The case for an independent body with power and resources which oversees the behaviour of firms globally

Introduction

Moon (2002) contends that Corporate Social Responsibility (CSR) “is only one of several terms in currency designed to capture the practices and norms of new business-society relations. There are contending names, concepts or appellations for corporate social responsibility” (p. 3). Addressing this “business-society relations”, in a phrase he coined “the triple bottom line” (TBL), Elkington (1994) argues that for companies to be socially and environmentally responsible, they ought to be able to account not only for profit or economic value, they also must be responsible for people and the planet. Along similar lines Carroll (1983) argues that:

To be socially responsible then means that profitability and obedience to the law are foremost conditions when discussing the firm’s ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent (p. 508)

For Handy (2002):

The purpose of a business is not to make profit, full stop. It is to make a profit in order to enable it to do something more or better. What that ‘something’ is becomes the real justification for the existence of the business (HBR, p.4)

Consequently, this essay seeks to explore Corporate Social Responsibility, ethics and sustainability in business, and the role of an independent body which sets the agenda and regulate businesses to behave responsibly.

Corporate social responsibility

The needs of the different actors vary in terms of CSR, in some cases substantially. Primary actors in this field include governments, the media, customers, people, shareholders, companies, the environment and non-governmental organisations (NGOs). Through history we have learnt that public opinion is crucial in bringing about social change, examples include the Vietnam War and Civil Rights Movement in the US. Once the public started seeing pictures in newspapers and visual coverage on TV, the emotional distance between the public and these phenomena suddenly reduced significantly. These stories invoked public debates, and empathy shifted towards the victims as their side of the story unfolded, and the people started asking new questions. Strengthening this theory, Boyd (1994) argues that “news journalism has broadly agreed set of values, often referred to as ‘newsworthiness’”. Newsworthiness is simply stories that are deemed worthwhile for news reporting, and they often fall within the twelve criteria set out by Galtung and Ruge (1965).

Carroll (1979) argues that CSR “encompasses the economic, legal, ethical and discretionary expectations that society has of organisations at a given point in time” (p. 500). Time is important in Carroll’s argument. In recent years we have seen changes in public opinion through news reporting, education, and public awareness campaigns by NGOs and other pressure groups. NGOs are often very sophisticated in using the media (both mainstream and social media) to move their agenda forward. Their investigative reporting has been responsible for exposure of unethical practices of Multinational Enterprises (MNEs), especially in developing countries. For example, social media is often used to spread messages, disseminate ideas, update members, recruit volunteers, fundraise, and inspire calls to action. These activities have resulted in demands from the public for transparency from companies, thereby forcing governments to put in place legislations to address some of these challenges. However, critics will argue that we still have a long way to go.

Carroll (1983) advanced that: “corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive” (p. 608). Even though scholars like Sheehy (2015) once described CSR as a type of international private business self-regulation, elements of CSR have now evolved from company policies to legal requirements — especially in the West. For example, we see the UK government not just tackling tax evasion, but also incorporating tax avoidance and money laundering into the legal framework. We also see the recent Modern Slavery Act 2018, in a bid to address abuse and exploitation of people, especially within supply chains of MNEs.

These developments present a plethora of strategic options for businesses. This includes, compliance with the law, compliance with normative ethical standards, or going beyond these ethical norms. Sadly, we also see companies exploiting instruments of CSR as tools for competitive advantage over their rivals in areas, especially in product branding and promotion, to the extent where claims are sometimes exaggerated. And others who fail in promoting their CSR credentials effectively, leading to shrinkage in market share and position in the process. However, David (2001) argues that CSR has no bearing on company’s bottom line (p. 171). Which opens the debate between the Moral Case and the Business Case for CSR. In the spirit of this debate, Shamir (2011) maintains that the goal post has in fact shifted from the original efforts to curtail the powers of MNEs (moral case), to strategic level business strategies by MNEs (business case) (pp. 313–336).

Carroll (1991) came up with a pyramid which incorporates four elements: economic, legal, ethical and philanthropy in sequential order of priority (see figure 1 below). As a health warning Carroll mentions that these four elements are in fact in tension with each other, with the economic argument being a constant in relation to the others. It takes the shape of economic vs legal; economic vs ethical, economic vs ethical; and, or economic vs philanthropic. However, citing the work of other scholars in relation to the impact of culture on CSR priorities, Visser (2006) argues for an African context. Visser advances that, “[a]lthough no comparative empirical study has been conducted, it is speculatively argued that the order of the layers in Africa — if they are taken as an indicator of relative emphasis assigned to various responsibilities — differs from Carroll’s classic pyramid” (p. 37), (see figure 2 below).

