 The firm is dependent on the stakeholder

 The stakeholder has power over the firm”
 Power dependence: Firm
dominant
(Mitchell, Agle & Wood, 1997)

 The stakeholder is dependent on the firm:

 “the firm is significantly responsible for their well-
being, or they hold a moral or legal claim on the
firm”
 The firm has power over the stakeholder:
 “asserts to have one or more of the kinds of stakes
in busines”
 Mutual power-dependence
relationship
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are mutually

dependent:
 “are depending on the firm in order to achieve their
personal goals & on whom the firm is depending for
its existence”
 “driven by their own interests & goals are
participants in a firm, & thus depending on it & on
whom for its sake the firm is depending”
 Basis for legitimacy of relationship
(Mitchell, Agle & Wood, 1997)

 The firm & stakeholder are in contractual

relationship:
 “constituents who have a legitimate claim on the
firm… established through the existence of an
exchange relationship” who supply “the firm with
critical resources (contributions) & in exchange
each expects its interests to be satisfied (by
inducements)”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has a claim on the firm

 “groups to whom the corporation is responsible”
 “asserts to have one or more of these kinds of
stakes” – “ranging from an interest to a right (legal
or moral) to ownership or legal title to the
company’s assets or property”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has something at risk:

 “bear some form of risk as a result of having
invested some form of capital, human or financial,
something of value, in a firm” or “are placed at risk
as a result of a firm’s activities”
 Basis for legitimacy of relationship
(Contd.) (Mitchell, Agle & Wood, 1997)

 The stakeholder has a moral claim on the firm:

 “benefit from or are harmed by, & whose rights are
violated or respected by corporate actions”
 “identified through the actual or potential harms &
benefits they experience or anticipate experiencing
as a result of the firm’s actions or inactions.”
 Stakeholder interests: Legitimacy
not implied (Mitchell, Agle & Wood, 1997)

 The stakeholder has an interest in the firm:

 “have an interest in the actions of an organization
and … have the ability to influence it”
 “have, or claim, ownership, rights, or interests in a
corporation & its activities”
Stakeholder salience
(Mitchell, Agle & Wood, 1997)
 What is stakeholder salience?
(Mitchell, Agle & Wood, 1997)

 “The degree to which managers give priority to

competing stakeholder claims”
 Stakeholder salience depends on
(Mitchell, Agle & Wood, 1997)

 Power
 Legitimacy
 Urgency
 Power
(Dahl, 1957, Pfeffer, 1981, Weber, 1947, in Mitchell, Agle & Wood, 1997)

 “A relationship among social actors in which

one social actor, A, can get another social
actor, B, to do something that B would not
have otherwise done”
 Bases of power
(Mitchell, Agle & Wood, 1997)

 “Coercive: force/ threat

 Utilitarian: material/ incentives
 Normative: symbolic influences”
 Legitimacy
(Suchman, 1995; Weber, 1947, in Mitchell, Agle & Wood, 1997)

 “A generalized perception or assumption that

the actions of an entity are desirable, proper,
or appropriate within some socially constructed
system of norms, values, beliefs, definitions”
 Bases for legitimacy
(Mitchell, Agle & Wood, 1997)

 “Individual
 Organizational
 Societal”
 Urgency (Mitchell, Agle & Wood, 1997)

 “The degree to which stakeholder claims call

for immediate attention”
 Bases for urgency
(Mitchell, Agle & Wood, 1997)

 “Time sensitivity: the degree to which

managerial delay in attending to the claim or
relationship is unacceptable to the stakeholder

 Criticality: the importance of the claim or the

relationship to the stakeholder”
Sorting of stakeholders
based on salience
(Mitchell, Agle & Wood, 1997)
Stakeholder typology
(Mitchell, Agle & Wood, 1997)
POWER

Dormant

Dangerous Dominant
LEGITIMACY

Definitive

Demanding
Dependent Discretionary
Nonstakeholder

URGENCY
 Classes of stakeholders based on
salience (Mitchell, Agle & Wood, 1997)

 Latent stakeholders
 Expectant stakeholders
 Definitive stakeholders
 Latent stakeholders
(Mitchell, Agle & Wood, 1997)

