Strategic Corporate Social Responsibility – David Chandler –
5TH Edition
Chapter One – What is CSR?
CSR is both critical and controversial. It is critical because the for-profit sector is the largest and most
innovative part of any free society’s economy. Fifty years ago, if you wanted to do the most social
good in your career, you’d enter public service (politics or nonprofits. Today, business is the more
effective vehicle for social good.
At the same time, CSR remains controversial. People who have thought deeply about ‘Why
does a business exist?’ or ‘What does profit represent?’ do not agree on the answers. In spite of the
rising importance of CSR, many still draw on the views of the Nobel Prize–winning economist Milton
Friedman to argue that society benefits most when firms focus purely on financial success. Others look
to the views of business leaders who have argued for a broader perspective.
The entirety of CSR can be discerned from the three words this phrase contains. CSR (Corporate
Social Responsibility) covers the relationship between corporations (or other for-profit firms) and the
societies with which they interact, focusing on the responsibilities that are inherent on both sides of
these ties. CSR defines society in its widest sense, and on many levels, to include all stakeholder
groups that maintain an ongoing interest in the firm’s operations. Stakeholder groups range from
clearly defined customers, employees, suppliers, reditors, and regulating authorities to other, more
amorphous constituents, such as the media and local communities.
While the corporate social responsibility hierarchy grid (Figure 1.1.) is useful, however, this typology
is not rigid. One of the central arguments of this book is that what was ethical or even discretionary is
becoming increasingly necessary due to the shifting expectations placed on firms. Yesterday’s ethical
responsibilities can quickly become today’s economic and legal necessities. Definitions, therefore, can
and do evolve. It seems that, in terms of CSR, the variance is considerable, with at least five
dimensions identified: environmental, social, economic, stakeholder, and “voluntariness.” And, of
course, there is variance not only within countries over time, but also across countries and cultures.
For the purposes of this book, it is important to emphasize that CSR is both a means
and an end. It is an integral element of the firm’s strategy—the way the firm goes about delivering its
products or services to markets (means). It is also a way of maintaining the legitimacy of the firm’s
actions in the larger society by bringing stakeholder concerns to the foreground (end). Simply put,
,CSR encourages a firm to manage its stakeholder relations because these ties are essential to its
success and, ultimately, its survival.
The call for social responsibility from businesses is not new. While specific issues may change,
societies have always made demands of firms. In short, “the pursuit of profit has been ‘unloved’ since
Socrates declared that ‘the more [men] think of making a fortune, the less they think of virtue.’”
Although crude and lacking the efficient communication that protests could be effective—initially in
terms social media enables today, it is clear that these early consumer-led protests paved the
way for today’s “politics of consumption. All business decisions have both economic and social
consequences. The trick to success is to manage the conflicting interests of stakeholders in order to
meet their ever-evolving needs and concerns. In short, it is in the best interest of any organization (for-
profit, nonprofit, or governmental) to anticipate, reflect, and strive to meet the changing needs of its
stakeholders. In the case of a for-profit firm, the primary stakeholder groups are its employees and
customers, without whose support the business fails. Other constituents, however, from suppliers to
shareholders to the local community, also matter. Firms must satisfy these core constituents if they
hope to remain viable over the long term. When the expectations of different stakeholders conflict,
CSR enters a gray area, and management has to negotiate among competing interests. An important
part of that conflict arises from different expectations, which, in turn, reflect different approaches to
CSR.
Strategic CSR represents an argument for a firm’s economic interests, where satisfying stakeholder
needs is central to retaining societal legitimacy (and achieving financial viability).
The danger of promoting a perspective of CSR that focuses primarily on its strategic value to
the firm is that the ethical and moral foundations on which much of the CSR debate rests are
ignored.
The advantage of making the business case for CSR is that it is more convincing to those most
skeptical of broadening the firm’s responsibilities and, as a result, is more likely to be
implemented.
In other words, the business case is expedient—it offers the greatest potential gain because it will
appeal to the widest possible audience of people who need to be convinced. There are three essential
components encapsulated within the concept of business ethics: normative, descriptive, and practical
ethics:
Normative ethics draws on moral philosophy to categorize individual actions as either right or
wrong in specific situations.
