Corporate Social Responsibility (CSR) - a micro-level view on economic by xrh13975

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									Corporate Social Responsibility (CSR) - a micro-level view on economic
                      globalisation and environmental policy


                                         Marta Goetz
               Warsaw School of Economics, Institute of International Economics



Abstract:
The aim of this article is to draw attention to another aspect of economic globalisation and
environmental policy. It will focus on firm’s level activities. The concept of Corporate Social
Responsibility (CSR) will be developed. Such attitude should enrich traditional, mostly
macroeconomic, view of linkages between globalisation and environment. It may be regarded as
realisation of famous principle “think globally, act locally”. The article starts with brief
explanation of CSR, and then focus shifts towards one of CSR strands namely the environmental
one. The rest of the paper presents examples of “best practices” in CSR, as well as possible
relations between CSR performance, stakeholders’ behaviour, competitiveness and international
trade.

Keywords: stakeholder, CSR – Corporate Social Responsibility, environment, competitiveness,
international trade, consumption patterns


1. CSR – Introduction
The aim of this article is to draw attention to another aspect of economic globalisation and
environmental policy. The possible linkages and relations between these two concepts will
be presented from lower level of aggregation, namely from company’s point of view. It
will therefore focus on firm’s level activities.
This article tries to bring readers closer with the concept of CSR – Corporate Social
Responsibility. This phenomenon stands for new orientation within private sectors. It puts
equal emphasis on economic as well as on social and environmental activities. Generally
speaking, CSR is about how the company includes social sensibility and environment
protection in its daily operating. Company’s CSR record gives answer to questions such:
whether a firm only obeys imposed rules and regulations, simply react, or it is proactive
and engages itself in activities in social and environmental areas? Whether it regards these
issues as a part of long-term strategy? In other words, what counts for a company is not
only to make profits, but also to engage in social and environmental activities. As many
examples show this helps achieving economic targets more efficiently.
Being in line with the interests and objectives of this conference, special attention will be
drawn to one strand of CSR, namely the environmental one.


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1.1 Definition
First of all the concept of CSR should be defined. CSR is a company’s obligation to be
accountable to all of its stakeholders in all its operations and activities with the aim of
achieving sustainable development not only in the economical dimension but also in the
social and environmental dimensions (EU Commission official WebPages devoted to
external trade and CSR). As stakeholder’s term remains crucial for CSR, this concept
should be explained as well. Company’s stakeholders are all those who are influenced by
and can influence a company’s decisions and actions, both locally and globally.1 They
include employees, customers, suppliers, community organisations, subsidiaries and
affiliates, local neighbourhoods, investors, and the environment. CSR is about 3Es:
Economics, Ethics and Environment (Łabno-Falęcka E., 2003)
CSR is recently also regarded as a new form of lobbying; more sophisticated lobbying of
next generation (Van Oranje-Nassau L., Casino-Diaz S., 1998, chapter 14). As far as
forms, it may take, are regarded, one may mention sponsoring, endorsement, supporting of
events, introducing environmental and social norms, etc. Laurentien van Oranje-Nassau
and Sonia Casino-Diaz in the last chapter of Robin Pedler’s book “Corporate Social
Responsibility: A new Approach to EU Policy-making, European Union Lobbying –
Changes in the Arena” have foreseen the CSR as a new way of approaching the EU policy-
making. However it is not justified to put equals sign between these two notions lobbying
and CSR. The future may belong to CSR, but it is much broader concept than lobbying
traditionally regarded as an activity aiming at exerting influence on decision-makers


1.2 Origins
The growing interest in the proper role of businesses in society has been influenced by
increased sensitivity to ethical issues.           Issues like environmental damage, improper
treatment of workers, are highlighted in the media. In the response, government regulation
regarding environmental and social issues has increased. Consumers have become
increasingly sensitive to the social as well as environmental performance of the companies
from which they buy their goods and services. This particular cumulating of forces requires
firms to operate simultaneously in an economically, socially and environmentally
sustainable way. The growing role of Non Government Organizations NGOs, which


1
    Multiple sources among which: EU Communications concerning CSR (July 2002), and (July 2001),


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become a powerful voice of social responsibility, have also contributed to CSR
development. Another impulse comes from media, which can be regarded as a critical
observer, conducting tough scrutiny of companies’ activities. Therefore some companies
have even developed ‘triple line’ reporting to show not only profits, but also social and
environmental impact.


