The Business Case for Corporate Social Responsibility
Matteo Tonello is Director of Corporate Governance for The Conference Board, Inc. This post is based on a Conference Board Director Note by Archie B. Carroll and Kareem M. Shabana , and relates to a paper by these authors, titled “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice,” published in the International Journal of Management Reviews .
In the last decade, in particular, empirical research has brought evidence of the measurable payoff of corporate social responsibility (CSR) initiatives to companies as well as their stakeholders. Companies have a variety of reasons for being attentive to CSR. This report documents some of the potential bottomline benefits: reducing cost and risk, gaining competitive advantage, developing and maintaining legitimacy and reputational capital, and achieving win-win outcomes through synergistic value creation.
The term “corporate social responsibility” is still widely used even though related concepts, such as sustainability, corporate citizenship, business ethics, stakeholder management, corporate responsibility, and corporate social performance, are vying to replace it. In different ways, these expressions refer to the ensemble of policies, practices, investments, and concrete results deployed and achieved by a business corporation in the pursuit of its stakeholders’ interests.
This report discusses the business case for CSR—that is, what justifies the allocation of resources by the business community to advance a certain socially responsible cause. The business case is concerned with the following question: what tangible benefits do business organizations reap from engaging in CSR initiatives? This report reviews the most notable research on the topic and provides practical examples of CSR initiatives that are also good for the business and its bottom line.
The Search for a Business Case: A Shift in Perspective
Business management scholars have been searching for a business case for CSR since the origins of the concept in the 1960s. 
An impetus for the research questions for this report was philosophical. It had to do with the long-standing divide between those who, like the late economist Milton Friedman, believed that the corporation should pursue only its shareholders’ economic interests and those who conceive the business organization as a nexus of relations involving a variety of stakeholders (employees, suppliers, customers, and the community where the company operates) without which durable shareholder value creation is impossible. If it could be demonstrated that businesses actually benefited financially from a CSR program designed to cultivate such a range of stakeholder relations, the thinking of the latter school went, then Friedman’s arguments would somewhat be neutralized.
Another impetus to research on the business case of CSR was more pragmatic. Even though CSR came about because of concerns about businesses’ detrimental impacts on society, the theme of making money by improving society has also always been in the minds of early thinkers and practitioners: with the passage of time and the increase in resources being dedicated to CSR pursuits, it was only natural that questions would begin to be raised about whether CSR was making economic sense.
Obviously, corporate boards, CEOs, CFOs, and upper echelon business executives care. They are the guardians of companies’ financial well-being and, ultimately, must bear responsibility for the impact of CSR on the bottom line. At multiple levels, executives need to justify that CSR is consistent with the firm’s strategies and that it is financially sustainable. [a]
However, other groups care as well. Shareholders are acutely concerned with financial performance and sensitive to possible threats to management’s priorities. Social activists care because it is in their long-term best interests if companies can sustain the types of social initiatives that they are advocating. Governmental bodies care because they desire to see whether companies can deliver social and environmental benefits more cost effectively than they can through regulatory approaches. [b] Consumers care as well, as they want to pass on a better world to their children, and many want their purchasing to reflect their values.
[a] K. O’Sullivan, “Virtue rewarded: companies are suddenly discovering the profit potential of social responsibility.” CFO , October 2006, pp. 47–52.
[b] Simon Zadek. Doing Good and Doing Well: Making the Business Case for Corporate Citizenship . New York: The Conference Board Research Report, 2000, 1282-00-RR.
The socially responsible investment movement Establishing a positive relationship between corporate social performance (CSP) and corporate financial performance (CFP) has been a long-standing pursuit of researchers. This endeavor has been described as a “30-year quest for an empirical relationship between a corporation’s social initiatives and its financial performance.”  One comprehensive review and assessment of studies exploring the CSP-CFP relationship concludes that there is a positive relationship between CSP and CFP. 
In response to this empirical evidence, in the last decade the investment community, in particular, has witnessed the growth of a cadre of socially responsible investment funds (SRI), whose dedicated investment strategy is focused on businesses with a solid track record of CSR-oriented initiatives. Today, the debate on the business case for CSR is clearly influenced by these new market trends: to raise capital, these players promote the belief of a strong correlation between social and financial performance. 
As the SRI movement becomes more influential, CSR theories are shifting away from an orientation on ethics (or altruistic rationale) and embracing a performance-driven orientation. In addition, analysis of the value generated by CSR has moved from the macro to the organizational level, where the effects of CSR on firm financial performance are directly experienced. 
The CSR of the 1960s and 1970s was motivated by social considerations, not economic ones. “While there was substantial peer pressure among corporations to become more philanthropic, no one claimed that such firms were likely to be more profitable than their less generous competitors.” In contrast, the essence of the new world of CSR is “doing good to do well.” 
CSR is evolving into a core business function, central to the firm’s overall strategy and vital to its success.  Specifically, CSR addresses the question: “can companies perform better financially by addressing both their core business operations as well as their responsibilities to the broader society?” 
One Business Case Just Won’t Do
There is no single CSR business case—no single rationalization for how CSR improves the bottom line. Over the years, researchers have developed many arguments. In general, these arguments can be grouped based on approach, topics addressed, and underlying assumptions about how value is created and defined. According to this categorization, CSR is a viable business choice as it is a tool to:
- implement cost and risk reductions;
- gain competitive advantage;
- develop corporate reputation and legitimacy; and
- seek win-win outcomes through synergistic value creation. 
Other widely accepted approaches substantiating the business case include focusing on the empirical research linking CSR with corporate social performance (CSP) and identifying values brought to different stakeholder groups that directly or indirectly benefit the company’s bottom lines.
Broad versus narrow views Some researchers have examined the integration of CSR considerations in the day-to-day business agenda of organizations. The “mainstreaming” of CSR follows from one of three rationales:
- the social values-led model, in which organizations adopt CSR initiatives regarding specific issues for non-economic reasons;
- the business-case model, in which CSR initiatives are primarily assessed in an economic manner and pursued only when there is a clear link to firm financial performance  ; and
- the syncretic stewardship model, which combines the social values-led and the business-case models.
The business case model and the syncretic models may be seen as two perspectives of the business case for CSR: one narrow and one broad. The business case model represents the narrow view: CSR is only recognized when there is a clear link to firm financial performance. The syncretic model is broad because it recognizes both direct and indirect relationships between CSR and firm financial performance. The advantage of the broad view is that it enables the firm to identify and exploit opportunities beyond the financial, opportunities that the narrow view would not be able to recognize or justify.
Another advantage of the broad view of the business case, which is illustrated by the syncretic model, is its recognition of the interdependence between business and society. 
The failure to recognize such interdependence in favor of pitting business against society leads to reducing the productivity of CSR initiatives. “The prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society.”  The adoption of CSR practices, their integration with firm strategy, and their mainstreaming in the day-to-day business agenda should not be done in a generic manner. Rather, they should be pursued “in the way most appropriate to each firm’s strategy.” 
In support of the business case for CSR, the next sections of the report discuss examples of the effect of CSR on firm performance. The discussion is organized according to the framework referenced earlier, which identifies four categories of benefits that firms may attain from engaging in CSR activities. 
Reducing Costs and Risks
Cost and risk reduction justifications contend that engaging in certain CSR activities will reduce the firm’s inefficient capital expenditures and exposure to risks. “[T]he primary view is that the demands of stakeholders present potential threats to the viability of the organization, and that corporate economic interests are served by mitigating the threats through a threshold level of social or environmental performance.” 
Equal employment opportunity policies and practices CSR activities in the form of equal employment opportunity (EEO) policies and practices enhance long-term shareholder value by reducing costs and risks. The argument is that explicit EEO statements are necessary to illustrate an inclusive policy that reduces employee turnover through improving morale.  This argument is consistent with those who observe that “[l]ack of diversity may cause higher turnover and absenteeism from disgruntled employees.” 
Energy-saving and other environmentally sound production practices Cost and risk reduction may also be achieved through CSR activities directed at the natural environment. Empirical research shows that being environmentally proactive results in cost and risk reduction. Specifically, data shows hat “being proactive on environmental issues can lower the costs of complying with present and future environmental regulations … [and] … enhance firm efficiencies and drive down operating costs.” 
Community relations management Finally, CSR activities directed at managing community relations may also result in cost and risk reductions.  For example, building positive community relationships may contribute to the firm’s attaining tax advantages offered by city and county governments to further local investments. In addition, positive community relationships decrease the number of regulations imposed on the firm because the firm is perceived as a sanctioned member of society.
Cost and risk reduction arguments for CSR have been gaining wide acceptance among managers and executives. In a survey of business executives by PricewaterhouseCoopers, 73 percent of the respondents indicated that “cost savings” was one of the top three reasons companies are becoming more socially responsible. 
Gaining Competitive Advantage
As used in this section of the report, the term “competitive advantage” is best understood in the context of a differentiation strategy; in other words, the focus is on how firms may use CSR practices to set themselves apart from their competitors. The previous section, which focused on cost and risk reduction, illustrated how CSR practices may be thought of in terms of building a competitive advantage through a cost management strategy. “Competitive advantages” was cited as one of the top two justifications for CSR in a survey of business executives reported in a Fortune survey.  In this context, stakeholder demands are seen as opportunities rather than constraints. Firms strategically manage their resources to meet these demands and exploit the opportunities associated with them for the benefit of the firm.  This approach to CSR requires firms to integrate their social responsibility initiatives with their broader business strategies.
Reducing costs and risks • Equal employment opportunity policies and practices • Energy-saving and other environmentally sound production practices • Community relations management
Gaining competitive advantage • EEO policies • Customer relations program • Corporate philanthropy
Developing reputation and legitimacy • Corporate philanthropy • Corporate disclosure and transparency practices
Seeking win-win outcomes through synergistic value creation • Charitable giving to education • Stakeholder engagement
EEO policies Companies that build their competitive advantage through unique CSR strategies may have a superior advantage, as the uniqueness of their CSR strategies may serve as a basis for setting the firm apart from its competitors.  For example, an explicit statement of EEO policies would have additional benefits to the cost and risk reduction discussed earlier in this report. Such policies would provide the firm with a competitive advantage because “[c]ompanies without inclusive policies may be at a competitive disadvantage in recruiting and retaining employees from the widest talent pool.” 
Customer and investor relations programs CSR initiatives can contribute to strengthening a firm’s competitive advantage, its brand loyalty, and its consumer patronage. CSR initiatives also have a positive impact on attracting investment. Many institutional investors “avoid companies or industries that violate their organizational mission, values, or principles… [They also] seek companies with good records on employee relations, environmental stewardship, community involvement, and corporate governance.” 
