Corporate Social Responsibility: History & Features

CSR (Corporate Social Responsibility) is a corporate public relations’ sub-function that can vary from country to country and over time, but it includes a variety of corporate concepts and practices with the purpose of improving the wealth of society and the natural environment that go beyond the state law and individual responsibility. In fact, companies should take the commitment to acting in a sustainable, transparent and ethical way towards all stakeholders to conduct a successful business. CSR can also be understood as the integration of ethical and social principles within a business model. In fact, through its use, companies pursue a goal that goes beyond that of the profit maximization, focusing on a greater one: meeting the needs of all stakeholders, respecting the environment by limiting pollution and creating new principles that can guide the company in the future. 

The development of this methodology concerns the gradual change that the economic function has undergone. Indeed, this activity was originally limited to the use of resources for planning new initiatives that can generate profits without committing crimes and fraud. This basic vision of companies’ role was very limited, since in this way they can make more profits by ignoring the damage that create in the environment and in the communities where they are present. The measure of the impact of companies over environment and society is called social costs. 

The problems facing a society can be varied, such as unemployment, discrimination, poverty. Many foundations and public institutions are committed to solving these problems but companies should take the responsibility for their actions because they often influence these issues. In this way, each company can decide which issues to take charge depending on its characteristics. This idea was not born recently, but its development is growing dramatically. It is also desirable that this process continue in the future because in certain markets it is mandatory for a company to plan CSR initiatives if it wants to operate there. Moreover, it can use CSR as a foreign policy strategy in order to manage relations with governments in case that these are interested in building a sustainable economy within their nations. 

The characteristics of Corporate Social Responsibility 

Companies over the years have integrated in their functions the use of political methodologies, also because not only MNCs, but even smaller companies may have a huge impact on people's lives, influencing their habits and customs. These subjects have direct links to society rather than many governments by realizing the products and services that are used every day by people. Furthermore, their decisions can be taken more quickly than government ones. For this reason, companies have the responsibility to help governments to integrate their policies and collaborate to improve society’s wealth; this orientation has influenced the development of CSR over the last sixty years. CSR supporters believe that through these methodologies a company can increase its productivity and profits in the long-term and hence consumer loyalty, because the implementation of ethical and responsible policies improves reputation. Instead, critics claim that this methodology distracts companies from their primary goals (the creation of dividend and profits for shareholders) by losing time and resources. However, it should be underlined that the importance of CSR as a foreign policy tool for companies depends on the needs of governments and communities where the company is present. In fact, although CSR can include many initiatives and be implemented in different ways, it is important to note that in some developing countries such as China, the role of foreign companies is perceived by the government and local society as being that of a political actor which must carry out activities to improve the conditions of society and the environment. For this reason, a company often invests in CSR under government pressure rather than its sense of responsibility towards society. However, if a company implements CSR with the final purpose of increasing its profit, this methodology is called CSR positivist; whereas if the company has a purpose that goes beyond the increase in profit, such as the creation of new principles for society or the true well-being of the community and the environment, it takes the name of CSR post-positivist. 

Once the CSR has been introduced and defined, its characteristics and peculiarities will be introduced through the following points: 

?    History of Corporate Social Responsibility; 

?    Corporate Social Responsibility activities. 

History of Corporate Social Responsibility 

The importance of CSR has grown enormously in recent years through a process of laws and initiatives from companies and governments. For this reason, in order to understand how CSR has developed over the last sixty years, the main events concerning this subject are described below. Indeed, the history of CSR can be divided into three chronological phases characterized by similar elements: 

?    Phase I (1960–1990). 

The term CSR began to spread in the 1960s when George Goyder introduced the concept of "stakeholder" and the importance of social audit with the publication of The Responsible Company in 1961. He argued that companies have to assume new responsibilities that do not concern only the production of profit for shareholder, but also the satisfaction of the needs of all subjects involved in the company. The main causes that contributed to the development of CSR during the second half of the 20th century were: 

?    Climate change; 

?    Social inequalities; 

?    The increasing importance of non-state actors; 

?    The need to compensate the regulatory gaps in government systems; 

?    To limit the State surveillance over companies; 

?    The increasing of company's accountability towards reducing the pollution and protecting human rights; 

?    The rise of the privatization of global public goods (health, education, rights) which once were state-owned activities. 