1.3 Objectives
The mission of a socially responsible organisation is to take into account the full scope of
their impact on communities and the environment when making decisions. This means
balancing the needs of stakeholders with company’s own need to make a profit. This
holistic approach to business allows regarding organisations as full partners in their
communities, local environments. This implies that it might be not enough to measure
companies merely on the basis of their products and profits. Although some regard CSR as
oxymoron, because companies are incapable of being emphatic, many believe that doing
well and doing good are not mutually exclusive.
To address key issues pertaining to corporate social responsibility in Europe CSR Europe
has been established. It is a business-driven network; a platform, which runs several
programs, designed (Van Oranje-Nassau L., Casino-Diaz S., 1998, chapter 14). One of
such programme is “Preparing Today’s and Tomorrow’s Managers on CSR. It was
launched in 1998 jointly by CSR Europe and TCC The Copenhagen Centre and aims to
stimulate academics to introduce and diversify courses on corporate social responsibility
and business ethics at all levels of study. Part of the programme was to investigate the
extent to which universities and business schools are integrating social and environmental
responsibility subjects into their traditional curricula


2. CSR – Environmental strand
As it was said, CSR is a broad concept focusing predominately on company’s social and
environmental performance. For the purposes of this conference the later area of activity
will be of high importance. Therefore the rest of the article focuses on environmental
strand within CSR.


2.1 CSR and stakeholders’ behaviour
One may ask why and if only it is profitable for companies to be involved in such usually
costly activities. The first and easiest explanation may be - they have simply no choice but


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to respond as it is required by governments, EU, and broad circle of stakeholders among
which consumers. Although this article concentrates on the last factor, legal regulations
must be mentioned. Standards set by the EU require the companies to adapt stringent rules,
based on the high standards of the most environmentally advanced member states such as
Denmark and Netherlands, rather than the low standards of Britain, and Southern Europe.
As some authors indicate in the area of environment, particularly in the case of product
packaging and labelling the EU has experienced a California effect “race to the top” rather
than a Delaware effect “race to the bottom” (Hix S., 1999, chapter 8). Regulations and
rules launched by national legislative as well as standards set by the EU certainly cannot be
underestimated. They affect companies’ ecological performance formidably. However
what makes firms to behave environmentally reasonable is also less coercive. It may be
behaviour of its stakeholders. On the consumer side particular changes have taken place.
Broadly speaking consumers become more environmental and social aware, have modified
their consumption patterns, and are now willing to pay more for higher standard, for goods
and services which are environmentally friendly. As demand became more sophisticated
and environmental aware, so must supply do.
As a driving force behind CSR may be therefore regarded consumers’ environmental
awareness and changing patterns in their consumption. But it is not only consumers’
attitude what makes firms to pay attention to environment and social dimension.
Expectations of employees, and suppliers do it as well. It happens even more frequently
that companies have to compete for good highly skilled workforce, which is becoming
more and more socially and environmentally sensitive and demanding. Generally speaking,
CSR has developed as a response to stakeholders’ expectations.
One may risk the thesis, that what we observe today is growing global “environmental
correctness”. Shift is visible on sides, demand and supply. Whereas demand choice is
much more voluntary, the decisions undertaken on supply side are often the required, the
only one, and response. Many (but hopefully not all) companies engage in environmental
movements willy-nilly. Nevertheless for environment it is certainly indifferent, what are
the reasons behind. Important is the attitude.


2.2 CSR and international trade
Why searching for linkages CSR versus international trade one inevitably will face the
concept of competitiveness. Only companies active in CSR, meet consumers’
requirements. They can remain competitive and may participate in international exchange,


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international trade. Products, services they offer, could be placed on international markets
and find purchasers. The green labelling – to dub CSR activities – some years ago – the
competitive edge is now becoming the rule, the necessity for companies willing to stay
competitive.
It is clearly good that businesses should seek to minimise their negative social and
environmental impact resulting from their economic activity. A firm that develops for
example new engine technology to reduce hydrocarbon consumption may be able to
deploy its CSR credentials and increase profits. Clearly this represents good management
and thus influences one of company’s competitiveness source.
CSR is a tool in competitive fight between companies operating in competitive markets.
For reasons that seem obvious, this concept rather does not apply to monopolistic markets.
Companies enjoying monopolistic position may afford not to obey some ecological rules
and norms. For some big enterprises it pays off to pollute instead to install filters and then
pay fines. On competitive markets, CSR assumes that such situation cannot take place. The
punishment is much painful than traditional fine, which for example polluters have to pay.
Here it may be even the consumer’s boycott.
Companies seem to have realised that as far as environmental and social issues are
concerned, their performance does not have to be only obeying existing rules and
regulations, and applying standards. It should be rather an immanent part of their strategy.
Such approach pays off inevitably. What really counts are permanent actions included in
company’s long-term strategy.