Corporate philanthropy Companies may align their philanthropic activities with their capabilities and core competencies. “In so doing, they avoid distractions from the core business, enhance the efficiency of their charitable activities and assure unique value creation for the beneficiaries.”  For example, McKinsey & Co. offers free consulting services to nonprofit organizations in social, cultural, and educational fields. Beneficiaries include public art galleries, colleges, and charitable institutions.  Home Depot Inc. provided rebuilding knowhow to the communities victimized by Hurricane Katrina. Strategic philanthropy helps companies gain a competitive advantage and in turn boosts its bottom line. 
CSR initiatives enhance a firm’s competitive advantage to the extent that they influence the decisions of the firm’s stakeholders in its favor. Stakeholders may prefer a firm over its competitors specifically due to the firm’s engagement in such CSR initiatives.
Developing Reputation and Legitimacy
Companies may also justify their CSR initiatives on the basis of creating, defending, and sustaining their legitimacy and strong reputations. A business is perceived as legitimate when its activities are congruent with the goals and values of the society in which the business operates. In other words, a business is perceived as legitimate when it fulfills its social responsibilities. 
As firms demonstrate their ability to fit in with the communities and cultures in which they operate, they are able to build mutually beneficial relationships with stakeholders. Firms “focus on value creation by leveraging gains in reputation and legitimacy made through aligning stakeholder interests.”  Strong reputation and legitimacy sanction the firm to operate in society. CSR activities enhance the ability of a firm to be seen as legitimate in the eyes of consumers, investors, and employees. Time and again, consumers, employees, and investors have shown a distinct preference for companies that take their social responsibilities seriously. A Center for Corporate Citizenship study found that 66 percent of executives thought their social responsibility strategies resulted in improving corporate reputation and saw this as a business benefit. 
Corporate philanthropy Corporate philanthropy may be a tool of legitimization. Firms that have negative social performance in the areas of environmental issues and product safety use charitable contributions as a means for building their legitimacy. 
Corporate disclosure and transparency practices Corporations have also enhanced their legitimacy and reputation through the disclosure of information regarding their performance on different social and environmental issues, sometimes referred to as sustainability reporting. Corporate social reporting refers to stand-alone reports that provide information regarding a company’s economic, environmental, and social performance. The practice of corporate social reporting has been encouraged by the launch of the Global Reporting Initiative (GRI) in 1997-1998 and the introduction of the United Nations Global Compact in 1999. Through social reporting, firms can document that their operations are consistent with social norms and expectations, and, therefore, are perceived as legitimate.
Seeking Win-Win Outcomes through Synergistic Value Creation
Synergistic value creation arguments focus on exploiting opportunities that reconcile differing stakeholder demands. Firms do this by “connecting stakeholder interests, and creating pluralistic definitions of value for multiple stakeholders simultaneously.”  In other words, with a cause big enough, they can unite many potential interest groups.
Charitable giving to education When companies get the “where” and the “how” right, philanthropic activities and competitive advantage become mutually reinforcing and create a virtuous circle. Corporate philanthropy may be used to influence the competitive context of an organization, which allows the organization to improve its competitiveness and at the same time fulfill the needs of some of its stakeholders. For example, in the long run, charitable giving to education improves the quality of human resources available to the firm. Similarly, charitable contributions to community causes eventually result in the creation and preservation of a higher quality of life, which may sustain “sophisticated and demanding local customers.” 
The notion of creating win-win outcomes through CSR activities has been raised before. Management expert Peter Drucker argues that “the proper ‘social responsibility’ of business is to … turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.”  It has been argued that, “it will not be too long before we can begin to assert that the business of business is the creation of sustainable value— economic, social and ecological.” 
An example: the win-win perspective adopted by the life sciences firm Novo Group allowed it to pursue its business “[which] is deeply involved in genetic modification and yet maintains highly interactive and constructive relationships with stakeholders and publishes a highly rated environmental and social report each year.” 
Stakeholder engagement The win-win perspective on CSR practices aims to satisfy stakeholders’ demands while allowing the firm to pursue financial success. By engaging its stakeholders and satisfying their demands, the firm finds opportunities for profit with the consent and support of its stakeholder environment.
The business case for corporate social responsibility can be made. While it is valuable for a company to engage in CSR for altruistic and ethical justifications, the highly competitive business world in which we live requires that, in allocating resources to socially responsible initiatives, firms continue to consider their own business needs.
In the last decade, in particular, empirical research has brought evidence of the measurable payoff of CSR initiatives on firms as well as their stakeholders. Firms have a variety of reasons for being CSR-attentive. But beyond the many bottom-line benefits outlined here, businesses that adopt CSR practices also benefit our society at large.
 See Edward Freeman, Strategic Management: a Stakeholder Approach , 1984, which traces the roots of CSR to the 1960s and 1970s, when many multinationals were formed. (go back)
 J. D. Margolis and Walsh, J.P. “Misery loves companies: social initiatives by business.” Administrative Science Quarterly , 48, 2003, pp. 268–305. (go back)
 J. F. Mahon and Griffin, J .J. “Painting a portrait: a reply.” Business and Society , 38, 1999, 126–133. (go back)
 See, for an overview, Stephen Gates, Jon Lukomnik, and David Pitt- Watson, The New Capitalists: How Citizen Investors Are Reshaping The Business Agenda , Harvard Business School Press, 2006. (go back)
 M.P. Lee, “A review of the theories of corporate social responsibility: its evolutionary path and the road ahead”. International Journal of Management Reviews , 10, 2008, 53–73. (go back)
 D.J. Vogel, “Is there a market for virtue? The business case for corporate social responsibility.” California Management Review , 47, 2005, pp. 19–45. (go back)
 Ibid. (go back)
 Elizabeth Kurucz; Colbert, Barry; and Wheeler, David “The Business Case for Corporate Social Responsibility.” Chapter 4 in Crane, A.; McWilliams, A.; Matten, D.; Moon, J. and Siegel, D. The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press, 2008, 83-112 (go back)
 Kurucz, Colbert, and Wheeler , 85-92. (go back)
 Berger,I.E., Cunningham, P. and Drumwright, M.E. “Mainstreaming corporate and social responsibility: developing markets for virtue,” California Management Review , 49, 2007, 132-157. (go back)
 Ibid. (go back)
 M.E. Porter and Kramer, M.R. “Strategy & society: the link between competitive advantage and corporate social responsibility.” Harvard Business Review , 84, 2006,pp. 78–92. (go back)
 Ibid. (go back)
 Kurucz, Colbert, and Wheeler, 85-92. (go back)
 Ibid., 88. (go back)
 T. Smith, “Institutional and social investors find common ground. Journal of Investing , 14, 2005, 57–65. (go back)
 S. L. Berman, Wicks, A.C., Kotha, S. and Jones, T.M. “Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance.” Academy of Management Journal , 42, 1999, 490. (go back)
 Ibid. (go back)
 Ibid. (go back)
 Top 10 Reasons, PricewaterhouseCoopers 2002 Sustainability Survey Report, reported in “Corporate America’s Social Conscience,” Fortune , May 26, 2003, 58. (go back)
 Top 10 Reasons . (go back)
 Kurucz, Colbert, and Wheeler (go back)
 N. Smith, 2003, 67. (go back)
 T. Smith, 2005, 60. (go back)
 Ibid., 64. (go back)
 Heike Bruch and Walter, Frank (2005). “The Keys to Rethinking Corporate Philanthropy.” MIT Sloan Management Review , 47(1): 48-56 (go back)
 Ibid., 50. (go back)
 Bruce Seifert, Morris, Sara A.; and Bartkus, Barbara R. (2003). “Comparing Big Givers and Small Givers: Financial Correlates of Corporate Philanthropy.” Journal of Business Ethics , 45(3): 195-211. (go back)
 Archie B. Carroll and Ann K. Buchholtz, Business and Society: Ethics, Sustainability and Stakeholder Management , 8th Edition, Mason, OH: South-Western Cengage Learning, 2012, 305. (go back)
 Kurucz, Colbert, and Wheeler, 90. (go back)
 “Managing Corporate Citizenship as a Business Strategy,” Boston: Center for Corporate Citizenship, 2010. (go back)
 Jennifer C. Chen, Dennis M.; & Roberts, Robin. “Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?” Journal of Business Ethics , 2008, 131-144. (go back)
 Kurucz, Colbert, and Wheeler , 91. (go back)
 Porter and Kramer, 60-65. (go back)
 Peter F. Drucker, “The New Meaning of Corporate Social Responsibility.” California Management Review , 1984, 26: 53-63 (go back)
 C. Wheeler, B. Colbert, and R. E. Freeman. “Focusing on Value: Reconciling Corporate Social Responsibility, Sustainability and a Stakeholder Approach in a Network World.” Journal of General Management , (28)3, 2003, 1-28. (go back)
 Ibid. (go back)
Nice blog. CSR has become something very important to all the corporate houses today. However, with the rising growth of CSR activities. It is very important to have an effective software that helps to keep a track of the entire exercise.
Interesting article! Perhaps nice to give Mr. Stephen ‘Gates’ his real name back? After all “The New Capitalists: How Citizen Investors Are Reshaping The Business Agenda” was written by Stephen DAVIS. I think he would like the recognition ;)
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4 The Business Case for Corporate Social Responsibility
Elizabeth C. Kurucz (Ph.D., York University) is Assistant Professor of Organizational Behaviour and Sustainable Commerce in the Department of Business, College of Management and Economics at the University of Guelph. Her research in Organizational Behaviour spans business, government, and civil society, and is focused on how organizational mindsets facilitate or inhibit progress toward more sustainable practice.
Barry A. Colbert (Ph.D., York University) is an Assistant Professor of Policy at the School of Business and Economics at Wilfred Laurier University in Canada. His work has been published in Academy of Management Review, the Journal of General Management, and Human Resource Planning. His research is centered on the ways and means by which organizations align a vision for sustainability, business strategy, and the strategic development of human capital.
David Wheeler is Dean of Management, Dalhousie University, Nova Scotia, Canada. He holds a Ph.D. in Applied Microbiology from the University of Surrey (UK). Dr Wheeler's research interests focus on the role of the private sector in international development, corporate strategy, governance and sustainability, and organizational change and sustainability. He was the principal author of The Stakeholder Corporation (Pitman), and has published more than 70 articles in the Science, Medicine, and Management literatures. Dr. Wheeler is currently Co‐chair of the United Nations Development Program Project on case writing in private sector development. He is Chair of the Foundation for Sustainable Enterprise and Development and a board member of Zero Footprint.
- Published: 02 September 2009
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The purpose of this article is to provide a general summary of the key value propositions evident in the research on the business case for corporate social responsibility (CSR), described as four general ‘types’ of the business case, or four modes of value creation. It then presents a critique of these approaches (including identifying some problems inherent in the construct of CSR itself) and offers some principles for constructing a ‘better’ business case. Its intent is not to conduct a thorough review of studies analyzing the relationship between CSR and financial performance, as that has been well done elsewhere. Rather it seeks to unearth assumptions underlying dominant approaches in an effort to build a more robust business case for CSR that can move beyond existing limitations.