 Do not acknowledge the firm

 Possess only one attribute
 Classes
 Dormant stakeholders
 Discretionary stakeholders
 Demanding stakeholders
 Dormant stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Power
 “Possess power to impose their will on a firm,
but by not having a legitimate relationship or
an urgent claim, their power remains unused.
 e.g.
 “… those who have a loaded gun (Coercive)”
 “…those who can spend a lot of money (Utilitarian)”
 “… those who can command the attention of the
news media (Symbolic)”
 Discretionary stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Legitimacy
 “… have no power to influence the firm & no
urgent claims.”
 In the absence of “… power & urgent claims,
there is absolutely no pressure on managers to
engage in an active relationship with such a
stakeholder, although managers can choose to
do so”
 E.g. donation dependent non profit
organizations
 Demanding stakeholders
(Mitchell, Agle & Wood, 1997)

 Attribute: Urgency
 “… those with urgent claims but having neither
power nor legitimacy”
 “… irksome but not dangerous, bothersome but
not warranting more than passing management
attention”
 e.g. non-violent protestors on the street
 Expectant stakeholders
(Mitchell, Agle & Wood, 1997)

 Stakeholders expect something

 Two attributes
 Classes:
 Dominant
 Dependent
 Dangerous
 Dominant stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Power & legitimacy

 Stake legitimate claims upon the organization and
are able “…to act on these claims (rather than as a
forecast to act on their claims)”
 Organization formalizes mechanisms to deal with
them
 e.g.
 Corporate boards of directors
 Representatives of owners
 Significant creditors
 Dependent stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Urgency & legitimacy

 “… lack power but have urgent legitimate claims
and depend on others for the power necessary to
carry out their will.
 “Because power in this relationship is not
reciprocal, its exercise is governed either through
the advocacy of guardianship of other
stakeholders, or through the guidance of internal
management values.”
 e.g. environmental stakeholders affected by
pollution
 Dangerous stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Urgency & power, no legitimacy

 “… stakeholder may become coercive &
possibly violent, making the stakeholder
“dangerous” to the firm”
 e.g. wildcat strikes, sabotage, & terrorism
 Definitive stakeholders
(Mitchell, Agle & Wood, 1997)

 Attributes: Legitimacy, Power, Urgency

 “… managers have a clear & immediate
mandate to attend to & give priority to that
stakeholder’s claim.”
Thank You
Stakeholder
management
 Comprehensive
stakeholder management
process model
(Preble, 2005)
 Step 1: Stakeholder identification
 Primary
 Public
 Secondary
 Step 2: General nature of stakeholder
claims & power implications

 Equity
 Economic
 Influencers
 Step 3: Determine performance
gaps
 Define stakeholder expectations
 Conduct performance audits
 Reveal gaps
 Explore stakeholder influence strategies
 Step 4: Prioritize stakeholder
demands
 Determine stakeholder salience (Power,
legitimacy, urgency)
 Assess the strategic importance of various
stakeholders
 Step 5: Develop organizational
responses
 Direct communication
 Collaboration/ partnering
 Set performance goals
 Develop policies/ strategies/ programs
 Allocate resources
 Revise Statement of Purpose
 Step 6: Monitoring & Control
 Continually check stakeholder positions
 Evaluate strategic progress
 Conduct social/ environmental audits
 Step 7
 Go back to step 1
Assessing stakeholders
(Savage et al., 1991)
 Factors affecting stakeholders’ potentials
for threat & cooperation (Savage et al, 2005)
Stakeholder’s Stakeholder’s
potential for potential for
threat cooperation

Stakeholder controls key resources Increases Increases

Stakeholder does not control key resources Decreases Either
Stakeholder more powerful than organization Increases Either
Stakeholder as powerful as organization Either Either
Stakeholder less powerful than organization Decreases Increases
Stakeholder likely to take action (supportive of the org) Decreases Increases
Stakeholder likely to take unsupportive action Increases Decreases
Stakeholder unlikely to take any action Decreases Decreases
Stakeholder likely to form coalition with other Increases Either
stakeholders
Stakeholder likely to form coalition with organization Decreases Increases
Stakeholder unlikely to form any coalition Decreases Decreases
Strategies for managing
stakeholders
(Savage et al, 1991)
 Diagnostic typology of organizational
stakeholders (Savage et al, 2005)
STAKEHOLDER’S POTENTIAL THREAT TO ORGANIZATION
COOPERATION WITH ORGANIZATION
STAKEHOLDER’S POTENTIAL FOR