Descriptive ethics explains why individuals make these right or wrong decisions
Practical ethics applies ethical principles that determine right and wrong actions to day-to-day
decision making.
Underpinning each of these three core components, of course, is the assumption that right and wrong
can be determined. CSR states that, rather than being relative constructs (i.e., varying from individual
to individual and culture to culture), ethical values are absolute (i.e., inalienable rights that are
consistent across cultures and applicable to all humans). Absolute values are easily definable and, as
such, exist as a standard against which behavior can be assessed.
An ethical argument for CSR essentially rests on one of two philosophical approaches—
consequentialist reasoning or categorical reasoning.
Consequentialist (or teleological) reasoning locates ethicality in terms of the outcomes caused
by an action.
Categorical (or deontological) reasoning “is defined as embodying those activities which
reflect a consideration of one’s duty or obligation.” As such, categorical reasoning represents
more of a process orientation than the outcome-oriented focus of consequentialist reasoning.
The violation of a society’s cultural heritage and ethical principles regarding issues of social justice,
human rights, or environmental stewardship, for example, is unethical and socially irresponsible. This
logic is the foundation of the social contract, which is based on societal expectations that bind firms
because compliance is directly related to a social license to operate. In terms of application, therefore,
,the two ethical perspectives are realized in norms: “those standards . . . which have been accepted by
the organization, the industry, the profession, or society as necessary for the proper functioning of
business.”
The moral argument for CSR mentions that, although profits are necessary for any business to survive,
firms are able to obtain those profits only because of the society in which they operate. All of the
firm’s stakeholders (even internal stakeholders, such as employees) exist primarily as members of a
society. Without that social context, there is no marketplace in which firms can compete. CSR emerges
from this symbiotic relationship between business and society. It is shaped by individual and societal
standards of morality that define contemporary views of right and wrong.
The rational argument for CSR is summarized by the Iron Law of Social Responsibility, which means
that in a democratic society, power is removed from those who abuse it. In addition to avoiding
ethical, moral, legal, and other societal sanctions, incorporating CSR into a firm’s operations and
strategic planning offers a potential point of differentiation and competitive market advantage upon
which future success can be built.
The economic argument notes that CSR influences all aspects of day-to-day operations. Everything a
firm does causes it to interact with one or more of its stakeholder groups. As a result, companies are
best served by building positive relationships with as many stakeholders as possible. An important
distinction that helps explain the particular value of the economic argument is between an effective
business model and a broader, more sustainable model for (all) business. In other words, rather than
focusing on what works in isolation, it is more effective to establish what works economy-wide.
Chapter Two – The driving forces of CSR
CSR is essential because it is synonymous with all aspects of business operations. Consumers want to
purchase products from firms they trust; suppliers want to work with firms on which they can rely;
employees want to work for firms that make them proud; large investment funds want to support firms
that are well managed; and non-profits and NGOs want to partner with firms seeking practical
solutions to common goals. Satisfying each of these stakeholder groups (and others) allows firms to
achieve their ultimate purpose, which is to create value and contribute to society.
This is an abstract argument, however. In order for CSR to be convincing, it is necessary to
place it in a contemporary context and make a practical case for its application. CSR is crucial to
business success because it provides firms with a set of operating principles around which their
multiple stakeholders can rally. In particular, CSR is an integral component of strategy that is
increasingly relevant due to five identifiable trends—trends that will continue to grow in importance
throughout the 21st century. Any one of these drivers (affluence, sustainability, globalization,
communication, or brands) might be ignored by managers unconvinced of the strategic value of CSR.
Collectively, however, these forces are reshaping the operating environment by empowering
stakeholder groups. And because they overlap, the interactive effects ensure that this complex context
will not only continue to change, but will increase at an rapid rate as well.