2.3 CSR – possible activities
While considering possible actions within CSR, one has to be aware, that some firms have
it easier to apply CSR in their daily performance, while for others it may be a challenge.
Let’s take an example of manufacturing and service companies. Producing, manufacturing
and assembling processes offer more opportunities to show company’s environmental
commitment. These firms can more or less include such practices in their daily operation.
In other words their attitude towards environment is closely related with their statutory
activities. It is strongly correlated with technologies used, production processes conducted
and inputs applied. The company may for example demonstrate which inputs it uses, how
it produce goods, whether it conducts recycling - labels like “tested dermatologically, not
on animals”. For service companies like banks, mobile phone operators, IT companies,
trading firms – CSR require definitely extra additional activities, out of daily routine. It


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may be participating in afforestation, sponsoring of zoological gardens, animal shelters,
providing care for animals in zoo. CSR may be observed in marketing, in growing number
of advertisements relate to environmental problems and P&R performance. Environmental
strand of CSR provides for such possible actions like (Forum Odpowiedzialnego Biznesu –
official WebPages):
    •   Activities aiming at reduction and monitoring the pollution, like eliminating CFC
        gases emission
    •   Improving recovery and recycling processes inside company
    •   Increasing use of environmental friendly heating such as solar heating
    •   Conservation of natural resources – water, air, minerals’ bed, soil
    •   Protection of natural environment – forests, national parks, primeval forests
    •   Taking care of animals, participating in (sponsoring) of veterinary services
    •   Broadly understood ecological education, promoting sustainable development
    •   Other activities supporting environmental protection


2.4 CSR – foreign and Polish examples
In Poland CSR is known as FOB Forum Odpowiedzialnego Biznesu, which is more or less
the translation of English CSR. In FOB however, social aspect seems to be more important
and much more attention is paid to these issues (high unemployment rate, the risk and fear
of losing job may be an explanation for this phenomenon).
Some examples will be showed to make the concept of CSR more appealing. Foreign
examples include Body Shop and Sony. Especially the later one will be presented in details
including some lofty words, as originally.
Body Shop2 – The Body Shop is a successful company best known for pioneering the
natural ingredient cosmetics market and practising social responsibility as an integral part
of company operations. Body Shop does not sell products tested on animals, and uses
ingredients that are bought from indigenous people in developing countries. The Body
Shop International, PLC is a “values-driven, high quality skin and body care retailer
operating in some 50 countries with over 1,900 outlets spanning 25 languages and 12 time
zones”. Body Shop conducts an environmental audit, which is an attempt to take stock of
company’s environmental performance and measure it against accepted standards. This


2
 Information concerning Body Shop stems from companies official webpage - http://www.the-body-
shop.com, as well as http://docs.wri.org/2003_bell_21_gray_bodyshop.doc and Green Book 2, by Body Shop


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helps to manage and minimise the negative effect on environment. Moreover Body Shop is
committed to reduce waste. Packaging is minimal; the company is absolutely against
secondary packaging. Discounts are given for bottles returned or refilled. Environmentally
responsible methods are used when disposing of packaging or waste.
The Sony Group Environmental Vision being a part of Sony Group presents basic
approaches for environmental management activities with the aim of creating a sustainable
society (Sony official WebPages’s part dealing with environmental issues). Sony
recognises the importance of preserving the natural environment that sustains all life on
earth for future generations and thereby ensuring that all humanity can attain the dream of
a healthy and happy life. Sony is committed to achieving this goal by seeking to combine
ongoing innovation in environmental technology with environmentally sound business
practices. Different environmental initiatives of Sony are presented briefly.


Eco-Efficiency at Sony - Eco-efficiency is the numerical indicator that Sony uses as a
gauge of the degree of environmental impact caused relative to the scale of its business
activities.




                         Eco-efficiency index of Sony


Eco-efficiency is a concept that links environmental conservation activities with business
activities, and is based on concepts such as those proposed by the World Business Council
for Sustainable Development (WBCSD)3. Eco-efficiency rises if the environmental impact
relative to the scale of the business is lowered.


Five Environmental Indices - Based on careful consideration of the life cycles of its
business activities, Sony has established its own unique set of five environmental indices,
which identify aspects of operations that Sony can audit and improve. These indices
provide quantitative measurements of environmental impact, with lower numerical values



3
  An organization of over 160 multinational corporations, the mission of the WBCSD is to provide leadership
in the effort to achieve sustainable development. Sony has been a WBCSD member since its establishment.