HIGH LOW

Stakeholder Type 4: Stakeholder Type 1:

Mixed Blessing Supportive
HIGH
Strategy: Collaborate Strategy: Collaborate

Stakeholder Type 3 Stakeholder Type 2:

Nonsupportive Marginal
LOW
Strategy: Defend Strategy: Monitor
 Managing stakeholders: Types
& strategies (Savage et al., 2005)

 Type 1: The supportive stakeholder:

 Low potential threat, high potential cooperation
 Strategy: “Involve the supportive stakeholder” in
decision making, relevant issues, etc.
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 2: Marginal stakeholder

 “… neither highly threatening, nor especially
cooperative”
 Strategy: Monitor the marginal stakeholder
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 3: The nonsupportive stakeholder

 “… high on potential threat, low on potential
cooperation”
 e.g. competing organizations, employee unions, &
sometimes news media
 “Strategy: Defend against the nonsupportive
stakeholder”
 Managing stakeholders: Types
& strategies (Contd.) (Savage et al., 2005)

 Type 4: The mixed blessing stakeholder

 High potential threat & cooperation
 e.g. employees with specialized training
 Strategy: “Collaborate with the mixed blessing
stakeholder”
 Transforming typical stakeholder
relationships (Savage et al., 2005)

1. “Identify key organizational stakeholders

2. Diagnose them along two critical dimensions
of potential for threat & potential for
cooperation
3. Formulate appropriate strategies both to
enhance or change current relationships with
those key stakeholders & to improve the
organization’s overall situation
4. Effectively implement these strategies”
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Stakeholder
dialogue
 Stakeholder dialogue (Kaptein & Van Tulder, 2003)

 “In the dialogue with stakeholders (both

primary & secondary) opinions are exchanged,
(future) interests & expectations are discussed,
& standards are developed with respect to
business practices.”
 Stakeholder debate vs. stakeholder
dialogue (Kaptein & Van Tulder, 2003)

Stakeholder Debate Stakeholder Dialogue

Competition with a single Cooperation where everyone is
winner or only losers (either-or a winner (and-and thinking)
thinking)
Egocentric where the other Empathetic where the other
party is a threat or a means to party is an opportunity and
personal profit represents an intrinsic interest
Putting yourself in a better light Being yourself
Speaking, to which others have Listening to others before
to listen speaking yourself
Influencing Convincing
 Stakeholder debate vs. stakeholder
dialogue (Contd.) (Kaptein & Van Tulder, 2003)
Stakeholder Debate Stakeholder Dialogue
Confronting, combative & destructive, Constructive &, from a point of mutual
whereby the weaknesses & wrongs of understanding & respect, looking for
the other party are sought out & the similarities from which to consider the
similarities are negated differences
A closed & defensive attitude because A vulnerable attitude because there
you personally know the truth are many truths & where parties are
open to criticism about their own
performance & they can use this to
learn from each other
Taking & keeping Giving & receiving
Divide & rule Share & serve
Separate/ isolated responsibilities Shared responsibilities
 Preconditions for effective
stakeholder dialogue (Kaptein & Van Tulder, 2003)

 “To know & be understood

 Trust & reliability
 Clear rules for the dialogue
 A coherent vision on the dialogue
 Dialogue skills
 Expertise on the subject matter
 Clear dialogue structure
 Valid information as basis
 Consecutive meetings
 Feedback of results”
 Why stakeholder dialogue?
(Kaptein & Van Tulder, 2003)

 “To identify trends & future issues at an early stage & to

prioritize these
 To gain insight into the stakeholders’ appreciation for the
organization & the evaluation of the current of current
performance
 To allow the organization & stakeholders to gain a better
understanding of each other’s interests & dilemmas, & broader
support for the decisions companies make
 To resolve specific tensions in the relationship with
stakeholders
 To gather suggestions & ideas for improving the company’s
performance in the social area, as well as KPIs for the
sustainability report.”
 Why stakeholder dialogue? (Contd)
(Kaptein & Van Tulder, 2003)

 “To increase sensitivity within the organization for

the stakeholders’ expectations & to heighten the
sense of responsibility for social issues.
 To create a greater mutual buffer of trust,
whereby possible problems can be dealt with more
effectively.
 To avoid incidents that receive wide pubic & media
attention.
 To create a basis for joint projects, alliances, &
partnerships.”
 Issues to consider when setting up a
dialogue with stakeholders
(Kaptein & Van Tulder, 2003)

 “How do we clarify for ourselves what the specific

objectives of the stakeholder dialogue are?
 How do we decide which stakeholders we are
going to talk to?
 How do we determine the topics for discussion?
 Who will represent the organization in the
meetings?
 How can we determine the order of the
meetings?”
 Issues to consider when setting up a
dialogue with stakeholders (Contd.)
(Kaptein & Van Tulder, 2003)

 “How often should the meetings take place?