The old thinking was that if you make money you can do this positive social and environmental stuff—but I think the true philosophy of sustainability is the interdependence. It's not about charity; it's about the fact that if you do the right things in the community, the community will do the right things for you. If you do the right things for the environment, you'll have a stronger business so that you can make more money. It's not about sort of a condescending view… I don't know if that's subtle or if people don't get it, but it's very important. It's about interdependence rather than balance. It's about mutual dependence or interdependence, rather than charity. It's fundamental. (Manufacturing Executive, 2005).
In business practitioner terms, a ‘business case’ is a pitch for investment in a project or initiative that promises to yield a suitably significant return to justify the expenditure. In what has become known as the ‘business case for Corporate Social Responsibility (CSR)’ the pitch is that a company can ‘do well by doing good’: that is, can perform better financially by attending not only to its core business operations, but also to its responsibilities toward creating a better society. A long tradition of scholars have examined this proposition, both theoretically ( Carroll, 1979 ; Swanson, 1995 , 1999 ; Wood, 1991 ), and empirically ( Cochran and Wood, 1984 ; Graves and Waddock, 1994 ; Mattingly and Berman, 2006 ; Russo and Fouts, 1997 ), primarily with a focus on conceptualizing, specifying, and testing some relationship between corporate social performance (CSP) and corporate financial performance (CFP). The results are decidedly mixed: a firm that dedicates resources to fulfilling what are perceived to be its social responsibilities will financially perform either better, worse, or the same as it might have done otherwise, depending on which studies we line up and consult.
In a meta‐analysis of CSP–CFP studies correcting for sampling error and measurement error, Orlitzky et al . (2003) found support for a generally positive relationship between CSP and CSF across industries and study contexts, and Preston and O'Bannon (1997) found evidence that positive financial performance either lagged or occurred synergistically with positive social performance. At the level of the individual firm, however, the question persists for both academics and practicing managers: is there a generalizable ‘business case’ for CSR, and if so, what are its dimensions?
The purpose of this chapter is to provide a general summary of the key value propositions evident in the research on the business case for CSR, described as four general ‘types’ of the business case, or four modes of value creation. We will then present a critique of these approaches (including identifying some problems inherent in the construct of CSR itself) and offer some principles for constructing a ‘better’ business case. Our intent is not to conduct a thorough review of studies analysing the relationship between CSR and financial performance, as that has been well done elsewhere ( Griffin and Mohon, 1997 ; Orlitzky et al ., 2003 ; Vogel, 2005 ). Rather we seek to unearth assumptions underlying dominant approaches in an effort to build a more robust business case for CSR that can move beyond existing limitations.
We take the view that managing a business enterprise is an increasingly complex task in an era of globalized trade and competition, exponentially faster information flow, highly fluid capital markets, and greater interconnectedness among civil society groups. Factors bearing upon the successful operation of a business are multiple, often non‐linear and stochastic (and therefore largely unpredictable), and inextricably entwined with the needs of a global society—as described by the executive business practitioner in the opening quote from recent research. If ever the separation of business concerns from those of society generally was real and justified—and we concur with those who contend that it is, and has always been, a false distinction—such a separation is now not only conceptually invalid, but is pragmatically untenable. Principles for constructing a better ‘business case’ for CSR must reflect the changing conditions for business at a global level.
This chapter is structured as follows: first we will draw on existing reviews and models to construct an overview of four general types of business case for CSR, where each type rests on a broad value proposition for corporate social responsiveness and performance; the four are: cost and risk reduction , competitive advantage , reputation and legitimacy , and synergistic value creation , focused on creating value on multiple fronts simultaneously. Here we attempt to organize much of the literature under these four value creation categories. Next we outline some underlying characteristics and basic assumptions of each general type of CSR business case. Third, we consider key critiques of the business case as highlighted in the broader CSR literature. Finally, we offer ideas toward addressing these limitations, toward building more compelling business cases for contemporary organizations operating in a complex global environment.
Four General Types of the Business Case for CSR
While there have been numerous reviews of the business case for CSR ( Haigh and Jones, 2006 ; Margolis and Walsh, 2001 ; Salzmann et al ., 2005 ; Smith, 2003 ; Vogel, 2005 ), most are focused on organizing and evaluating the evidence for establishing a link between corporate social responsibility and financial performance ( Griffin and Mohon, 1997 ; Orlitzky et al ., 2003 , Roman et al ., 1999 ). Over 120 studies have examined this link over the past 30 years with mixed results (Margolis and Walsh, 2003) , which has left some scholars in the field of CSR to question whether there is really any clear market motivation for firms to engage in socially responsible behaviour (Vogel, 2005) . It would appear then that in the real world of strategic management a solid business case cannot be built by depending solely on locating an irrefutably established causal connection between CSP and financial performance.
Given these diverse reviews, this chapter will take a different approach. Although this mixed evidence might suggest that there is no a priori reason to develop a business case for CSR, there are growing calls for business to adopt a wider range of social and environmental responsibilities—from business associations such as the World Business Council for Sustainable Development and Business for Social Responsibility (Smith, 2003) and from governments and business leaders (Wheeler and Grayson, 2001) . As the economic, political, and social power of business has grown relative to other societal institutions (governments, organized religion, for example), some argue that corporate social responsibility has expanded to the provision of the kind of services that used to be offered by governments and community organizations ( Perrow, 2002 ; Solomon, 1997 ), including the function of guarding and enabling citizens' rights ( Crane et al ., 2004 ; Matten et al ., 2003 ).
So here we have an apparent paradox: critics of business—and global business leaders themselves—are calling for an increased role for business in social and environmental affairs, yet there is mixed evidence of a positive ‘business case’ for CSR. Perhaps that is because most business cases seek justification on purely economic grounds. We support those who have argued that some kind of business case must be made in order to call attention and garner support from the business sector ( Joyner and Payne, 2002 ; Schmidt Albinger and Freeman, 2000 ), but we suggest that the case to be made is qualitatively different from the one that currently dominates the literature.
A necessary step towards advancing a robust business case for CSR is a close exploration of the fundamental underlying assumptions of dominant approaches, so that we can move beyond the stalemate between economic or ethical models of CSR ( Driver, 2006 ; Matten et al ., 2003 ), and build a more ‘nuanced’ business case for virtue (Vogel, 2005) . While there is no universal definition of CSR ( Carroll, 1999 ; Driver, 2006 ; Garriga and Melé, 2004 ; Smith, 2003 ; Van Marrewijk, 2003 ) this in itself is not problematic; like CSR, ‘sustainability’ has often been referred to as a ‘contested concept’ (Jacobs, 1999) and in this field of alternate meanings lies opportunity for forward‐thinking businesses that adopt this frame ( Colbert et al ., forthcoming 2008 ; Hart, 2005 ). We suggest that what is needed is a set of questions for unearthing the underlying assumptions of the various approaches in order to build a better (more robust, multidimensional, more compelling) business case for CSR, in order to address the growing need for business to become engaged in creating value on multiple fronts. In so doing we add to the call for the development of more integrative models of CSR ( Driver, 2006 ; Swanson, 1995 , 1999 ; Freeman, 2000 ), and make advances in that direction by offering a set of criteria that will begin to enable a move beyond economic and ethical conceptions of the business case through a focus on modes of value creation and the various dimensions that underlie this construct.
This section presents findings from our review of the literature focusing on the business case for CSR, which we have organized as four general types of business cases, each embodying a proposition for value creation: cost and risk reduction , profit maximization and competitive advantage , reputation and legitimacy , and synergistic value creation . As with other classification schemes, there may be disagreement on the placement of a topic under one category or another, but we hold with Bowie and Dunfee (2002) who emphasized the pragmatic usefulness of offering a classification scheme over an ad hoc approach. We do not present these as mutually exclusive categories—a firm may be involved in all four at once through a variety of policies and initiatives—but in our review of the business case for CSR literature, we identified these as predominant themes emphasized across the field of theories and studies.
In the following sections we describe these four general types of CSR business cases in terms of the focus of the approach , the topics of empirical studies and theory papers that characterize the type, as well as by the underlying assumptions about how value is created and defined in each domain.
Cost and Risk Reduction: Optimization Subject to Constraints
The focus of this approach is that the firm chooses to engage, or not, in CSR related activities in order to reduce costs and risks to the firm. A number of areas of inquiry typify this general approach to building a business case for CSR, including: the trade‐off hypothesis , the available funds hypothesis or slack resources theory , and enlightened value maximization . Each of these hypotheses can be seen as embodying a view of value creation as some form of trading interests among social, environmental, and economic concerns.
The trade‐off hypothesis, which most explicitly displays this view of value creation, was polemically defined by Milton Friedman (1962, 1970), who made a clear distinction between what he considered to be the real obligations of corporate executives: to work solely in the interests of the firm's owners, customers, and employees, and to eschew any urge toward diverting funds to improving the general social good, which he deemed ‘taxation without representation’—grounds for another revolution. His succinct libertarian view set a firm dichotomy in the debate between fulfilling fiduciary duties and social responsibility, and established a benchmark statement on the negative trade‐off view of CSR and costs to the firm: by increasing social performance for reasons of managerial whimsy, firms incur unnecessary costs and reduce their profitability—a view supported in a few subsequent studies in CSR ( Kedia and Kuntz, 1981 ; Lerner and Fryxell, 1988 ). Some studies under this approach have identified an inverted U relationship which suggests that there is an optimal level of environmental and social performance, beyond which the corporation is incurring unnecessary costs and reductions in profitability ( Salzmann et al ., 2005 ; Lankoski, 2000 ). The available funds hypothesis or slack resources theory (Waddock and Graves, 1997 a ) , also assumes a trade‐off view of CSR and financial performance by suggesting that when organizations are enjoying superior financial performance, or have slack resources, they are able to dedicate additional resources to CSR activities. The implication in this approach is that firms perceive CSR as an additional cost and thus can only afford to pursue these activities when they are not in a situation where they need to minimize costs. In terms of Carroll's characterization (1979 , 1991 ) of four categories of responsibilities (economic, legal, ethical, and discretionary or philanthropic), the slack resources theory addresses primarily the discretionary responsibilities.