Figure 1. Pyramid of CSR, (Carroll, 1991, p. 42)
Figure 2. Africa’s CSR Pyramid, (Visser, 2006, p. 37)

Carroll’s definition also infers the existence of a psychological contract between society and companies, thereby placing the onus on companies to ensure that they are constantly in engagement, or in tune with the demands of society to stay abreast with CSR. This stance is more of a reactionary measure as to strategic, with very strong likelihood of leaving companies in the dark. In contrast, Baden (2016) argues for a revision of Carroll’s position due to “the changing role of business in society and the power of business relative to government in the 21st century necessitates an updating and reviewing of priorities suggested by Carroll’s pyramid of CSR” (p. 14). Contrary to the Carroll’s idea of the economy being paramount in terms of priorities, citing (Kang and Wood, 1995), Baden notes that if a business must break legal and ethical law to make profit, then that business should not even exist in the first place (2016, p. 15). Highlighting the negative influence of Carroll’s pyramid in scholarship, Baden notes that such ideas give birth to the profit before ethics attitude we see in boardrooms today (2016, p15). Mentioning changes like the increase in number of foreign direct investment, power, and influence of MNEs, Baden (2016) posits:

It is concluded, based on both moral arguments and empirical research, that Carroll’s pyramid of CSR now represents the relative priorities of business responsibilities both as they ought to be, and as they currently perceived by both business and non-business respondents. (p. 14)

Citing research on the relationship of Carroll’s four responsibilities of businesses, by Aupperle (1984) and Clarkson (1988); Baden (2016) maintains that a strong inverse relationship exists between the economic and ethical domains of the pyramid, and that the more weight is given to economic concerns, and less to ethical concerns (p. 14). Therefore, “CSR is at heart primarily a moral concept, designed to highlight the responsibility of business to (as a minimum) avoid causing harm to society and the environment, or more proactively, contributing to the welfare of society and its stakeholders” (Baden, 2016, p. 15)

Business ethics

As noted in the section on CSR, by and large ethics serves as overarching framework that regulates how entities behave. Entities here include companies, organisations, governments, people, and autonomous machines. Scholars argue for two dimensions to business ethics, namely: normative business ethics and descriptive business ethics. Crane and Matten (2016) defines normative ethics as “ethical theories that propose to prescribe the morally correct way of acting (p. 86), while, “descriptive theories seek to tell us what business people actually do — and more importantly, they will help to explain why they do those things” (p. 135).

Carroll (1991) lists ethics as the third level in his pyramid, just above legal responsibilities. For Crane and Matten (2016) ethics takes the shape of a spectrum, as such in business there can be good and even bad ethics (p. 4). Crane and Matten advance that, “[b]usiness activity would be impossible if corporate directors always lied; if buyers and sellers never trusted each other; or if employees refused to ever help each other” (ibid). Advancing their argument, they define, “business ethics as the study of business situations, activities, and decision where issues of right and wrong are addressed” (2016, p. 5). But in contrast to this school of thought Duska (2000) posits that:

Business pushes one way, ethics the other. If achieving ever-increasing profit is the basic purpose and principle of business, and economic profitability is the primary and overriding factor in strategic business decisions, ethical behavior and business behavior eventually must conflict. (p. 112)

Scholarship on business practices have largely been informed from a Western perspective, and by and large these businesses have operated for selfish reasons. Sadly, Western some businesses have been known to serve as proxies in Africa and other developing countries, supporting the political agenda of their home country. They have been known to interfere with politics in foreign countries and to facilitate corruption. Some benefited from wars, slavery, colonialism, the nuclear arms race during the cold war; while others have caused ecological degradation. That said, some have also acted as catalyst of social change. This includes the philanthropic vision of Cadbury, Peabody, Rowntree, and in recent years — Microsoft, through the Melinda Gates Foundation. These firms will take the credit for their moral vision and corporate citizenship. The social housing ventures by Peabody for instance will go on to serve as a template for council housing in England.

In addition, instead of cooperation, businesses often compete. On the odd occasion when they cooperate, it is mostly to exploit the customers — hence the need for laws and regulations against cartels, oligopoly, monopoly; and other regulatory tools to protect consumers. Competition sometimes leads to companies outdoing each other to a point where a rival is forced out of business. Presenting their case for Blue Ocean Strategy, Kim and Mauborgne (2018) argue that, “while disruption may be what everyone fervently focuses on today, you don’t have to disrupt and displace others to create” (INSEAD). Thus, Kim and Mauborgne (2018) posits:

In a world where the strategic focus of organisations is on competing and disrupting, it is difficult for business leaders to do social good. From a blue ocean perspective, however, this doesn’t have to be the case — what is good for business can be good for society (ibid)

Whenever a company is displaced, or a market disrupted, while the winning firm benefit from creaming the best staff from rivals, a huge majority of others are left with no jobs. The social and economic impact on these employees, their dependants, the government and the wider society is up for debate. And the big question remains — what are the real benefits to customers when one business forces another out of business? In similar vein Marx (1848) contends that, “[t]he bourgeoisie has stripped of its halo every occupation hitherto honored and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage laborers.” (Communist Manifesto). Little wonder why in a bid to discredit proponents of business ethics in the US, they were often tagged as communists.