 How do we avoid leaving out stakeholders, as a result of
which they may feel excluded & cause a big fuss?
 How do we retain our freedom to make decisions &
carry our responsibility for these?
 How do we avoid stakeholders abusing the trust we vest
in them & the information we share with them?
 How do we avoid stakeholders developing the feeling,
also in hindsight, that they have been abused?”
 Issues to consider when setting up a
dialogue with stakeholders (Contd.)
(Kaptein & Van Tulder, 2003)

 “How can we learn the most from the meetings?

How do we avoid creating overly high expectations
among the stakeholders about the content &
follow-up of the stakeholder dialogue?
 How do we prevent a stakeholder dialogue from
becoming a time-consuming exercise?
 How can the dialogue be embedded in the
management systems & the sustainability report
that may be published?
 How can we know that the stakeholder dialogue
satisfies the wishes of the stakeholders?
 Inappropriate/ Inadequate attention
to the above issues leads to
(Kaptein & Van Tulder, 2003)

 “Stakeholders feeling ignored

 Stakeholders feeling abused
 Meetings becoming a repetition of sets
 Internal support for the meetings crumbling
 Misuse of confidential information”
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 Management
of Stakeholder
Dialogue
 Stakeholder dialogue: Levels of
engagement (Pedersen, 2006)
Level of engagement

Low High
Inclusion Only a few privileged stakeholders All relevant stakeholders are
are included in the dialogue included in the dialogue
Openness Dialogue is structured around a Dialogue is structured around open
fixed set of questions/ problems/ questions/ problems/ issues
Dimension

issues
Tolerance One position has priority over all New, alternative & critical voices
the others are respected
Empower- One stakeholder dominates the Freedom & equality in dialogue as
ment dialogue & decisions well as in decisions
Transpa- No access to information about the Full access to information about the
rency process & outcomes of the process & outcomes of the
stakeholder dialogue stakeholder dialogue
 Types of stakeholder dialogue
(Kaptein & Van Tulder, 2003)

 Proactive dialogue
 Organization takes initiative
 Inclusive
 Prioritization of issues & prompt communication to
stakeholders
 Stakeholder panel
 Organization takes initiative
 Usually in response to a crisis
 Concrete plan of action developed & action taken
 Types of stakeholder dialogue
(Contd.) (Kaptein & Van Tulder, 2003)

 Selective reactive stakeholder dialogue

 Selective about stakeholders
 In response to a crisis
 Very cautiously dealt with – spread of problem
controlled
 Defensive dialogue
 Usually in response to a crisis
 Purpose is to defend the reputation of/ minimize
risk to the organization
 Dimensions of stakeholder
dialogue (Kaptein & Van Tulder, 2003)

 Type of issue (social & / or environmental)

 No. of stakeholders involved in the dialogue
 Frequency of conversations
 No. of issues per conversation
 No. of stakeholders per conversation
 Orientation toward problems (identifying
problem and/ or problem solving)
 Dimensions of stakeholder
dialogue (Contd.) (Kaptein & Van Tulder, 2003)

 Orientation toward time (prospective/

retrospective)
 Participants of the organization (support
management, operational management and/ or
employees
 Organizational level (head office and/ or local)
 Monitoring of dialogue quality
 Inclusion in annual report
 Filters in stakeholder dialogue
(Pedersen, 2006)

 “Selection Filter: “[…] about the access to the

dialogue ‘arena’.”
 “Interpretation filter: […] concerns the
transformation of the multiple voices from the
dialogue into a limited number of decisions.”
 “Response filter: […] relates to the activities
that take place when the decisions move out of
the dialogue arena.”
 Phases of stakeholder dialogue
(Pedersen, 2006)

