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Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable — to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society including economic, social, and environmental. To engage in CSR means that, in the normal course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to it.[1]

“Corporate social responsibility”, or CSR, is typically understood as actions by businesses that are:
(i) not legally required, and
(ii) intended to benefit parties other than the corporation (where benefits to the corporation are understood in terms of return on equity, return on assets, or some other measure of financial performance).
The parties who benefit may be more or less closely associated with the firm itself; they may be the firm’s own employees or people in distant lands.

A famous example of CSR involves the pharmaceutical company Merck. In the late 1970s, Merck was developing a drug to treat parasites in livestock, and it was discovered that a version of the drug might be used treat River Blindness, a disease that causes debilitating itching, pain, and eventually blindness. The problem was that the drug would cost millions of dollars to develop, and would generate little or no revenue for Merck, since the people afflicted with River Blindness—millions of sub-Saharan Africans—were too poor to afford it. In the end, Merck decided to develop the drug. As expected, it was effective in treating River Blindness, but Merck made no money from it. As of this writing in 2016, Merck, now in concert with several nongovernmental organizations, continues to manufacture and distribute the drug for free throughout the developing world.

Corporate social responsibility, or CSR, is not the only term that business ethicists use to describe actions like Merck’s. They might also be described as an example of “corporate citizenship” or “corporate sustainability” (Crane, Matten, & Moon 2008; cf. Néron & Norman 2008). It is doubtful that anything important hangs on one’s choice of labels.

The scholarly literature on CSR is dominated by social scientists. Their question is typically whether, when, and how socially responsible actions benefit firms financially. The conventional wisdom seems to be that there is a slight positive correlation between corporate social performance and corporate financial performance, but it is unclear which way the causality goes (Margolis & Walsh 2003; Orlitzky et al. 2003; Vogel 2005). That is, it is not clear whether prosocial behavior by firms causes them to be rewarded financially (e.g., by consumers who value their behavior), or whether financial success causes firms to engage in more prosocial behaviors (e.g., by freeing up resources that would otherwise be spent on core business functions). Since our concern is with normative questions, we will focus on moral reasons for and against CSR.

Some writers connect the debate about CSR with the debate about the ends of corporate governance. Thus Friedman (1970) objects to CSR, saying that managers should be maximizing shareholder wealth instead. Stakeholder theory is thought to be more accommodating of prosocial activity by firms, since it permits firms to do things other than increase shareholder wealth. But we do not need to see the debate about CSR as arguments about the proper ends of corporate governance. We can see it as a debate about the means to those ends, with some arguing, and others denying, that certain acts of prosocial behavior are required no matter what ends a firm pursues.

Many writers give broadly consequentialist reasons for CSR. The arguments tend to go as follows:
(1) there are serious problems in the world, such as poverty, conflict, environmental degradation, and so on;
(2) any agent with the resources and knowledge necessary to ameliorate these problems has a moral responsibility to do so, assuming the costs they incur on themselves are not great;
(3) firms have the resources and knowledge necessary to ameliorate these problems without incurring great costs; therefore,
(4) firms should ameliorate these problems. The view that someone should do something about the world’s problems seems clearly true to many people. Not only is there an opportunity to increase social welfare by alleviating suffering, suffering people may also have a right to assistance. The controversial issue is who should do something to help, and how much they should do. Thus defenders of the above argument focus most of their attention on establishing that firms have these duties, against those who say that these duties are properly assigned to states or individuals. O. O’Neill (2001) and Wettstein (2009) argue that firms are “agents of justice”, much like states and individuals, and have duties to aid the needy. Strudler (2017) legitimates altruistic behavior by firms by undermining the claim that shareholders own them, and so are owed their surplus wealth. Hsieh (2004) says that, even if we concede that firms do not have social obligations, individuals have them, and the best way for many individuals to discharge them is through the activities of their firms (see also McMahon 2013).

Debates about CSR are not just debates about whether specific social ills should be addressed by specific corporations. They are also debates about what sort of society we want to live in. While acknowledging that firms benefit society through CSR, Brenkert (1992b) thinks it is a mistake for people to encourage firms to engage in CSR as a practice. When we do so, he says, we cede a portion of the public sphere to private actors. Instead of deciding together how we want to ameliorate social ills affecting our fellow community members, we leave it up to private organizations to decide what to do. Instead of sharpening our skills of democracy through deliberation, and reaffirming social bonds through mutual aid, we allow our skills and bonds to atrophy through disuse.[2]


References

  1. Definition of Corporate Social Responsibility (CSR) Investopedia
  2. Explaining Corporate Social Responsibility Stanford University