Defining corporate social responsibility (CSR)

It is continuously debated what is considered a company’s responsibility in terms of corporate social responsibility. The literature agrees that there is no one correct definition for CSR. The definitions are generally related to the business affecting itself and the surrounding environment and societies. As an example, CSR can be defined as:

“a firm’s commitment to maximize long-term economic, societal and environmental well being through business practices, policies and resources.” (Du, Bhattacharya, and Sen 2011, 3)

“Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

(Richard and Watts 2000, 8)

Growther and Güler (2008, 15–17) give a basis for the elements of CSR. They divide CSR into three main principles, accountability, transparency, and sustainability. They describe these principles as mandatory factors for a successful CSR strategy.

1) Accountability refers to a company recognizing and taking responsibility for its actions, which can have an effect on the external environment. When it comes to responsibility in reporting, a company should inform the parties or individuals affected by the actions or operations made by the company. Responsible reporting includes reporting such things as, for example, the

relevance of the information, accuracy of measurements, and comparability and on who the report concerns. Responsibility, together with accountability, is connected to the acceptance of the organization being a part of a broader social environment.

2) Transparency means that the impacts and information of the actions or operations should be visible and ascertained from the company’s published reports. All the effects and other information should be found out with the reporting standards or the method the company has chosen to use. No relevant information should be left out or disguised in the complexity of the report.

3) The last one is sustainability. The critical part of sustainability is that organizations must not use more resources than necessary. The quantity of resources is finite, and resources used now are not available in the future. This leads to the issue of decreasing resources in the future and costs of resources increasing. Therefore, sustainability is about creating and regenerating the same amount or more resources than consuming.

In a report called Our Common Future, published by World Commission on Environment and Development (1988), there are seven strategic imperatives for sustainability. The report is also known as the Brundtland report. It is well known as a basis from where one of the definitions for sustainability originated. The imperatives for sustainable development are:

1) Reviving growth,

2) changing the quality of growth,

3) meeting essential needs for jobs, food, energy, water, and sanitation, 4) ensuring a sustainable level of population,

5) conserving and enhancing the resource base, 6) reorientating technology and managing risk, and

7) merging environment and economics in decision making.

As the definitions for CSR indicate, organizations take actions that do not only have an impact on the business itself but also on the business environment, local environment, and global environment. Organizations can impact multiple ways, for example, they can enhance communities by increasing employment, allocating resources, and increasing competition. This can lead to, for example, more companies, which leads to increasing employment, and distribution of wealth. As CSR activities also affect internal and external stakeholders, there can be a debate whether some CSR actions have a positive impact. Some may see specific CSR-related actions as beneficial, and others may see them as harmful. In addition, the same actions can be beneficial in certain situations or specific times but harmful in other situations or times. This can create a tradeoff and controversy between stakeholders. (Growther and Güler, 2008, 13)

Porter and Van Der Linde (1995) explain that there used to be a prevailing view between managers about the tradeoff between ecology and economy. In this tradeoff, the other side strives for environmental standards, and the other resists those standards because of increasing costs and reducing competitiveness. Porter and Van Der Linde deny the tradeoff of ecology versus economy because it assumes that everything except regulation is constant (technology, products, processes, and customer needs). This would lead the environmental regulation to raise costs.

Instead, they argue that environmental standards can lead to innovative solutions that benefit both costs and the environment. Therefore, competitiveness can be enhanced with the right kind of regulation. In addition, Porter and Van Der Linde argue that pollution means resources have not been used efficiently or effectively. They conclude that managers and regulators should focus on including the opportunity costs of pollution, wasted resources, wasted effort, and diminished product value to the customer.

Crane, Matten, and Spence (2013, 5–7, 13–14) cover corporate social responsibility in global and organizational contexts. They list six core characteristics relevant to well-managed CSR for a company.

1) Voluntary activities that are beyond the legal minimum that is required by the law.

2) Internalizing and managing externalities means the side effects which affect others, such as pollution. By regulation, the pollution fines can be used to force the companies to internalize the pollution costs.

3) Multiple stakeholder orientation refers to CSR covering different variables, impacts, and responsibilities, which concerns stakeholders other than just shareholders. Other stakeholders can be, for example, internal (employees and managers) or external (government, consumers, communities, and other companies).

4) Corporate social responsibility includes aligning with social and economic responsibilities.

5) Practices and values refer that CSR includes business practices and actions that handle social responsibility issues and also to name a philosophy purpose or values that represent these actions and practices.

6) The last one focuses on philanthropy, which points out that CSR should not be a separate function but should be united with the company's core business operations and functions.

They also mention that CSR, for example, providing healthcare or fighting climate issues, could be seen among the US companies before European companies. In the EU, it was seen that many CSR-related issues were the government's responsibility. Therefore, companies' involvement in CSR issues depends on the laws and regulations set by the government. Because of the differences in regulation, the involvement in CSR issues is far more visible in multinational companies.