A focus on enlightened value maximization (Jensen, 2002) implies that long‐term corporate value maximization occurs through the appropriate management of trade‐offs between stakeholders. Managerial decision trade‐offs are driven by the ‘agency solution’, that is, the alignment of managerial interests with those of company owners through executive compensation weighted with stock options. High incentive plans can lead to the managerial opportunism hypothesis ( Aklhafaji, 1989 ; Posner and Schmidt, 1992 ; Preston and O'Bannon, 1997 ), which identifies the potential for executives to reduce social and environmental spending, even when funds are available, in order to maximize personal compensation linked to short‐term financial performance. Instrumental stakeholder management ( Berman et al ., 1999 ; Donaldson and Preston, 1995 ; Quinn and Jones, 1995 ) describes how the firm is affected by stakeholder relations with a view to risk and cost reduction through trading off stakeholder concerns in the firm's decision‐making process. Firms view stakeholders as part of the environment to be managed, rather than as driving corporate strategic decisions (Berman et al ., 1999) , and attention to stakeholder concerns helps to reduce corporate risk by avoiding decisions that will push stakeholders to oppose the organization's objectives (Bowie and Dunfee, 2002) . Establishing trusting relationships with key stakeholders is seen from this perspective as having the potential to significantly lower costs of the firm ( Barney and Hansen, 1994 ; Hill, 1995 ; Jones, 1995 ; Wicks et al ., 1999 ; Godfrey, 2005 ). A focus on developing CSR standards and auditing CSR practices is a focus of the risk management approach aimed at building confidence among stakeholders ( Story and Price, 2006 ; Kok et al ., 2001 ); research that presents a ‘trading’ managerial view positions CSR as separate from and secondary to economic performance (Adams, 2002) and strategic management (Dick‐Forde, 2005) . How organizations respond to expressions of morality in markets is influenced by a desire to avoid consumer boycotts, liability suits, increased labour costs, and short‐term losses in market capitalization (Bowie and Dunfee, 2002) .
Under a cost and risk reduction perspective of the CSR business case, the primary view is that the demands of stakeholders present potential threats to the viability of the organization, and that corporate economic interests are served by mitigating those threats through a threshold level of social or environmental performance.
Competitive Advantage: Adapting and Leveraging Opportunities
In this general case, CSR initiatives are conceived strategically as conferring competitive advantage on the firm over industry rivals. A number of topics relate to this area of focus, including: the supply and demand theory of the firm, base of the pyramid approaches, a natural resource‐based view of the firm, and including stakeholders for competitive advantage . What is common to these perspectives is the characterization of value creation occurring through the firm adapting to its external context in order to optimize the organization's competitive advantage in its respective industry.
The supply and demand theory of corporate CSR ( McWilliams and Siegel, 2001 ; Anderson and Frankle, 1980 ; Aupperle et al ., 1985 ; Freedman and Jaggi, 1982 ) takes an adaptation perspective toward the external environment by suggesting that firms will supply only the level of environmental and social performance that is demanded of them, with a view to profit maximization. Base of the pyramid approaches ( Hart and Christensen, 2002 ; Prahalad, 2004 ; Prahalad and Hammond, 2002 ; Prahalad and Hart, 2002 ) examine how multinational firms might adapt to global drivers for change, such as population growth and poverty, in order to capitalize on the ‘fortune at the bottom of the pyramid’ (Prahalad and Hart, 2002) . Similarly, adaptations of the traditional resource‐based view of strategic management (Barney, 1991) are the ‘natural resource based view’ (Hart, 1995) , natural capitalism (Lovins et al ., 1999) and the sustainable value framework ( Hart, 1997 ; Hart and Milstein, 1999 , 2003 ) that challenge managers to adapt to global drivers of change using an appropriate set of ‘sustainability lenses’ that allow a firm to segment shareholder value creation strategies. Also in line with the resource‐based view, social and ethical resources and capabilities ( Harrison and St John, 1996 ; Hillman and Keim, 2001 ; Litz, 1996 ; Petrick and Quinn, 2001 ) are conceived in this approach as internal organizational resources that build competitive advantage by enabling a strategic adaptation to the external environment. Approaches advocating stakeholder inclusion in strategy‐making ( Hart and Sharma, 2004 ; Mitchell et al ., 1997 ; Ogden and Watson, 1999 ; Wheeler and Sillanpää, 1998 ) also take an adaptation perspective toward creation of investor value. Competitive strategic positioning is the focus of Porter and Van der Linde's (1995) view of CSR as a competitive driver to be resourced by the firm. Social investments in a competitive context ( Porter and Kramer, 1999 , 2002 ) or strategic philanthropy ( Bruch and Walter, 2005 ; Smith, 1994 ) also fall under this approach where firms elect to engage in philanthropic efforts that are supported by the core competencies of their organization, adapting to stakeholder expectations in order to generate sustainable performance with regard to stakeholder needs and their own competitive advantage.
In sum, adaptive approaches to building a business case for CSR focus on building firm competitive advantage through strategically orienting and directing resources toward the perceived demands of stakeholders. Stakeholder demands are viewed less as constraints on the organization, and more as opportunities to be leveraged for the benefit of the firm.
Reputation and Legitimacy: Building a Responsible Brand
The business case built in this domain is focused on exploiting CSR activities in order to build value through gains in firm reputation and legitimacy. Frames of inquiry associated with this view include: licence to operate , social impact hypothesis , cause‐related marketing , and socially responsible investing . These approaches are characterized by a focus on value creation by leveraging gains in reputation and legitimacy made through aligning stakeholder interests.
Licence to operate concepts can be linked to Davis's (1973) ‘iron law of responsibility’ with the idea that a business organization is a social entity that must exercise responsible use of its power, or risk having it revoked, and thereby lose control over its own decision making and external interactions (Sethi, 1979) . Social impact hypothesis ( Cornell and Shapiro, 1987 ; Pava and Krausz, 1996 ; Preston and O'Bannon, 1997 ) focuses on the importance of alignment by suggesting that failure to meet stakeholder needs has a negative impact on firm reputation and thus suggests that the costs of CSR activities are much less than the potential benefits. Other studies focus on the positive link between a firm's corporate social performance and reputation ( Fombrun and Shanley, 1990 ; Turban and Greening, 1997 ). Social cause‐related marketing ( Drumwright, 1996 ; Varadarajan and Menon, 1988 ; Murray and Montanari, 1986 ) highlights the alignment of stakeholder and firm interests by linking corporate philanthropy and marketing, showcasing socially and environmentally responsible behavior of the firm in order to generate reputational gains. Studies on ethical purchasing behavior and green consumerism ( Crane, 2001 ; Frankel, 1998 ; Peattie, 1998 ), an extension of consumer sovereignty arguments that have been employed to model citizenry behaviour in political markets ( Haigh and Jones, 2006 ; Jones, 1995 ), consider how a strong product brand or reputation acts as a marketing differentiation strategy for firms that can impact financial performance through enhancing reputation ( Smith, 1990 ; Bhattacharya and Sen, 2004 ; Brown and Dacin, 1997 ; Sen and Bhattacharya, 2001 ).
Socially responsible investing ( Barnett and Salomon, 2003 ; Domini, 2001 ; Kinder et al ., 1993 ) and ethical investing (Mackenzie and Lewis, 1999) emphasize an alignment between a potential investor's ethics and expectations of corporate social performance, suggesting a relationship with reputation and market value. Studies on the attractiveness of corporations as prospective employers ( Schmidt Albinger and Freeman, 2000 ; Waddock et al ., 2002 ; Riordan et al ., 1997 ; Turban and Greening, 1997 ; Stigler, 1962 ) emphasize the alignment between a firm's reputation in the area of CSR and its ability to attract talent. Reputation and legitimacy is also the focus of intrinsic stakeholder approaches ( Calton and Lad, 1995 ; Jones, 1995 ) that compare the approach a firm uses to interact with one stakeholder group, and its effects on stakeholder groups' perceptions. Isomorphic pressure for social responsibility is explored for its role in motivating CSR where an organization might gain first mover advantage and reap the rewards of reputational gains with dominant stakeholders (Bansal and Roth, 2000) or within industry‐specific CSR initiatives (King and Lenox, 2000) . The potential performance benefits granted through enhanced legitimation from corporate CSR disclosures ( Gelb and Strawser, 2001 ; King and Lenox, 2001 ) is another area of inquiry in this general type of business case for CSR. Supply chain pressures on firms to seek social or environmental certification in order to support their legitimacy (Cashore, 2002) is another topic area that supports a business case for CSR through concerns with impact on firm reputation.
In summary, these topics and studies, organized under an aligning perspective, focus on building competitive advantage by enhancing the reputation and legitimacy of the organization through firm CSR initiatives.
Synergistic Value Creation: Seeking Win‐Win‐Win Outcomes
The focal point of this approach is in finding win‐win‐win outcomes by seeking out and connecting stakeholder interests, and creating pluralistic definitions of value for multiple stakeholders simultaneously. Topics gathered under this approach to the business case include: positive synergy or ‘ virtuous circle ’, sustainable local enterprise networks , value‐based networks , and societal learning . A focus underlying these approaches is the view that creating connections between stakeholders by relating common interests will open up heretofore unseen opportunities for multi‐point value creation.
Positive synergy or the ‘virtuous’ circle' approach ( Pava and Krausz, 1996 ; Preston and O'Bannon, 1997 ; Stanwick and Stanwick, 1998 ; Waddock and Graves, 1997 b ) highlights positive gains generated through combining slack resources and good management. The sustainable local enterprise networks (Wheeler et al ., 2005) model emerged from examining 50 case studies of successful and self‐reliant sustainable enterprise‐based activities in developing countries, resulting in virtuous cycles of reinvestment in human, social, financial, and ecological capital. The value‐based networks conception (Wheeler et al ., 2003) describes how communities and social networks united by a sense of what is valuable create new opportunities for mutual gain. The concept of the triple bottom line of sustainability (Elkington, 1998) emphasizes synergies that can emerge for organizations, environment, and societies through integrating efforts across these domains.
Societal learning is defined as articulating new paradigms that can alter the perspectives, goals, and behaviours of social systems larger than particular organizations (Brown and Ashman, 1998) . Of the three types of learning—single, double, and triple loop (Argyris and Schon, 1978) —societal learning deals with triple‐loop learning (rethinking the rules of the business and society relationship), although it often is stymied at double‐loop learning (reflection on how to play the current game better) (Waddell, 2002) .
In summary, approaches advocating synergistic value creation are focused on seeking opportunities to unearth, relate, and synthesize the interests of a diverse set of stakeholders, broadly conceived. Because many of these emerging ideas fall outside of traditional business models, they are the least represented in our framework of value creation approaches.
Summary of Section: Four General Types of the Business Case
The business case for CSR is conceived under a wide range of topical and theoretical approaches. We have offered a typology of the chief approaches according to the basic value proposition embodied in each.
There are subtle but distinct differences between some approaches we have categorized under one type of business case or another. For example, one could argue for base of the pyramid (BoP) approaches to be situated under a synergistic value creation instead of competitive advantage view. Our rationale is that BoP advocates typically exhort multinational corporations (MNCs), primarily situated in more developed nations, to enter less developed geographies and find business opportunity by alleviating social problems, but with much of the financial value captured by the MNC. Sustainable local enterprise networks , by comparison, assume a more organic, grassroots, relativistic approach, and work with existing networks. The private sector is one player that can extract value but not necessarily the key player.
Our intent here is to draw some broad second‐level CSR value creation categories in order to examine some of the basic assumptions underpinning the various business case pitches. The next section highlights some general characteristics of each type of business case, along with some basic underlying assumptions.
