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Chapter 13
Ethnics and Corporate Social
Responsibility
Definitions
- Ethnics refer to moral principles that underpin modes of behaviour.
- CSR refers to the commitment sown by business to behave in an ethnical manner
Levels
- Society
- Professional life
- Individual level
- Managerial level
Philosophical approaches to ethnics
Moral principles
Approach in case of ethnical dilemma moral principles state what is right and what is wrong à depend on framework ( e.g. generally it is wrong to kill someone but in war it is usual ) Also in business moral principles have impact on the way the people inside and outside the organization acts
Utilitarianism
Approach that maximizes utility for the greatest number of people à outcome has to be known so that the activity can be best for a majority. But even if the majority benefits there are people who do not (weakness of this approach è shift to human rights approach)
Human rights
Every human being on earth should have the same basic rights à all around the world (also concerning business). Abuses are also reported ( e.g. by Human Rights Watch )
Individualism
Adam Smith view à if individual concentrates on own benefits the whole benefits as well. Criticism include that business sector is not this far spread like
society à approach cannot be simply adapted (raison d’etre à maximize profit without harming someone) Advantages of ethnical business practice and CSR Many advantages like economic advantages, competitive advantages, enhanced image and reputation, improved stakeholder relationships, increased lobbying power, accreditation, safer products and processes and environmental benefits and sustainable business. First instance à direct impact on performance since consumers more and more pay attention to what they buy and under which circumstances the goods are produced ( arguable position ); treatment of workers can undermine the image of the organisation; ways in how organizations deal with their customers etc. CSR are often underestimated but can easily create and competitive advantage and can arise customer loyalty as well as brand reputation.
Image and reputation
Image and reputation are essential assets for customer loyalty and creation of a competitive advantage. CSR and ethnics are significant parts of an organisation’s image and thus the formulation of a mission nowadays often capture ethnical topics ( e.g. turn to more efficient and ecological friendly means of transport ). More over credibility can be increased, which can lead to a better lobby
Accreditation and standards
Achieve certain standards and accreditations is nowadays necessary for a company to be allowed to produce their goods (e.g. EU regulations concerning cars) à became an own industry
Stakeholder communication
Stakeholder’s power is quite high concerning the image of a brand ( e.g. Apple changed suppliers when the media revealed problems with the old one ) Another important part there is the communication with as well suppliers as activist, which are criticising them. The impact of stakeholders reaches from production to packaging to advertising and finally even consuming. à corporate governance : management, shareholders, stakeholders and board control themselves
Disadvantages
-‐ Reduced freedom -‐ Competitive Disadvantage -‐ Dependence on suppliers
Internal stakeholders: stockholders, directors, management, or employees of an organization External stakeholders: all people who affect or are affected by the activities of the organization ‘4 E’s’-‐principle to include a CSR into their activities: (i) make it easy for the customer to be green (ii) empower consumers with solutions (iii) enlist the support of the consumer (iv) establish credibility with the wider public
Social audits
Measure current performance (of CSR’s) against past (but not reached) targets. Can be done internal, but to achieve more credibility external consultants should do the work. Result is helpful when shared in-‐ and external (e.g. find out weaknesses and turn them into opportunities )
Corporate social responsibility and profitability
à main reason for CSR to raise are the support it gives to the mission of the organization and its right to exist; the threat of externally imposed regulation; and the effect on brand (loyalty, new customers, new markets) Close connection between economic and social targets (where the first can be better measured) à Criticism: rather value is created than profit increased The role of CSR in mission and goals
Mission statement
Mission: Fundamental purpose that sets an organization apart from others + embodies the philosophy of the decision makers, implies the aimed image the firm wants to be seen as, reflect its self-‐concept, and indicates the principal and customer, which is aimed The objectives of mission statements are: -‐ to ensure unanimity of purpose within the organisation -‐ to provide a basis for motivating the use of resources of the organization -‐ to develop a basis for allocating resources of the organization -‐ to establish a general organisation climate -‐ to serve a point of reference for those who can identify with the company -‐ to facilitate the translation of objectives and goals into a working structure
-‐ to specify organisational purposes and the translation of those into goals so that parameters (cost, time, performance) can be assessed and controlled
The role of CSR in mission formulation
Three specifications:
- Specification of the basic product or service
- Specification on the primary market
- Specification on principal technology for production or delivery à statements about goals vary from private to public sector Philosophy should be mentioned in the mission statement (CSR’s included)
CSR as organisational goals
Goal: A future state of affairs that an organisation attempts to realise Five categories of goals (Perrow, 1970): Societal goals: goals as perceived by the wider society ( e.g. carbon emission levels ) Output goals: production targets over a set period of time System goals: goals relating to the process stage of organisational activity ( e.g. production rate ) Product goals: relate to the characteristics of the output (may be expressed in term of quantity, quality or availability) Derived goals: goals, which are not stated in the mission but are pursued by organisational activity ( e.g. lobbyism ) Goals change over time, but are closely connected to the opinion of stakeholders and customers à CSR came into action as society changed and is today a part of goal finding A framework for CSR Since 2004 UK has a CSR academy à developed framework with six core characteristics of CSR:
- Understanding society: Understand the whole environment in which a company acts, which includes understanding of social and economic structures à understand responsibilities
- Building capacity:
Achieved when executive and strategic decision makers support managers for fully integrating CSR activities across the organisation