Selection Interpretation Response

Filter Filter Filter

Customers

Suppliers

Distributors

Stakeholder Implementation
Employees Decision
dialogue & Impact
Investors

Community

Etc.
 Factors affecting operationalization
of stakeholder dialogue (Pedersen, 2006)

 Commitment: Willingness
 Consciousness: Knowledge & awareness
 Consensus: Harmony/ conflict between
stakeholders & organization
 Capacity: Available resources
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
Planning of CSR activities:
Responsibility paradigms
 Paradigms of responsibility
 The CSR Pyramid
 Intersecting circles
 Concentric circles
 The CSR Pyramid
(Carroll, 1991, in Schwartz & Carroll, 2003)

Be a good citizen Desired

Philanthropic

Be ethical Expected
Ethical

Required
Obey the law Legal

Required
Be profitable Economic
Intersecting Circles (Schwartz & Carroll, 2003)

Purely Ethical

Economic/
Legal/
Ethical
Ethical/ Ethical
Legal/
Economic
Purely Economic Purely Legal
Economic/
Legal
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic Domain:
 “… those activities which are intended to have
either a direct or indirect positive economic impact
on the [organization]”
 Criteria for positive impact:
 “… maximization of profits” and/ or
 “… maximization of shared value”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Legal Domain:
 “Compliance:
 Passive
 Restrictive
 Opportunistic”
 Avoidance of civil litigation
 Anticipation of the law”
 Legal Domain (Contd.)
(Schwartz & Carroll, 2003)

Type of legal motive Typical corporate/ managerial response

Passive compliance “Well, looking back on it, we did happen to
(Outside legal domain) comply with the law”
Restrictive compliance “We wanted to do something else but the law
prevented us.”
“We did it in order to comply with the law”
Opportunistic compliance “Well, the law allows us to do it”
“We operate in that jurisdiction because of the
less stringent legal standards”
Avoidance of civil “We did it because we might get sued otherwise”
litigation “Lawsuits will be dropped”
“Anticipation of the law “The law is going to be changed soon”
“We wanted to pre-empt the need for legislation”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Ethical domain:
 “Conventional standard: “… those standards or norms
which have been accepted by the organization, the
industry, the profession or society as necessary for the
proper functioning of business”
 “Consequentialist standard: “… an action can be
considered eithical […] when it promotes the good of
society or […] when the action is intended to produce
the greatest net benefit (or lowest net cost) to society
when compared to all of the other alternatives.”
 Deontological standard: “… those activities which reflect
a consideration of one’s duty or obligation”
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic/ Ethical: “good ethics is good business”

e.g. green products, social marketing etc.
 Economic/ Legal: using legal loopholes for
economic benefit, e.g. eco-dumping, social
dumping etc. (offshoring activities to countries
with lower environmental or work safety
standards)
 Legal/ Ethical: e.g. installing devices because they
are legally required & ethical even with no
economic benefit
 Intersecting circles (Contd.)
(Schwartz & Carroll, 2003)

 Economic/ Legal/ Ethical: All three domains.

e.g. withdrawing defective/ potentially harmful
products from the market. Maggi Noodles case
– mono sodium glutamate & lead found in
Maggi noodles.
https://www.youtube.com/watch?v=ko8pIdcr5
xk
Concentric model (Geva, 2008)

Philanthropic

Ethical
Legal

Economic
 Concentric model (Contd.)
(Geva, 2008)

 Interdependence of various circles

 Economic circle: Generation of wealth towards improving
overall standard of living, fair price selling, provision of jobs
etc.
 Legal circle: Following the law: Obey the law & justify your
reasons for not being able to follow the law when you are
not able to follow the law
 Ethical circle: Doing good rests on good economics & legal
compliance
 Philanthropic circle: “… contributions of business firms to
humanitarian & social causes, which are usually considered
outside the firms’ natural line of business”
 Comparison of the three paradigms
(Geva, 2008)

CSR Pyramid Intersecting Circles Concentric Circles

General Hierarchy of separate Nonhierarchical set of Integration of
Description responsibilities intersecting responsibilities: all
responsibilities sharing a central core
Theoretical Normative restraints Classification Incurred obligation to
assumptions: of responsiveness framework: No work for social
Nature of CSR normative guidance betterment
Scope of Narrow Split Wide
responsibilities
Total CSR Conjunction Disjunction Integration
Order of Hierarchy: Economic No prima facie order Inclusion system:
importance Responsibility first economic circle at the
core
Role of “Icing on the cake” Subsumed under Integral part of CSR
philanthropy economic/ ethical
responsibilities
 Comparison of the three paradigms
(Contd.) (Geva, 2008)