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signifying smaller levels of impact. The goal is to raise Eco-efficiency in each of these five
areas.




 Sony’s five environmental indices


Product Assessment Based on Product Life Cycle - Reducing the environmental impact of
products requires to study environmental impact throughout the products" life cycles "
from manufacture of parts and products, to transport, use by customers (through methods
such as reduced power consumption) and final disposal. Sony has developed a system to
clarify the environmental impact of products throughout their life cycles. By inputting
basic product information, parts configurations, product transport conditions, and other
data, product design divisions can estimate CO2 emissions, energy consumption and
resource consumption at each stage of the life cycle as well as the total figure. This enables
to identify products and stages with high environmental impact, clarify improvement
priorities and prepare targets.




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           Product Assessment Based on Product Life Cycle


Product Environmental Data Collection System - To facilitate all environmental activities
within company, product environmental data collection system has been developed. For
each new product, environmental data concerning electric power consumption, weight,
quantity of recycled materials, and use or non-use of controlled chemical substances is
collected from the product design divisions through an online database. Necessary
information is obtained from other Sony databases to calculate the total environmental
impact of products, including existing products.


Green Management 2005 - This initiative assumes introducing special targets to obtain by
2005, as far as environmental performance is regarded. These objectives are plenty and
encompass targets for products and services such as: reduce operating power consumption
by 30%, reduce product weight and number of parts by 20%, increase percentage of
recycled materials in products (by weight) by 20%, shift to environmentally conscious
packaging materials such as recycled materials, targets for greenhouse gas emissions like:
reduce energy use converted to CO2 emissions from business sites by 15% or more per
sales unit, aim to increase the use of renewable energy to at least 5% of energy used at all
sites, reduce fuel consumption by business vehicles on a CO2 emissions basis by 20% or
more per sales unit, targets for resource conservation such as: reduce waste from sites by
30% per sales unit, reduce the volume of water purchased or drawn from groundwater by
20% per sales unit.


Polish Examples from annual report “CSR in Poland 2004” - The following best practices
are presented with regard to: the company initiating activity, objectives of initiative, and



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underlying logic. Particularly it gives the answer to following questions: which company
introduces this initiative? what are the objectives of such initiatives?, what does it consist
in?


Polish best CSR practices 2004
The name of the           Initiator           Objectives                     Underlying logic
initiative
The Charter of Earth      Toyota Motor        Spatial Development in         Grants and funds for
                          Poland              Walbrzyski region,             schools, improving co-
                                              improving environment          operation in region
                                              protection of region in        between important
                                              industrial decline (mining,    actors
                                              polluted region)
The Eco-House             IKEA                Waste disposal,                Special Eco-house has
Centre for Waste                              separation, utilisation        been constructed in
Disposal                                                                     Targowek, where
                                                                             people can bring waste,
                                                                             glass, paper, cans, and
                                                                             learn how to separate
                                                                             waste. In return receive
                                                                             small gifts – flowers,
                                                                             T-shirts
“Bison Year”          Bank Pekao S.A Draw attention to                       Distribution of
                                     menaced, rare spices of                 bulletins, leaflets,
                                     animals like Polish Bison               preparing exhibitions
                                     in Bialowieza
The Principle One for Barlinek SA    To create Customers                     To plant one tree for
One                   producer of    Forest                                  one package of boards
                      wooden boards                                          bought
Source: own elaboration on the basis of Raport Odpowiedzialny Biznes w Polsce 100 dobrych przykładów,
Forum Odpowiedzialnego Biznesu 2004


Other examples comprise: HP competition for best proposals of environmental activities -
“In Harmony with Nature”, “Green Offices” - Initiative of Ricoh, “Digital Maps for Tatra
National Park” – delivered by Techmex


3. Concluding remarks
CSR may be regarded as realisation of famous principle – think globally, act locally.
Companies applying CSR are proactive. They engage in environmental movement because
they want to manifest and demonstrate their opinions and attitudes. Impulse for CSR seems
to come from demand side. Therefore, CSR is about building relationships with customers,