Underlying Characteristics and Basic Assumptions of the Four Types of CSR Business Case
Each general type of CSR business case we have constructed embodies a number of characteristics and is underpinned by some basic assumptions. Our assessment of these underpinnings is necessarily broad, with the aim of sketching the general contours of each approach—to step back from the trees and describe the shape of the forest of CSR business case research. Characteristics we highlight are: the fundamental proposition for how value is created (and for whom); emphasis regarding a particular role for business ; a preferred level of theorizing on which it is focused; and a dominant logic under which the basic proposition is grounded. Basic assumptions include the underlying ontological stance and epistemological stance of each of these approaches, which we will highlight in order to identify opportunities to bridge traditional debates in CSR. The general shape of each type is outlined in Table 4.1 .
Key Proposition for Value Creation
The four general types of CSR business case we have described differ in their key value propositions based on the approach to dealing with elements in the organizational environment (stakeholder interests, competitive pressures, or other), each of which is succinctly captured under our four active descriptors: trading, adapting, aligning, or relating. Business cases framed as cost and risk reduction focus on trading among what are viewed generally as competing interests; competitive advantage business cases describe payoffs accrued through adapting to the competitive environment; a CSR proposition based on building reputation and legitimacy advocates aligning with political and social norms and expectations; and synergistic value creation approaches are aimed at relating disparate elements in the operating domain, and integrating those elements in novel ways.
Central Actor Role for Business
Across the theories underpinning these four broad propositions for business value creation there are, implied and explicit, a number of ‘actor roles’ for business institutions to play in society. Garriga and Melé (2004) mapped the territory of CSR theory and offered a set of four groups: instrumental theories, in which the organization is seen only as an instrument for wealth creation; political theories, which are concerned with the use of corporate power in the political arena; integrative theories, which focus on the satisfaction of social demands; and ethical theories, which are based on the responsibilities of corporations to society. These groups of theories correspond roughly to Carroll's (1991) categories (a pyramid of economic, legal, ethical, and philanthropic responsibilities) though his morality‐based perspective would fit into the latter of the theoretical groups.
If we consider these groups of general theories and responsibilities in the CSR field at large, and we view ‘business’ (we use this term in the general sense to mean the private business sector, focusing mainly on public corporations) as a value‐creating actor in the world, we can draft various actor roles that business is purported to play in global society. Both the cost and risk reduction and competitive advantage approaches take the explicit view that business is primarily an economic actor —the chief (or in the extreme, only) function of business is to efficiently convert inputs to products and services and to create financial wealth, and CSR activities are admitted as a means to that narrow end. Business cases based on a reputation and legitimacy approach highlight the political actor role for business. This includes and extends the economic role to include a complex mix of political and economic interests and dynamics. The power and position of the corporation in society is the central concern; the organization accepts social duties and rights or participates in some form of social cooperation (Garriga and Melé, 2004) as an expected part of doing business. Synergistic value creation approaches focus on the firm as an integrative social actor , which we define to embrace both the economic and political roles for business, and also extend to improving general social well‐being. This is not a new idea, but one based on the reasonable presumption that economics and politics are human constructs, and therefore integral to the broad societal domain. This conception is consistent with the ‘concentric circles’ depiction of corporate responsibility issued by the Committee for Economic Development (CED), based on the notion that ‘business functions by public consent and its basic purpose is to constructively serve the needs of society’ (1971: 11, cited in Carroll 1999 ). The first circle holds the economic and efficiency function of a corporation, the second contains the responsibility to execute the economic function with sensitivity to context, including changing social values and priorities, and the outer circle holds the responsibility to actively improve the general social environment, including the natural environment. The outer circle contains the inner two, and is not separable. This view is all the more relevant in an increasingly globalizing business environment.
Main Level of Theorizing
The level of theory (Klein et al ., 1994) is the organizational level that the researcher is attempting to depict or describe, and is the level to which the findings are purported to be generalizable. The four general types of CSR business case vary across theoretical levels; that is, each includes and describes interactions and effects at various levels in the business system. Theorizing in the cost and risk reduction view is centered on the organization, with key variables such as CSP and CFP distinctly attached to the firm; competitive advantage approaches necessarily include consideration of the relevant industry dynamics; reputation and legitimacy business cases address elements in the political and cultural context; and synergistic value creation approaches take a wide view of all components of the societal context. Again here, these are not mutually exclusive categories; there is an accumulative expansion of variables under consideration moving left to right.
Assumed Nature of System Interactions
As the level of theory is raised above the organization level there is a corresponding assumption regarding the nature of system interaction effects across the four general types. Cost and risk reduction approaches, often involving linear regression of CSF dependent variables on CSP/CSR independent variables, generally assume linear effects; competitive advantage approaches typically involve mediating or moderating strategic variables, complicating direct linear effects; a reputation and legitimacy view acknowledges non‐linear complex effects in qualitative reputational narratives; and synergistic value creation approaches emphasize the self‐organizing tendency of complex interactive variables. ‘Complex’ in this instance ‘means more than just “complicated”; it describes a system whose component agents operate with some measure of autonomy, as well as in relation to other system components, i.e. independently and interdependently. That interaction gives rise to emergent properties that are irreducible, that exist only in relationship. As Cilliers (1998) has noted, an airliner is merely complicated ; a mayonnaise is complex ’ (Colbert 2004: 349) .
Dominant Logic Frame
The dominant logic frame describes the grounds for logical justification in each of the four general CSR business case types. A key debate in the literature turns on how to justify CSR‐related corporate activity, which we address in the next section on key critiques. In our construction of four general types we deliberately have not separated out a purely ‘moral business case’, as we adopt the assumption that morality and ethics are embedded within constructs of economy and politics: to suggest that these are value‐free realms is absurd, despite the distinctions made in much of the CSR literature. The four general types constructed here are justified on normative economic grounds, normative political grounds, or on grounds of cognitive social integration—that is, of unearthing and connecting notions of value and values in the broad social domain. The cost and risk reduction and the competitive advantage approaches appeal exclusively to economic logic and norms; the reputation and legitimacy cases find grounding in political logic—in the relative power dynamics operating in the prevailing social system, in the service of economic ends; and the synergistic value creation approach is grounded in cognitive social integration.
Relevant Ontological and Epistemological Stance
Economics‐based descriptive research, which includes the cost and risk reduction and competitive advantage business cases, is primarily founded on a realist ontology that sees reality as objective and unequivocal (Wicks and Freeman, 1998) . Both predominantly embody a positivist epistemological stance, which relies ‘on the assumption of an objective world external to the mind that is mirrored by scientific data and theories’ (Gephart, 2004: 456) . A degree of relativism is admitted under a competitive advantage approach through a post‐positivist epistemological stance, which holds that reality can only be known probabilistically; plurality is typically introduced in taking stakeholder constructions into strategy formulation processes.
Reputation and legitimacy approaches are built on an equivocal, constructivist ontology and epistemology. The social construction of reality means that social existence is a human construction, while at the same time human perspectives are shaped by social factors (Berger and Luckmann, 1966) . There are two main streams of social construction: an interactionist approach and a structuralist approach (Pfeffer, 1985) . The interactionist position is one of extreme relativism, with each event knowable only from the perspective of the individual experiencing it, whereas the structuralist sees patterns of meaning shaped by roles and shared paradigms, which both structure and constrain the interpretations that are given to interaction patterns. Reputation and legitimacy are constructs that can be framed from both an interactionist and a structuralist view.
The synergistic value creation view holds an equivocal, or relativist, ontology, but adopts a pragmatic stance that sees intersubjective realities as mediated by language, history, and culture (Wicks and Freeman, 1998) . A pragmatic epistemology rejects the categorical distinctions of positivism, and the absolute relativism of anti‐positivism, and assesses research not on grounds of ‘truth’, however constructed, but on grounds of usefulness (Wicks and Freeman, 1998) —in this case, usefulness applies to the level and range of value creation through corporate CSR activities.
Underlying Characteristics and Assumptions: Summary
The characteristics and assumptions described above and displayed in Table 4.1 help to illustrate some key differences across the four types of CSR business case. Differences across the central role of business , and the level of theorizing point to an opportunity to broaden the scope of business‐case making to explicitly include consideration of value creation at various levels—levels that are cumulatively integrated, or exist as nested systems. The range of the assumed nature of system interactions and variations in the dominant logic taken together suggest there are alternate ways in which a business case can be framed. There are also alternate ways in which one might be received by managers and stakeholders, once we admit a wider variety of sense‐making frames and processes of meaning creation. And finally, the variation in ontological and epistemological stances indicates that the methods by which we attempt to describe and justify a business case for CSR could be broader than they are typically.
General Critiques of the Business Case for CSR
Building a ‘business case’ for CSR implies we are building a coherent justification for a corporation to invest in CSR‐defined initiatives. The central debates and critiques in the CSR literature, as they relate to a business case for CSR, are therefore problems of justification. Three key problems that recur in CSR critiques are: the level of justification (organization and society); the logic of justification (economic, ethical, political, social); and the grounds of justification (positivist, anti‐positivist, and pragmatist).
Level of Justification: Organization and Society
The search for definitive causal connections between CSP and CFP has yielded inconclusive results (Griffin and Mohon, 1997) , and some have argued that the search is pointless, because there logically cannot be a consistently positive relationship between these two constructs: the working assumption of CSP research is that corporate social and financial performance are universally related, and it is an extreme, untenable proposition to assert that any management initiative is always positively correlated with financial results under any conditions (Rowley and Berman, 2000) . While generalizable justification at the level of the single organization might inherently not be possible, meta‐studies have found a positive correlation overall between CSP and CFP indicators ( Orlitzsky et al ., 2003 ; Preston and O'Bannon, 1997 ). This suggests that CSR business case arguments might be more appropriately framed at multiple levels simultaneously: we might see ‘the projects of “self‐creation” and ‘community creation’ as two sides of the same coin, and see in institutions many possibilities for different ways of living together to pursue the joint ends of individual and collective good’ (Freeman and Liedtka, 1991: 96) .
Logic of Justification: Economic, Ethical, Political, Social
The problem with the logic of justification is most often characterized as a schism between economic and ethical justifications for CSR—the implication being that economic evidence is not normative, is value free. This problem is perpetuated due to an inherent defect in the construct of CSR itself: by asserting that corporations must attend to ‘social responsibilities’ in addition to ‘business responsibilities’, we admit that the two are distinct and separable. This distinction is further amplified when we attempt to justify CSR with a ‘business case’, i.e. when we attempt to express the value of socially responsible practices in purely financial terms, which says that financial performance stands as sufficient justification for CSR‐related activity.
Swanson (1995) described several theory‐building problems with ‘economic’ and ‘duty‐aligned’ (ethical, political, social) perspectives of CSP research: incompatible value outcomes, a focus on individual choice, and narrow value orientations. Others have argued that CSR justified on economic models presents a too‐narrow idea of the corporation and of the interests of investors ( Gioia, 2003 ; Stormer, 2003 ), for whom, presumably, a business case for CSR is built.