CSR Pyramid Intersecting Circles Concentric Circles

Research Constant-sum CSR portraits Representative range
implications: method of measures
Operationalization
CSR-CFP Positive Positive, negative or Non-linear
relationship neutral

Justification for Ethics pays Strategic Normative obligation

ethics considerations
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 CSR Design
&
Implementation:
Stakeholder Integration
(Maon, 2009)
 Cramer’s framework (2005)
(in Maon et al., 2009)

 CSR Conception:
 World Business Council for Sustainable
Development (WBCSD) definition: “… the
commitment of business to contribute to
sustainable economic development, working with
employees, their families, the local community &
society at large to improve their quality of life”
 Cramer’s (2005) framework (Contd.)
(Maon et al., 2009)

 CSR integration process:

1. “Listing the expectations & demands of the stakeholders
2. Formulating a vision & a mission with regard to corporate
social responsibility and, if desired, a code of conduct
3. Developing short- and longer-term strategies with regard
to CSR & using these to draft a plan of action
4. Setting up a monitoring & reporting system
5. Embedding the process by rooting it in quality &
management systems
6. Communicating internally & externally about the approach
& the results obtained.
 Cramer’s (2005) framework (Contd.)
(Maon et al., 2009)

 Stakeholders’ role in the process:

 Primarily stakeholder dialogue
 Khoo & Tan’s (2002) framework
(Maon et al., 2008)

 CSR conception:
 “Business commitment to CSR should ‘envelop all
employees (i.e. their health & well being), the quality of
products, the continuous improvement of processes, &
the company’s facilities & profit-making opportunities.
[…] Sustainable manufacturing & development is
further defined as ‘the integration of processes, decision
making & the environmental concerns of an active
industrial system that seeks to achieve economic
growth, without destroying precious resources or the
environment”
 Khoo & Tan’s (2002) framework
(Contd.) (Maon, 2009)

 CSR Integration Process:

1. “Preparation (involving leadership & strategy
planning)
2. Transformation (involving people & information
management)
3. Implementation (involving the embedment of
sustainability in the company processes)
4. Sustainable business results (involving the review
of the system’s performance)”
 Khoo & Tan’s (2002) framework
(Contd.) (Maon, 2009)

 Stakeholders’ role: “… addressing the well-

being of employees & needs & expectations of
customers.”
 Maignan et al.’s, (2005) framework
(Maon et al., 2009)

 CSR Conception:
 “Business commitment to CSR is viewed as, ‘at a
minimum, adopt values & norms along with
organizational processes to minimize their negative
impacts & maximize their positive impacts on
important stakeholder issues’. The CSR of an
organization is issue specific. Also commitment to
CSR is best evaluated at the level of an individual
business unit.”
 Maignan et al.’s (2005) framework
(Contd.) (Maon et al., 2009)

 CSR integration process:

1. “Discovering organizational values & norms
2. Identifying stakeholders & their respective salience
3. Identifying the main issues of concern to the identified
stakeholders
4. Assessing a meaning of CSR that fits the organization of
interest
5. Auditing current practices
6. Prioritizing & implementing CSR changes & initiatives
7. Promoting CSR by creating awareness & getting stakeholders
involved
8. Gaining stakeholders’ feedback”
 Maignan et al.’s (2005) framework
(Contd.) (Maon et al., 2009)

 Stakeholders’ role in the process: Feedback

loops:
 “Stakeholders’ feedback to be used as input for the
next audit. Consequently, the sequence linking
steps five to eight should be performed on a regular
basis (bi-annual audits of current practices)
 Stakeholders’ feedback as an input to reassess the
first three steps of the CSR management process in
the long run (approximately every four years)
 Panapanaan et al.’s (2003)
framework (Maon, 2009)

 “CSR ‘encompasses three dimensions –

economic, environmental, & social’ […] & is
about ‘doing business sustainably & ethically as
well as treating or addressing stakeholders’
concerns responsibly”
 Panapanaan et al.’s (2005)
framework (Contd.) (Maon et al., 2009)

 CSR integration process:

