Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept that business has a set of multidimensional obligations to meet the expectations of society's global stakeholders by fulfilling economic, legal, ethical, ecological, and discretionary philanthropic responsibilities. The belief that modern corporations have a responsibility to society and nature that extends beyond the economic responsibility to make money or profits for investors has become a key element in global corporate governance and a pervasive global expectation in [Page 405]light of the tremendous power exercised by multinational corporations (MNCs). The history and nature of CSR and the business case for it as a new global expectation requiring a strategic corporate response are dimensions of this concept to consider.

History and Nature of CSR

CSR has been discussed throughout the 20th century, but it was Howard R. Bowen's book Social Responsibilities of the Businessman (1953) that originated the modern debate on the topic. Bowen reasoned that there would be general social and economic benefits that would accrue to society if business recognized broader social goals in its decisions.

Numerous scholars contributed to the development of the concept, but during the 1970s a number of catalysts accelerated the acceptance of CSR. First, in its 1971 publication Social Responsibilities of Business Corporations, the Committee for Economic Development (CED), composed of business practitioners and leading scholars, endorsed CSR as reflecting a changing social contract between business-society and business-government relations. Second, in the early 1970s there was a major expansion of U.S. government social regulation including the creation of the Environmental Protection Agency, the Consumer Product Safety Commission, and the Equal Employment Opportunity Commission, which led to a supportive national context for CSR. Third, in the late 1970s Archie B. Carroll proposed a four-part model of CSR that differentiated CSR from corporate social performance (CSP). He maintained that CSP was an extension of the concept of CSR that focuses on actual performance results achieved rather than the general notion of business accountability or responsibility to society. However, in order for managers to engage in CSP they needed to have a basic definition of CSR, identification of stakeholders to whom the firm had a responsibility, and a pattern of responsiveness to CSR issues.

Carroll noted that the traditional view, advocated by the eminent economist Milton Friedman—that the only social responsibility of business was to legally make a profit for its investors—was inadequate to describe the judgment of many business leaders and did not reflect the changing expectations of domestic and global societies. He proposed that CSR encompass economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. This definition provided individuals with categories with which to quantitatively state the nature or kind of obligation that business had toward society.

First, according to Carroll, business has an economic obligation to society. Business has an economic responsibility to supply goods and services that society demands and to sell them at a profit. Unless a business is financially viable, its other responsibilities cannot be fulfilled. To achieve its capitalistic economic responsibilities, business must be effective, efficient, innovative, and strategically adaptive to changing global conditions.

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