Burrell and Morgan described a unitary view of organizations as one that tends to stress that the corporation is a cooperative enterprise united in the pursuit of a common goal. A pluralist view stresses the diversity of individual goals and interests—the formal goals of an organization are seen as ‘little more than a legitimizing façade, an umbrella under which a host of individual and group interests are pursued as ends in themselves’ (1979: 202–3). Debate between economic and ethical justifications for CSR is a debate between two fundamental conceptions of what is a corporation : a disconnected, simple entity with unidimensional, stable interests, or an interconnected, complex self with multidimensional, dynamic interests, taking responsibility for a greater common good (Driver, 2006) .
Throughout the CSR literature, economic and ethical justifications are separated, and the latter are called ‘normative’; we rejected that separation in our overview of the underlying characteristics of business case arguments, and used the terms normative economic and normative political to foreground the integration of ethics and values into those paradigms. All management research is normative in the sense that every paradigm rests on some (often unstated, unchallenged) assumptions about what is good and valuable and worth pursuing; CSR researchers hold that firms have real obligations to a broad set of stakeholders, and because this runs counter to the dominant ideology of shareholder primacy, they appeal to ethical arguments to substantiate their preferences (de Bakker et al ., 2005) ; this creates the appearance of a separation between ethics and economics where none exists, as the dominant view is just as ethically laden. This false separation is perpetuated when we attempt to justify positive social behaviour in economic terms, rather than as valuable in itself, and as integral to a healthy capitalist business system.
Grounds of Justification: Positivist, Anti‐positivist, and Pragmatist
A further critique occurs on epistemological grounds of justification for CSR: what has been called the ‘integration dilemma’ (Swanson 1999: 507) , of bringing together empirical (descriptive) and normative (prescriptive) approaches. Empirical inquiry investigates measurement, explanation, and prediction, while normative inquiry focuses on moral evaluation, judgment, and prescription of human action (Trevino and Weaver, 1994) . Positivistic approaches place a sharp distinction between describing and prescribing: in descriptive work, researchers stand as neutral observers, using scientific methods to make contact with ‘reality’, to report to managers ‘in an unbiased way what empirical forces are to be reckoned with in a given context’ (Wicks and Freeman, 1998: 125) . When prescription is undertaken, as it often is in the strategy discipline, it is done so on the grounds of assumed goals such as corporate efficiency and wealth maximization. An anti‐positivist epistemology (including interpretive, constructivist, and morally normative approaches) admits an intersubjective, multi‐vocal plurality to the grounds of justification, but is in danger of collapsing under the weight of the relativist dilemma, where nothing useful can be said to advance organizational practice, lest one view be privileged over another. The pragmatist approach employs the criterion of ‘usefulness’—though not in the utilitarian sense of ‘the greatest good for the greatest possible number’. Rather, useful ‘in the sense of helping people to cope with the world or to create better organizations’ (Wicks and Freeman, 1998: 129) . A pragmatic epistemology admits multi‐vocality, but finds evaluative criteria in higher order humanistic goals.
These three problems: the level , logic , and grounds of justification are critical issues to be addressed in formulating research in the business case for CSR. These problems are at some level irresolvable, and are exacerbated by the construct of CSR itself. Rather than attempt resolution, we will next offer ideas toward building more expansive conceptions of the CSR business case to embrace these apparent paradoxes.
Building a Better Business Case for CSR: Addressing the Critiques and Embracing a Social Actor Role for Business
We suggest that progression toward a more integral approach to CSR, with a focus on modes of value creation , would assist with developing a more robust rationale for why CSR matters to business theorists and practitioners. To set out some recommendations in this regard, it would first be helpful to consider three ‘eras’ of CSR research (Van Marrewijk, 2003) , and how we might envisage different incarnations of the business case for CSR in relation to those eras. We consider how research in CSR might shift in order to enable the development of a ‘postconventional’ view of the business case for corporate social responsibility. Our recommendations will address the ontological (rational to pluralistic to integral), epistemological (reductive to fragmented to integrative), and methodological (positivist to constructivist to pragmatic) transitions that we argue are required for this new ‘era’ of the business case in CSR to be fully realized.
Three Eras in CSR Research and the Business Case for Social Responsibility
Different authors have outlined historical eras in CSR in terms of a sequence of approaches ( Carroll, 1999 ; Freeman, 1984 ; Van Marrewijk, 2003 ). Rather than take this as a succession of eras, where the shareholder approach was replaced by the stakeholder approach and so on, we suggest that these approaches exist simultaneously, one building on the next and necessitating a broader business case be built (this is a matter of shifting emphasis: ‘stakeholder’‐focused management has existed since the beginning of the Industrial Revolution, 1 what is novel is that this view has been named and described, and has moved to the mainstream of management thought and practice). The first era of shareholder primacy is characterized by a view of organizations as primarily accountable to shareholders, evidenced most clearly in the cost and risk reduction approach, and to some degree in the competitive advantage view to building a business case for CSR. The second era of stakeholder management broadens the locus of reference for the firm toward incorporation of, and adaptation to, a variety of stakeholder interests. In the general types of the business case for CSR, competitive advantage and reputation and legitimacy approaches demonstrate thinking in this ‘era’ by extending the role of business beyond that of an economic actor, toward acknowledging a dual role for business: as both economic and political actor. This approach thus builds on the perspective of the previous era, rather than negating it, developing a richer and fuller view of the organization in context. The third era of social integration , or a societal approach, is represented by a move away from thinking about social responsibility toward thinking about societal responsibility (Gioia, 2003) . CSR theory and research that builds the business case for synergistic value creation begins to advance into this era by incorporating a view of business as an economic, political, and social actor (all of which embrace ethics). Each of these eras co‐exists in the social integration approach to CSR, with ‘eras’ representing waves of influence in the dominant approaches, rather than temporally distinct conceptions. In fact, the social integration perspective was embodied in the CED (1971) description of CSR more than 35 years ago, and thus does not represent a modern ‘era’, so much as a worldview toward social systems as holistic and contextually sensitive.
Eras of CSR and Development in Human Systems
In order to explore this more fully, we follow Van Marrewijk (2003) and invoke Ken Wilber's thinking on levels of development in human systems. The four value propositions identified earlier as four general types of the business case for CSR can be conceived of as four modes of value creation , underlain by several dimensions. These dimensions can be mapped across the three eras of general CSR research in order to describe a new form of the business case for CSR, one that holds the promise of advancing the field. In his map of ‘human possibilities’, Wilber (2000) describes the evolution of social systems and related evolution in culture and worldview in terms of preconventional, conventional, and postconventional states, and these can map onto the different eras of CSR. Shareholder primacy typifies the preconventional ‘corporate states’ approach to social systems reflected in a scientific rational worldview. Stakeholder approaches can be seen as the conventional state, organizing society in terms of ‘value communities’ that are embodied within a pluralistic perspective. Finally, the postconventional approach of societal integration portrays a view of social systems as an integral commons, coextensive with an integral worldview—a creative space (physical, cognitive, or virtual) to foster the coming together of humanistic interest and intention.
CSR value holarchy
In this progression, nothing is lost, but there is an increase in integrative capacity that facilitates a move toward holism—the progression is not ‘hierarchical’, but ‘holarchical’. Figure 4.1 depicts a CSR value holarchy. Each stage can be viewed as ‘higher or deeper, meaning more valuable and useful for a wider range of interactions’ (Wilber, 1998: 59) .
While acknowledging that the ‘pluralistic relativism’ of stakeholder management is a positive progression, it must be viewed as a precursor to moving to the ground for integration, or be found irrelevant; without integration, pragmatic action is stymied. Within the stakeholder management era then, the move away from dealing with a few individual stakeholders that are powerful, legitimate, and urgent (Mitchell et al ., 1997) and the increasing trend toward acknowledging a wider range of ‘fringe stakeholders’ (Hart and Sharma, 2004) holds great potential for enhancing contextual sensitivity. However, there is the danger that this new radical pluralism will collapse to fragmentation and challenge any action beyond individual agency. It is necessary to view this as a stage of development toward integralism. For business organizations, integralism occurs when deep and broad social needs are put to the foreground in re‐imagination of business strategies—when strategic planning exercises are driven from an intensive exploration and understanding of real human needs, versus commercially created wants. This move honours that difference but creates a healthy tension between agency and communion , in order to avoid what Wilber calls the ‘pathology’ of fragmentation.
Four modes of value creation in the CSR business case
In our analysis of the business case for CSR, this integral commons is approached in the move from stakeholder management to social integration through a focus on value‐based networks, with modes of value creation forming the business case for corporate social responsibility (see Fig. 4.2 ). We describe the dimensions of these modes of value creation more fully in the following three recommendations for building a better business case for CSR; that is, one that has more integrative capacity, is more holistic and allows for emergence, and thus is more valuable and useful for a wider range of interactions.
Recommendations for Building a Better Case for CSR: Dimensions of Modes of Value Creation
In this section we will discuss three recommendations for building a better business case for CSR: acknowledging complexity, building integrative capacity, and encouraging pragmatism.
Acknowledge Complexity and Allow for Emergence
To overcome the difficulty in conceiving a business case for CSR, it is essential to broaden the locus of reference for business away from an organization‐centric to an organization‐and‐society view. We argue that CSR research needs to move beyond the reductive approach of the rational view, and the fragmented challenges of radical pluralism, to a view of the organization as part of an integral complex network, ‘interdependent and complexly interactive’ (Wilber, 1998: 57) .
Causal effects in complex systems are both linear and non‐linear, and complex living systems pursue multiple goals ( Frederick, 1998 ; Colbert, 2004 ). Frederick (1998) suggests that a paradigm shift in which we move beyond existing stakeholder concepts to a view of social systems that draws on insights from complex natural systems is essential for the field to respond to urgent questions facing business and society. This complexity perspective would focus more on non‐linear emergent outcomes, rather than on more reductive or linear relationships.
Build Integrative Capacity for a more Holistic Approach
Our second recommendation for building a better business case for CSR is to focus on enhancing the integrative capacity of business in order to encourage holism. CSR needs to move beyond the economic/ethical divide through a decreased emphasis on reductive or fragmented approaches to a more integrative perspective. This integrative capacity is characterized by a move from corporate states, to value communities to a view of the integral commons—that is, by a capacity for members of the organization to view themselves and their work as a part of something larger, whether purpose‐bound or value‐chain‐defined, and then to assess whether that larger purpose is satisfactory.