Subsequently, in the 1970s, many national regulations spread the principles of CSR, for instance the Bilan Social law in France and some organizations such as Social Audit Limited in Great Britain. They began to regulate CSR for large European companies, encouraging them to create the first reports about environmental and social performance. In addition, in the 1980s many companies had introduced quality systems and environmental sustainability. 

Phase II (1990-2000). Since the 1990s, the importance of ethics in business has increased significantly through the introduction of numerous national laws such as the Sarbanes-Oxley Act in the USA. This law regulates business conduct in companies through the implementation of important ethical principles. The leading public relations experts have long supported the influence of ethics in the creation of trust, a fundamental component for maintaining relationships. In the ‘90s, the spread of CSR principles had increased because of the growth of the economic activities’ transparency through the development of media. In addition, the international context was characterized by important events that guided public opinion towards social issues. In 1992 there was the Earth Summit in Rio de Janeiro and in 1997 the Kyoto Protocol that introduced the importance of sustainable development. In 1999, Dow Jones Sustainability Indexes were created, they are a set of indexes that evaluate the sustainability performance of many companies. In addition, in 2000, Millennium Development Goals were signed by all UN countries. Among these eight goals to be completed by 2015 there was also that of the environmental sustainability. All these events increase the pressure on companies to develop ethical and sustainable criteria. 

Phase III (2000–Ongoing). One of the most important initiatives of the last years was developed in 2001 by the European Union through the Green Paper. It is a document that has raised the public debate on the importance of CSR in Europe with the aim of promoting it in the community and in the rest of the world. One of the key points of this paper emphasizes that CSR must be perceived as a strategic investment and not as a cost. For example, human capital investments have a direct impact on productivity. Indeed, one of the most important goals for a company is to attract and retain skilled workers and it can achieve this through some of the methods outlined by CSR such as: 

?    To increase education and training throughout the life of the worker; 

?    To increase the balance between work and leisure; 

?    To increase diversity in human resources; 

?    To enforce equality for wages and career prospects for women; 

?    To increase workers’ participation in corporate actions and safety. 

In addition, in 2002 several US companies joined their forces to create The Open Compliance and Ethics Groups, which is a set of new ethical practices to be used for conducting business. Furthermore, the creation of the OECD Principles of Corporate Governance in 2004 by the namesake organisation was important at international level. The aim of these principles was the raising of awareness among Member States' governments about various social issues, such as: child labour, forced labour, social relations, consumer protection and the fight against corruption. Moreover, in the last years the United Nations Human Rights Council has approved a set of ethical values and principles that should conduct the business of companies which is called Protect Respect, and Remedy Doctrine.

CSR is also indispensable to obtain funding, in fact, banking institutions increasingly use social and ecological criteria to assess the risk of lending or investment in companies. The reputation of a socially responsible enterprise can increase the value of its shares creating a concrete financial advantage.

The process of re-evaluating business goals is indispensable to protect the economy from new international crises. The creation of social principles that protect the environment and inspire the future of society are indispensable for the survival of businesses. In the future, these methods will be essential for business creation. 

Corporate Social Responsibility activities 

For a company it is very important to understand the opinion of its stakeholders concerning its responsibilities towards them and especially to society and environment thus CSR activities can help it to achieve this objective. Also for this reason, the importance of this methodology has recently increased and in 2004 the web sites of at least 80% of the Fortune 500 companies showed and advertised their sustainable initiatives. These are very different and depend on the characteristics of the companies and their external environment. Socrates: The Corporate Social Ratings Monitor, an observatory that analyses the CSR activities of some US companies, divides them into different areas: 

Community support. All the activities that sustain the livelihood of local communities, such as schools, sporting events, health and education programs. 

Diversity. Initiatives undertaken to avoid the inequalities between employees (gender, ethnicity and religion). 

Employee support. Actions related to workers’ safety or their financial support for medical and educational expenses. 

Environment. Initiatives to promote waste recycling or environmental protection such as limiting greenhouse gas emissions. 

Foreign programs. Operations undertaken to protect civil rights in developing countries where the company operates, such as the selection of certain suppliers which respect human rights. 

Product. Innovations and activities to increase the safety of final consumers. 

In practice, the CSR that is carried out by companies can be a combination of the above mentioned and originally the most common activities were financial donations.