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by showing companies awareness and responsibility in environmental issues. Although the
influence of other stakeholders, like employees is also significant.
As it was said some companies have explicitly the possibility to demonstrate their Eco-
commitment. For others mainly services like Banks, IT companies – the only way to show
their attitude are extraordinary additional actions, like sponsoring some events, building
and/or financing animals’ shelters, taking part in afforestation, etc.
Summing up, intention of this article was to show the relatively broad-brush picture of
CSR. It aimed at enriching the macroeconomic view on globalisation and environmental
policy with perspective, which is closer to individual firms. CSR being the phenomenon on
companies’ side was certainly the result of changes on the demand side. Such activities, at
first sight, may seem to be not economically feasible. Directly they usually bring about
costs. Eco-activities don’t create profits immediately. But they are necessary to create
profits in the long run. They contribute to firm’s results indirectly. According to CSR
Europe Survey, 30% of asked analysts and managers believe that social and environmental
risk management improves a company’s market value in the short term, 86% in the long
term (Euractiv EU News, Policy Positions, and EU Actors online WebPages devoted to
key issues on CSR Europe) CSR behaviour may be later on reflected in consumers’
demand for products of a given company. Moreover, for many corporations, CSR
programs create a kind of good will in the community, which can indirectly increase
revenue.
CSR activities allow among others for tighter co-operation between firms. Therefore apart
from traditional input-output linkages new links in the form of ecological co-operation
have been created.
Laurentien van Oranje-Nassau and Sonia Casino-Diaz while pondering over challenges of
the CSR draw attention to the catch 22 situation. If companies talk too much about their
commitment to the CSR, this commitment is likely to be criticised for being a pure “PR
exercise”, but if they do not, they miss a valuable and needed opportunities for promoting
the issues more widely. What is positive, is the observed shift form a French-style more
ideological declaration, to an Anglo-Saxon more pragmatic model focused on action.
These authors also point out that CSR is an ongoing process and the issue is moving
rapidly at both political and business level. Nevertheless, the CSR is perceived differently
in different European countries.
What remains to be done among others is to develop new measures if the benefits from
profits, social impact and environmental impact can be effectively weighed against each


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other. Another challenge is trustworthy. Most large companies now produce social reports
that cover CSR issues. But it is not always clear what companies say across the whole
organisation and what they really carry out. Even tobacco companies like BAT produce
social reports. Moreover CSR could be quite misguided, however. A company which
recycles components in a manner which used more resources than were required to
produce the original component is at best well intentioned, but in reality is harming both
the environment and profits.
Nevertheless such drawbacks cannot discourage a company form environmental friendly or
at least environmental aware operating.


References

1. Body Shop - http://www.the-body-shop.com,
    http://docs.wri.org/2003_bell_21_gray_bodyshop.doc
2. Business for Social Responsibility -
    http://www.bsr.org/CSRResources/Environment/EnvResources.cfm business for social
    responsibility
3. Eubusiness - Europe's leading independent online business information service about
    the European Union - http://www.eubusiness.com/guides/csr
4. EU Communication from the Commission, Corporate Social Responsibility: A
    business contribution to sustainable development (July 2002)
5. EU Communication from the Commission, Corporate Social Responsibility Green
    paper, Promoting a European Framework for Corporate Social Responsibility (July
    2001)
6. Euractiv EU News, Policy Positions, and EU Actors online -
    http://www.euractiv.com/Article?tcmuri=tcm:29-110204-16&type=Overview
7. European Commission official WebPages devoted to Trade Issues, Corporate Social
    Responsibility - http://europa.eu.int/comm/trade/issues/global/csr/index_en.htm
8. Forum Odpowiedzialnego Biznesu - www.fob.org.pl,
    http://www.odpowiedzialnybiznes.pl/
9. Hix, S., (1999) Regulation of the single Market, in Political System of the European
    Union, Palgrave, chapter 8
10. Lois, L., Hinkley, R., (2004), Is CSR an oxymoron?, CommonDreams.org
11. Łabno-Falęcka, E., 2003, Daimler Chrysler i idea społecznej odpowiedzialności
    biznesu - http://www.unia-polska.pl/index.php?id=4&q=762
12. Raport Odpowiedzialny Biznes w Polsce 100 dobrych przykładów, Forum
    Odpowiedzialnego Biznesu 2004
    http://adm.odpowiedzialnybiznes.pl/cms/binsource?docId=2565&paramName=BINAR
    YOBJ_FILE&index=0&language=PL
13. Sony Corporate Social Responsibility - http://www.sony.net/SonyInfo/Environment/
14. Van Oranje-Nassau, L., Casino-Diaz, S., (1998), Corporate Social Responsibility: A
    new Approach to EU Policy-making in Pedler (ed.) European Union Lobbying –
    Changes in the Arena, Palgrave, chapter 14




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