Affluence
Social issues tend to gain a foothold in societies that are more affluent—societies where people have
jobs, savings, and security, and can afford the luxury. Because they have a higher standard of living,
they expect more from the firms whose products they buy. A poor society, in need of inward
investment and economic development, is simply looking to provide basic transportation solutions to
its population, so it is less likely to enforce strict regulations and penalize firms that might otherwise
take their business elsewhere. As societies become increasingly affluent, the collective understanding
of social issues like pollution grows, as does society’s ability to afford effective solutions. While
affluence drives CSR, the concept of being better off is relative. In other words, we judge our own
wealth by comparing it to the wealth of others. Although we can clearly measure affluence on an
objective scale (i.e., we know we are wealthier today than we were 100 years ago), this relative
, measure matters to us. This matters because the relationship between inequality and social stability is
strong, with one reinforcing the other—as inequality rises, stability falls.
While growing affluence increases the demands societies place on firms, decreasing affluence
(e.g., during a recession) is also an important driver of CSR. In particular, decreasing relative affluence
(or income/wealth inequality) greatly increases resentment among segments of the population, which
can lead to altered power balances within a country. As such, it is shortsighted to assume that CSR is
applicable only where there is affluence.
In addition to reflecting local concerns, such protests demonstrate that stakeholders living in
affluent societies are willing to impose their values on firms that operate overseas. As a result of such
domestic pressure, firms such as Nike, GAP, and Apple now require their subcontractors to provide
wages and working conditions above local norms. Even so, activists continue to advocate for higher
standards, criticizing the pay and conditions of subcontractors that are below those in developed
countries, such as the United States. Due to such activism, developed-country living standards (and the
expectations that accompany them) are rapidly diffusing throughout the world. The obvious
conclusion is that competitive strategies must consider the ever-shifting pattern of expectations placed
on firms by the greater choices (and challenges) that affluence affords societies. As society becomes
more complex, this task will become more difficult.
Sustainability
The impact of heightened affluence and changing societal expectations is enhanced by a growing
concern for the environment. The speed at which we are approaching our planet’s limits and the
potential consequences of our actions are complicated issues about which experts do not agree. What
is not in doubt, however, is that human economic activity is depleting the world’s resources and
causing dramatic changes to the Earth’s atmosphere—changes that could become irreversible in the
near future. As a result of this heightened awareness, sustainability will increasingly drive CSR. And
firms that are perceived to be indifferent to their environmental responsibilities will be punished by
stakeholders.
In particular, we need to be more efficient in our resource utilization—extracting fewer raw
materials and recycling (ideally upcycling) a much higher percentage of the resources we use. Because
waste is inherent to GDP growth (our economic model prefers us to replace our cars every three years
rather than ten and buy disposable products rather than ones we can reuse), and because the supply of
raw materials is finite, it is essential that we use resources more effectively. Some CSR advocates see
waste as a fault in our economic model and call for a revolution. The argument presented in this book,
however, seeks evolution—reforming the current system to create value broadly by integrating a CSR
perspective into firm strategy and throughout operations. But it is only by focusing on the system as a
whole that lasting change can occur. While there is much progress still to be made, stakeholder
awareness of sustainability will ensure that progressive firms can secure market share and competitive
differentiation by integrating CSR throughout strategic planning and day-to-day operations.
Globalization
Operating in multiple countries and cultures magnifies the complexity of business exponentially.
There are not only more laws and regulations to interpret, but also many more social norms and
cultural subtleties to navigate. While globalization has increased the potential for efficiencies gained
from operations across borders, it has also increased the potential to be exposed on a global stage if a
firm’s actions fail to meet the needs and expectations of its stakeholders. The Internet, which drives
this global environment, is a powerful enabling tool for communication, transportation, trade, and
international capital flows. In the process of connecting over large distances, however, the Internet
initially reduced our sense of an immediate community. This, in turn, affected business’s sense of self-
interest and loosened the self-regulating incentive to maintain strong local ties.
Yet, as globalization progresses, information is communicated more efficiently. As result, the
world grows smaller, and societies return to the conditions under with widespread Internet access
allowing anyone with a phone to broadcast what they witness worldwide. These ideas are expressed in