Frederick (1998) comments on the ‘pre‐Copernican’ state of dominant CSR research and theorizing, advocating a move away from the organization as the central focus of CSR analysis that has led much of this research to a dead end. He draws on complexity theorist Stuart Kauffman (1992) to describe how it is essential to broaden the context within which we consider human relations and ‘decenter’ the corporation away from the normative reference for the field of social issues in management. In a similar fashion, Gioia (2003) advocates moving from the concept of ‘social responsibility’ to that of ‘societal responsibility’. This shift would emphasize the move away from creating organizational wealth, to the organization as an instrument for creating broader societal value. This view of business as an interdependent system is essential for recognizing the complexity of globalization and the interaction of systems, so that CSR becomes the foundation for strategic action rather than an add‐on (Stormer, 2003) . This requires moving beyond the stakeholder model of the firm to an inter‐systems model of business (Stormer, 2003) : shifting the assumption of corporations as autonomous or independent entities, which secondarily consider their obligations to the community, toward a view of firms as part of the communities that created them (Solomon, 2004) as an essential element of this critique. This is characterized by a shift from the ‘egoic’ view of the self as alienated and autonomous toward the ‘post‐egoic’ view of the organization self as interdependent (Driver, 2006) . Rather than focusing exclusively on the ‘responsibilities’ piece of the term, which emphasizes an ‘atomistic individualism’ (Solomon, 2004: 1029) there is a need to emphasize the social aspect as well. We argue that in order to address critiques of the dominant approaches to the business case for CSR, we need to return to some more fundamental questions about the self and communities that will allow us to envision new forms of social and economic life (Freeman and Liedtka 1991) .
Encourage Pragmatism to Enhance Value Creation
Our final recommendation for building a more robust business case for CSR deals with the importance of moving beyond positivist and constructivist epistemologies to embrace a pragmatic perspective. We have argued that each stage in the eras of development is deeper, more valuable, and useful for a wider range of interactions. From the pragmatic perspective, becoming more integral through acknowledging complexity and enabling emergence, and more integrative through building capacity and encouraging holism, is more useful because it enables a broader view of value creation, supported by this wider range of interactions. While value from this perspective may be hard to measure with traditional quantitative approaches that have an ontological view of reality that is unequivocal, more qualitative, narrative perspectives may assist with apprehending the worth of these approaches to support a business case for social responsibility.
We began with the view that managing a business enterprise is an increasingly complex task: that factors bearing upon the successful operation of a business are multiple, often non‐linear (and therefore unpredictable), and inextricably entwined with the needs of a global society. We suggested that a ‘better business case’ for CSR must reflect the changing conditions for business at a global level. We have drawn three recommendations in this chapter for conceiving a more robust, nuanced, and compelling CSR business case: acknowledge system complexity (move from reductive, to pluralistic, to integral conceptions of the business and value creation), build integrative capacity (in conceiving of the locus of value creation, from corporate, to value‐based communities, to seeking an integral commons), and taking a pragmatic approach (encouraging managerial experimentation with new business models for value creation).
If the four modes of value creation in CSR are viewed along a holarchic progression, where each is inclusive of the last, and if CSR objectives are defined integratively, as creating simultaneous value for organizations and society, and if the business case for CSR is framed as a pragmatic, experimental pursuit toward a better society and better organizations, then the business case for CSR would be a relevant concept, and would look quite different than it does currently. The case for socially responsible thinking and action would extend beyond the economic business case. It would attempt to connect the identity of the organization and of individual members, and it would be an argument for a more richly and deeply conceived notion of value creation.
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5 Examples of Corporate Social Responsibility That Were Successful
- 06 Jun 2019
Business is about more than just making a profit. Climate change, economic inequality, and other global challenges that impact communities worldwide have compelled companies to be purpose-driven and contribute to the greater good .
In a recent study by Deloitte , 93 percent of business leaders said they believe companies aren't just employers, but stewards of society. In addition, 95 percent reported they’re planning to take a stronger stance on large-scale issues in the coming years and devote significant resources to socially responsible initiatives. With more CEOs turning their focus to the long term, it’s important to consider what you can do in your career to make an impact .
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What Is Corporate Social Responsibility?
Corporate social responsibility (CSR) is a business model in which for-profit companies seek ways to create social and environmental benefits while pursuing organizational goals, like revenue growth and maximizing shareholder value .
Today’s organizations are implementing extensive corporate social responsibility programs, with many companies dedicating C-level executive roles and entire departments to social and environmental initiatives. These executives are commonly referred to as a chief officer of corporate social responsibility or chief sustainability officer (CSO).
There are many types of corporate social responsibility and CSR might look different for each organization, but the end goal is always the same: Do well by doing good . Companies that embrace corporate social responsibility aim to maintain profitability while supporting a larger purpose.
Rather than simply focusing on generating profit, or the bottom line, socially responsible companies are concerned with the triple bottom line , which considers the impact that business decisions have on profit, people, and the planet.
It’s no coincidence that some of today’s most profitable organizations are also socially responsible. Here are five examples of successful corporate social responsibility you can use to drive social change at your organization.
5 Corporate Social Responsibility Examples
1. lego’s commitment to sustainability.
As one of the most reputable companies in the world, Lego aims to not only help children develop through creative play, but foster a healthy planet.
Lego is the first, and only, toy company to be named a World Wildlife Fund Climate Savers Partner , marking its pledge to reduce its carbon impact. And its commitment to sustainability extends beyond its partnerships.
By 2030, the toymaker plans to use environmentally friendly materials to produce all of its core products and packaging—and it’s already taken key steps to achieve that goal.
Over the course of 2013 and 2014, Lego shrunk its box sizes by 14 percent , saving approximately 7,000 tons of cardboard. Then, in 2018, the company introduced 150 botanical pieces made from sustainably sourced sugarcane —a break from the petroleum-based plastic typically used to produce the company’s signature building blocks. The company has also recently committed to removing all single-use plastic packaging from its materials by 2025, among other initiatives .
Along with these changes, the toymaker has committed to investing $164 million into its Sustainable Materials Center , where researchers are experimenting with bio-based materials that can be implemented into the production process.
Through all of these initiatives, Lego is well on its way to tackling pressing environmental challenges and furthering its mission to help build a more sustainable future.
Related : What Does "Sustainability" Mean in Business?
2. Salesforce’s 1-1-1 Philanthropic Model
Beyond being a leader in the technology space, cloud-based software giant Salesforce is a trailblazer in the realm of corporate philanthropy.
Since its outset, the company has championed its 1-1-1 philanthropic model , which involves giving one percent of product, one percent of equity, and one percent of employees’ time to communities and the nonprofit sector.
To date, Salesforce employees have logged more than 5 million volunteer hours . Not only that, but the company has awarded upwards of $406 million in grants and donated to more than 40,000 nonprofit organizations and educational institutions.
In addition, through its work with San Francisco Unified and Oakland Unified School Districts, Salesforce has helped reduce algebra repeat rates and contributed to a high percentage of students receiving A’s or B’s in computer science classes.
As the company’s revenue continues to grow, Salesforce stands as a prime example of the idea that profit-making and social impact initiatives don’t have to be at odds with one another.
3. Ben & Jerry’s Social Mission
At Ben & Jerry’s, positively impacting society is just as important as producing premium ice cream.
In 2012, the company became a certified B Corporation , a business that balances purpose and profit by meeting the highest standards of social and environmental performance, public transparency, and legal accountability.
As part of its overarching commitment to leading with progressive values, the ice cream maker established the Ben & Jerry’s Foundation in 1985, an organization dedicated to supporting grassroots movements that drive social change.
Each year, the foundation awards approximately $2.5 million in grants to organizations in Vermont and across the United States. Grant recipients have included the United Workers Association, a human rights group striving to end poverty, and the Clean Air Coalition, an environmental health and justice organization based in New York.
The foundation’s work earned it a National Committee for Responsive Philanthropy Award in 2014, and it continues to sponsor efforts to find solutions to systemic problems at both local and national levels.
Related : How to Create Social Change: 4 Business Strategies
4. Levi Strauss’s Social Impact
In addition to being one of the most successful fashion brands in history, Levi’s is also one of the first to push for a more ethical and sustainable supply chain.
In 1991, the brand created its Terms of Engagement , which established its global code of conduct regarding its supply chain and set standards for workers’ rights, a safe work environment, and an environmentally-friendly production process.
To maintain its commitment in a changing world, Levi’s regularly updates its Terms of Engagement. In 2011, on the 20th anniversary of its code of conduct, Levi’s announced its Worker Well-being initiative to implement further programs focused on the health and well-being of supply chain workers.
Since 2011, the Worker Well-being initiative has been expanded to 12 countries and more than 100,000 workers have benefited from it. In 2016, the brand scaled up the initiative, vowing to expand the program to more than 300,000 workers and produce more than 80 percent of its product in Worker Well-being factories by 2025.
For its continued efforts to maintain the well-being of its people and the environment, Levi’s was named one of Engage for Good’s 2020 Golden Halo Award winners, which is the highest honor reserved for socially responsible companies.
5. Starbucks’s Commitment to Ethical Sourcing
Starbucks launched its first corporate social responsibility report in 2002 with the goal of becoming as well-known for its CSR initiatives as for its products. One of the ways the brand has fulfilled this goal is through ethical sourcing.
In 2015, Starbucks verified that 99 percent of its coffee supply chain is ethically sourced , and it seeks to boost that figure to 100 percent through continued efforts and partnerships with local coffee farmers and organizations.
The brand bases its approach on Coffee and Farmer Equity (CAFE) Practices , one of the coffee industry’s first set of ethical sourcing standards created in collaboration with Conservation International . CAFE assesses coffee farms against specific economic, social, and environmental standards, ensuring Starbucks can source its product while maintaining a positive social impact.
For its work, Starbucks was named one of the world’s most ethical companies in 2021 by Ethisphere.
The Value of Being Socially Responsible
As these firms demonstrate , a deep and abiding commitment to corporate social responsibility can pay dividends. By learning from these initiatives and taking a values-driven approach to business, you can help your organization thrive and grow, even as it confronts global challenges.
Do you want to gain a deeper understanding of the broader social and political landscape in which your organization operates? Explore our three-week Sustainable Business Strategy course and other online courses regarding business in society to learn more about how business can be a catalyst for system-level change.
This post was updated on April 15, 2022. It was originally published on June 6, 2019.
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Social Responsibility Journal
ISSN : 1747-1117
Article publication date: 8 March 2011
This paper aims to identify the pattern of CSR programs run by PT Unilever Indonesia Tbk, PT Sari Husada PT, Astra International Tbk, and PT Aneka Tambang Tbk.
The research was focused on three main areas, namely: relation of CSR programs with the companies' core businesses; coverage of the programs on triple bottom line (economic, social, and environmental); and the execution of CSR programs as sustainable development and the companies' competitive advantage. It used a qualitative approach, i.e. a case study. Primary and secondary data are in the form of information about CSR programs conducted by the four companies from sustainable reports downloaded from each respective company's web site, mass media news downloaded from the internet, and other literature studies.