Sustainability

On a global scale, building on the 8 Millennium Development Goals (MGDs) in 2000, the United Nations (UN) introduced the 17 Sustainable Development Goals (SDGs) as a wider vision for its 2030 agenda for Sustainable Development. While the MDGs provided a scope and context for international development, including environmental sustainability as the 7th goal, critics argue that it was limited in scope. An impact assessment carried out by the UN in 2015 note that: “[t]he assessment of progress towards the MDGs has repeatedly shown that the poorest and those disadvantaged because of gender, age, disability or ethnicity are often bypassed” (The Millennium Development Goals Report). That same year the UN completed and introduced a bigger and ambitious agenda in the shape of the 17 SDGs, and 169 sub agendas.

In a bid to drive down cost we have seen MNEs take advantage of globalisation and technological development by moving their operations to developing countries. Global value chains are often difficult to manage for these firms because of their size and complexity. As a result, elements of operations are often outsourced to smaller providers with a view that these firms focus on their core value proposition. In some cases, this also meant that legal and ethical standards in the West are often sacrificed on the altar of profits and returns for shareholders, as they capitalise on the proximity from their home countries and lax laws in the developing world to pursue profit motives. These practices are exhaustive — including child labour, bribery, modern slavery, environmental degradation, tax evasion, and poor working conditions. Simply put, some MNEs act as if they are above the legal standards in these foreign countries, thus sustainability has to be closely linked with the TBL.

Writing on Elkington’s perspective of the TBL in relation to sustainability, Crane and Matten (2016) argue that “[Elkington’s] view of the TBL is that it represents the idea that business does not have just one single goal — namely adding economic value — but that it has an extended goal which necessitates adding environmental and social value too” (p. 33). Crane and Matten (2016), posit that “at a basic level, sustainability appears to be primarily about system maintenance, as in ensuring that our actions do not impact upon the system — for example, the Earth or the biosphere — in such a way that its long-term viability is threatened” (p. 31). For Bruntland (1987), sustainability is “[d]evelopment that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Report for the World Commission on Environment and Development). Its sphere encompasses environmental, economic and social impact (Crane and Matten, 2016, p. 33). Therefore, sustainability provides an “essential new conceptual frame for assessing not only business activities specifically, but industrial and social development more generally” (ibid).

Conclusion

Corporate Social Responsibility, Business Ethics and Sustainability serve to motivate businesses to play an active role in self-reflection and responsible practice within society, as reflected in the spirit of the TBL. However, one will fail in doing justice to these doctrines without considering the religious dimension. Religions broadly serve as human efforts to come to terms with the complexities of our world, especially around the idea of cause and effect. In our evolution it provided comfort and answers to phenomena that were beyond our comprehension.

If we take to consideration the three Abrahamic faiths, for instance, religion takes the shape of the existence of a metaphysical realm and physical identity. The metaphysical realm includes the existence of a Divine being which acts as a focal point for theology and accountability. Laws, music, poetry, folklore, relationships, customs, education, cultures, business and all other levels of human interactions are underpinned by a theological framework. On another level, it is further enhanced with foundational myths which serves as mythical stories that binds the community with a common heritage. Both dimensions provide anchors which serve to preserve the community. So, when a member of the community fails to comply with these standards they are either: exiled, punished or executed; depending on the gravity of their offence.

In the West for instance, once we moved from polytheism to monotheism, the next logical step was the idea of an invisible entity that does not necessarily need to be represented by any visual object or confined to a physical location. Then we began to articulate the possibility that this entity inspires or work through us as humans in bringing about his purpose on earth, hence we are accountable to this Divine entity when our time on earth expires. However, The Enlightenment brought about new questions. These questions forced us to begin to articulate the possibility that collectively we are in fact masters of our destiny, and there is no Divine being or entity. The conundrum however as Nietzsche (1882) realised is the fact that morality and religion in the West are in fact intertwined. In other words, while we might have been successful in proving that there is no Divine being (at least in the sense conjured in religious settings), we still adhere to moral precepts that are largely Christian — owing to our history. As such our social norms in the West are largely derived from our Christian heritage (The Gay Science).

On a global scale, businesses are faced with the moral dilemma, that in the absence of a universal metaphysical being in which we are all accountable to for our motives and actions, ethics becomes a personal or cultural construct. Furthermore, with developments in technology we are now at the stage where the role of the Divine being can be outsourced to autonomous entities. Questions include: what moral and ethical framework will these entities operate on? If they operate with our standards, we run the risk of setting standards that might seem ethical in the short term but fall short in the future. Case in point, slavery was right in many quarters in the West. In fact, it provided the funds and impetus for the industrial revolution — even the church supported and invested in it. Consequently, is it then possible for these machines to evolve to a point where they can set standards, and educate humanity about ethics, CSR and sustainability? Only time will tell.

For now, in the absence of a universal religion, ethics being shaped by cultural biases, competition for customers and scarce resources prevalent; businesses are highly unlikely to act ethically organically. Therefore, it becomes necessary to have a global standard which is championed and monitored by an independent arbiter — a role the UN can assume. With more powers and resources, the UN can take centre stage in setting global agendas around ethics, CSR, and sustainability. It will have the power also to enforce sanctions on offenders — including State actors and corporations. For we have seen through history that our challenges are often never resolved except we take responsibility to fight against the tides and bring about lasting change in our world and for all of humanity.

 

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