1. Assessment of CSR (identification of the main CSR
areas & identifications of the relevant CSR
parameters)
2. Decision whether to proceed in managing CSR:
1. Organization & structure
2. Planning
3. Implementation
4. Monitoring & evaluation
5. Communication & reporting”
 Panapanaan et al.’s (2003)
framework (Contd.) (Maon et al., 2009)

 Stakeholders’ role in the process:

 Step 1: Social risk assessment & its role in
developing CSR programs by “… considering
stakeholders’ clusters (employees, community,
customers, community, suppliers)& their issues.
 Werre’s (2003) framework
(Maon et al., 2009)

 CSR conception:
 “… the strategic choice to take responsibility for the
impact of business with respect to economic,
environmental & social dimensions.”
 Werre’s (2003) framework
(Contd.) (Maon, 2009)

 CSR integration process: Main phases in a

Corporate Responsibility implementation model:
1. “Raising top management awareness
2. Formulating a CSR vision & core corporate values
3. Changing organizational behavior
4. Anchoring the change”
 Werre’s (2003) framework (Contd.)
(Maon et al., 2009)

 Stakeholders’ role in the process:

 Involvement of internal stakeholders
Thank You
Corporate Social Responsibility

Aradhna Malik (PhD)

Assistant Professor
VGSOM, IIT Kharagpur
 CSR Design
&
Implementation:
Stakeholder Integration
(Maon, 2009)
 Stakeholder expectations
(Longo et al., 2005, in Jamali, 2008)

Stakeholder Expectations divided into value classes

Employees Health & safety at work
Development of workers’ skills
Wellbeing & satisfaction of workers
Quality of work
Social equity
Suppliers Partnership between ordering company & suppliers
Selection & analysis systems of suppliers

Customers Product quality

Safety of customer during use of product
Consumer protection
Transparency of consumer product information
Community Creation of added value to the community
Environmental safety & production
 Integrative framework for
designing & implementing CSR
(Maon et al., 2009)

 Sensitize:
 Unfreeze: Plan
 Move:
 Do
 Check/ improve
 Refreeze: Mainstream

While engaging continuously in a dialogue with

stakeholders
 Integrative framework (Contd.)
(Maon et al., 2009)

 Sensitize:
 Step 1: Raise CSR awareness through:
 Social drivers
 Political drivers
 Managers’ personal values
 Economic drivers
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Unfreeze: Plan:
 Step 2: Assess corporate purpose in a social context:
 Uncover organizational systems, as well as corporate norms &
values
 Identify key stakeholders & critical stakeholder issues
 Step 3: Establish a vision & a working definition for CSR
 Step 4: Assess current CSR status
 Audit current CSR norms, standards, practices
 Benchmark competitors’ CSR practices, norms, standards,
practices
 Step 5: Develop a CSR-integrated strategic plan: Embed
CSR in organizational strategy
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Move:
 Do:
 Step 6: Implement CSR integrated strategic plan:
Implement organizational initiatives & strategies linked to
CSR
 Step 7 (Steps 6, 8 & 9 feed into this and this is ongoing
till the end of the process): Communicating about CSR
commitments & performance
 Check/ Improve:
 Step 8: Evaluate CSR integrated strategies &
communication: Evaluate, verify & report on CSR
progress
 Integrative framework … (Contd.)
(Maon et al., 2009)

 Mainstream:
 Step 9: Institutionalize CSR: Anchoring changes into
organizational systems, as well as corporate culture
& values
 Critical success factors in the CSR
process (Maon et al., 2009)

Plan Do Check/ Improve Mainstream

Corporate •Connecting CSR vision & - Considering mistakes as an -
Level initiatives with organization’s opportunity to learn &
core values & competencies improve CSR programs &
•Formalizing CSR vision policies
through official documents
•Getting key people’s commitment (directors, owners, senior managers)
•Engaging participation of key stakeholders in the CSR process
Organizational Building upon •Ensuring the •Considering Emphasizing
Level existing organization has mistakes as an relationships
organizational internal skills to make opportunity to between new
structures & the transformation learn & improve organizational
process •Training employees in CSR programs & behavior & success
CSR issues policies
•Fostering the presence of moral/ CSR champions
•Thinking in terms of long-term engagement rather than quick fix solutions
Managerial Creating enthusiasm & credibility around Rewarding people that
Level CSR create CSR success
Recognizing the critical role of leadership
Thank You