The case study shows high commitment from the four companies to the execution of CSR programs and business ethics. They also attempt to carry out programs involving the triple bottom line. Also, this case study found that two consumer goods companies (Unilever Indonesia and Sari Husada) and one manufacturing company (Astra International) conduct CSR programs that are both related and unrelated to their core businesses while a mining company (Aneka Tambang) tends to conduct CSR programs that are unrelated to its core business. Another finding from this case study is that both related and unrelated programs are forms of the companies' sustainable development.
The primary data in this case study were only collected from the publications of CSR programs, and from company web sites or news coverage accessed via the internet, and so may be incomplete and not detailed. Therefore, it would be better to include in‐depth interviews with the companies to support the primary data in a further study. In general, this research brings a specific understanding of the qualitative research method. In particular, it gives a greater understanding of the importance of all applications in a case study. The procedures, types, designs and data analysis methods in the study case can be comprehended clearly.
The results of this case study can improve comprehension of the CSR concepts and theories, business ethics, sustainable development and reputations used to identify the pattern of CSR programs implemented by the four companies as research objects. Last but not least, the results of the case study give detailed comprehension regarding the CSR practices of several companies in Indonesia, based on the companies' characteristics, CSR programs' relations to the core business, CSR programs covering the triple bottom line, and the sustainability of the CSR programs.
- Business ethics
- Competitive advantage
- Corporate social responsibility
- Sustainable development
Hidayati, N.D. (2011), "Pattern of corporate social responsibility programs: a case study", Social Responsibility Journal , Vol. 7 No. 1, pp. 104-117. https://doi.org/10.1108/17471111111114576
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Home » Management Case Studies » Case Study: Corporate Social Responsibility of Starbucks
Case Study: Corporate Social Responsibility of Starbucks
Starbucks is the world’s largest and most popular coffee company. Since the beginning, this premier cafe aimed to deliver the world’s finest fresh-roasted coffee. Today the company dominates the industry and has created a brand that is tantamount with loyalty, integrity and proven longevity. Starbucks is not just a name, but a culture .
It is obvious that Starbucks and their CEO Howard Shultz are aware of the importance of corporate social responsibility . Every company has problems they can work on and improve in and so does Starbucks. As of recent, Starbucks has done a great job showing their employees how important they are to the company. Along with committing to every employee, they have gone to great lengths to improve the environment for everyone. Ethical and unethical behavior is always a hot topic for the media, and Starbucks has to be careful with the decisions they make and how they affect their public persona.
The corporate social responsibility of the Starbucks Corporation address the following issues: Starbucks commitment to the environment, Starbucks commitment to the employees, Starbucks commitment to consumers, discussions of ethical and unethical business behavior, and Starbucks commitment and response to shareholders.
Commitment to the Environment
The first way Starbucks has shown corporate social responsibility is through their commitment to the environment. In order to improve the environment, with a little push from the NGO, Starbucks first main goal was to provide more Fair Trade Coffee. What this means is that Starbucks will aim to only buy 100 percent responsibly grown and traded coffee. Not only does responsibly grown coffee help the environment, it benefits the farmers as well. Responsibly grown coffee means preserving energy and water at the farms. In turn, this costs more for the company overall, but the environmental improvements are worth it. Starbucks and the environment benefits from this decision because it helps continue to portray a clean image.
Another way to improve the environment directly through their stores is by “going green”. Their first attempt to produce a green store was in Manhattan. Starbucks made that decision to renovate a 15 year old store. This renovation included replacing old equipment with more energy efficient ones. To educate the community, they placed plaques throughout the store explaining their new green elements and how they work. This new Manhattan store now conserves energy, water, materials, and uses recycled/recyclable products. Twelve stores total plan to be renovated and Starbucks has promised to make each new store LEED, meaning a Leader in Energy and Environmental Design. LEED improves performance regarding energy savings, water efficiency, and emission reduction. Many people don’t look into environmentally friendly appliances because the upfront cost is always more. According to Starbucks, going green over time outweighs the upfront cost by a long shot. Hopefully, these new design elements will help the environment and get Starbucks ahead of their market.
Commitment to Consumers
The second way Starbucks has shown corporate social responsibility is through their commitment to consumers. The best way to get the customers what they want is to understand their demographic groups. By doing research on Starbucks consumer demographics, they realized that people with disabilities are very important. The company is trying to turn stores into a more adequate environment for customers with disabilities. A few changes include: lowering counter height to improve easy of ordering for people in wheelchairs, adding at least one handicap accessible entrance, adding disability etiquette to employee handbooks, training employees to educate them on disabilities, and by joining the National Business Disability Council. By joining the National Business Disability Council, Starbucks gains access to resumes of people with disabilities.
Another way Starbucks has shown commitment to the consumers is by cutting costs and retaining loyal customers. For frequent, loyal customers, Starbucks decided to provide a loyalty card. Once a customer has obtained this card, they are given incentives and promotions for continuing to frequent their stores. Promotions include discounted drinks and free flavor shots to repeat visitors. Also, with the economy being at an all time low, Starbucks realized that cheaper prices were a necessity. By simplifying their business practices, they were able to provide lower prices for their customers. For example, they use only one recipe for banana bread, rather than eleven!
It doesn’t end there either! Starbucks recognized that health is part of social responsibility. To promote healthier living, they introduced “skinny” versions of most drinks, while keeping the delicious flavor. For example, the skinny vanilla latte has 90 calories compared to the original with 190 calories. Since Starbucks doesn’t just sell beverages now, they introduced low calorie snacks. Along with the snacks and beverages, nutrition facts were available for each item.
Also one big way to cut costs was outsourcing payroll and Human Resources administration . By creating a global platform for their administration system, Starbucks is able to provide more employees with benefits. Plus, they are able to spend more money on pleasing customers, rather than on a benefits system.
Commitment and Response to Shareholders
One way Starbucks has demonstrated their commitment and response to shareholder needs is by giving them large portions. By large portions, Starbucks is implying that they plan pay dividends equal to 35% or higher of net income to. For the shareholders, paying high dividends means certainty about the company’s financial well-being. Along with that, they plan to purchase 15 million more shares of stock, and hopefully this will attract investors who focus on stocks with good results.
Starbucks made their commitment to shareholders obvious by speaking directly to the media about it. In 2004, Starbucks won a great tax break, but unfortunately the media saw them as “money grubbing”. Their CEO, Howard Shultz, made the decision to get into politics and speak to Washington about expanding health care and the importance of this to the company. Not only does he want his shareholders to see his commitment, but he wants all of America to be able to reap this benefits.
In order to compete with McDonalds and keeping payout to their shareholders high, Starbucks needed a serious turnaround . They did decide to halt growth in North America but not in Japan. Shultz found that drinking coffee is becoming extremely popular for the Japanese. To show shareholders there is a silver lining, he announced they plan to open “thousands of stores” in Japan and Vietnamese markets.
Commitment to Employees
The first and biggest way Starbucks shows their commitment to employees is by just taking care of their workers. For example, they know how important health care, stock options, and compensation are to people in this economy. The Starbucks policy states that as long as you work 20 hours a week you get benefits and stock options. These benefits include health insurance and contributions to employee’s 401k plan. Starbucks doesn’t exclude part time workers, because they feel they are just as valuable as full time workers. Since Starbucks doesn’t have typical business hours like an office job, the part time workers help working the odd shifts.
Another way Starbucks shows their commitment to employees is by treating them like individuals, not just number 500 out of 26,000 employees. Howard Shultz, CEO, always tries to keep humanity and compassion in mind. When he first started at Starbucks, he remembered how much he liked it that people cared about him, so he decided to continue this consideration for employees. Shultz feels that a first impression is very important. On an employee’s first day, he lets each new employee know how happy he is to have them as part of their business, whether it is in person or through a video. His theory is that making a good first impression on a new hire is similar to teaching a child good values. Through their growth, he feels each employee will keep in mind that the company does care about them. Shultz wants people to know what he and the company stand for, and what they are trying to accomplish.
Ethical/Unethical Business Behavior
The last way Starbucks demonstrates corporate social responsibility is through ethical behavior and the occasional unethical behavior. The first ethically positive thing Starbucks involves them self in is the NGO and Fair Trade coffee. Even though purchasing mostly Fair Trade coffee seriously affected their profits, Starbucks knew it was the right thing to do. They also knew that if they did it the right way, everyone would benefit, from farmers, to the environment, to their public image.
In the fall of 2010, Starbucks chose to team up with Jumpstart, a program that gives children a head start on their education. By donating to literacy organizations and volunteering with Jumpstart, Starbucks has made an impact on the children in America, in a very positive way.
Of course there are negatives that come along with the positives. Starbucks isn’t the “perfect” company like it may seem. In 2008, Starbucks made the decision to close 616 stores because they were not performing very well. In order for Starbucks to close this many stores in one year, they had to battle many landlords due to the chain breaking lease agreements. Starbucks tried pushing for rent cuts but some stores did have to break their agreements. On top of breaching lease agreements, Starbucks was not able to grow as much as planned, resulting their future landlords were hurting as well. To fix these problems, tenants typically will offer a buyout or find a replacement tenant, but landlords are in no way forced to go with any of these options. These efforts became extremely time consuming and costly, causing Starbucks to give up on many lease agreements.
As for Starbucks ethical behavior is a different story when forced into the media light. In 2008, a big media uproar arose due to them wanting to re-release their old logo for their 35th anniversary. The old coffee cup logo was basically a topless mermaid, which in Starbucks’ opinion is just a mythological creature, not a sex symbol. Media critics fought that someone needed to protect the creature’s modesty. Starbucks found this outrageous. In order to end the drama and please the critics, they chose to make the image more modest by lengthening her hair to cover her body and soften her facial expression. Rather than ignoring the media concerns, Starbucks met in the middle to celebrate their 35th anniversary.
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Snapshot of the casebook
The environment in which companies operate prioritises the need to integrate their economic, environmental and social concerns (triple bottom line) with their culture and values, decision-making, strategy-formulation and operations. An organisation needs to follow certain guidelines and principles to ensure that its operations such as corporate governance, human resource management, health and safety, environmental protection and community development are transparent and accountable towards its employees and the society. Corporate Social Responsibility (CSR) is the tool that helps the organisations achieve this. CSR not only ensures that companies follow an ethical approach towards business but also helps sustain that approach. CSR, as in the past, is not confined to corporate philanthropy, but it now includes the company's contribution towards the general public, its employees and the environment. Moreover, non-profit organisations and institutional investors have gained considerable financial clout and the power to influence investors� decisions. The rise in the number of corporate scandals has made CSR vital for companies to maintain a virtuous image in the public and attract investors who have started giving ethical values as much importance as profitability.
This book Case Studies on Corporate Social Responsibility - Vol.I contains case studies , which highlight the circumstances under which various companies have integrated CSR into their company values. It also showcases the setbacks that companies faced as a result of their non-compliance with CSR policies. It also brings to light the failure of some companies to raise their image despite adopting CSR, sparking questions regarding the use of CSR as just a PR tool.
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