Corporate Social Responsibility and Globalization: A Reassessment
by Randall Frost, Ph.D
Introduction
Social responsibility, in one form or another, has been on the minds
of businesses for
over 100 years. In the late 19th century, U.S. pharmaceutical
companies established codes of conduct that stressed their need
to serve public health while making profits. In 1977, the Reverend
Leon Sullivan proposed a human rights code -- later expanded into
the Global
Sullivan Principles of Social Responsibility -- for companies
doing business in South Africa. At the launch, UN Secretary General
Kofi Annan declared, “Enlightened business leaders recognize
that their reputations and even their bottom lines are intimately
tied to good corporate citizenship.”
The
United Nations' Global Compact on corporate citizenship represents
an international attempt to make globalization more stable by establishing
a set of common values. Among the areas covered by that document
are human rights; freedom of association, child and forced labor;
anti-discrimination; and environmental protection. Georg Kell, executive
head of the Global Compact, told The Financial Times in
February 2003, "The only hope we have is to make globalization
work, as poverty is caused by too little globalization, not too
much.”
By the 1980s, over 100 mutual funds and investment funds were screening
investments for human rights or environmental records. But the current
idea of social activists telling large corporations how to run their
businesses -- and companies listening -- is much newer. Nevertheless,
responding to issues of corporate social responsibility (CSR) has
today become integral to the way many large businesses operate.
In March 2002, Starbuck's vice-president of corporate social responsibility
told The Financial Times, “Activists play a vital
and vibrant role in our continued growth and evaluation of who we
are as a company.” As the following examples show, Starbuck's
is not alone.
- Following criticism of its labor practices in El Salvador and
elsewhere, Gap established a Code
of Vendor Conduct and hired 80 compliance officers to oversee
labor, health and safety issues in its contract operations around
the world.
- After Shell Oil was spotlighted trying to sink an oil platform
in the North Atlantic in 1996, and then accused of ecological
and labor abuses in Nigeria, the company began reporting on its
global social and environmental efforts. It also initiated US$50
million in annual
social investments in Nigeria.
- In response to outside criticism, Chiquita Brands obtained
independent
certification for its 119 banana farms in Central and South
America and upgraded its operations to reduce the use of chemicals.
Why CSR?
One argument for increased social responsibility on the part of
transnational companies is that because these companies have reaped
the benefits of globalization, including privatization, deregulation
and freeing of international trade and investment flows, they should
assume more of the burdens of social responsibility.
Many corporate executives have argued that social responsibility
is just a public relations exercise that companies sign up to because
their competitors have. Some activists apparently agree. George
Monbiot told The Observer (London), "CSR is a public
relations device designed to throw sand in our eyes." This
view was seconded by Kelly Dent, program director of a labor rights
non-government organization in Sri Lanka, she told The Observer,
“Corporate responsibility has become a PR tool of transnational
corporations to convince consumers it's okay to keep buying.”
Although intentions behind implementing CSR practices may be varied,
Daniel T. Griswold, associate director of the Cato
Institute's Center for Trade Policy Studies in Washington, D.C.,
explains the underlying benefits. “Corporations have a certain
strength and that is providing goods and services that satisfy customers.
. . [T]hat is their greatest social contribution. When corporations
increase competition in an economy and provide not only goods and
services but employment and other economic opportunities, they are
making a tremendous contribution to the social welfare of that country.”
Does CSR affect the bottom line?
Some activists have argued that adopting CSR standards allows companies
to build brand value by imbuing their brands with ideas, emotions
and beliefs that appeal to consumers. They have also purported that
the cost of building brand value with social responsibility initiatives
is usually cheaper than trying to achieve the same effect through
advertising and public relations.
But many corporate executives disagree. Ben Stimson, group head
of a British broadcasting service, told Brand Strategy in 2002,
“I don't see any evidence in the short term that successful
community programs increase sales. . . CSR is not so important for
the immediate bottom-line impact as the longer-term positive effects
on reputation.”
The Cato Institute's William A. Niskanen goes even further, “I
would not personally invest in any business that sacrifices the
interests of its shareholders for some other objective [because]
any dilution of the objectives of a business is likely to lead to
behavior that does not serve any group very well.” Seemingly,
in accord with Niskanen's position is the study's findings that
the stocks of companies that scored well on social and environmental
issues did not always perform as well as others in the same industry.
But other studies have suggested that consumers do respond to CSR
indices. In 2002, The Financial Times cited surveys showing
that 75 to 80 percent of British consumers were inclined to reward
companies for being “good corporate citizens,” and 20
percent were likely to punish the “bad-doers.”
Philosopher David Schmidtz states, “I think what multinational
companies do in foreign companies should be done with more publicity,
for better or worse. Companies should resolve to run businesses
they can be proud of . . . .” By running a business that the
community, local and global, can be “proud” of, corporations
are able to create a climate of compassion that could likely translate
into consumer support.
This article originally appeared at aWorldConnected.org. Visit
http://www.aworldconnected.org/article.php/524.htm
to read the full piece.
Randall Frost, Ph.D. is a freelance journalist based in Pleasanton,
California. His work has appeared on CBSHealthWatch, on brandchannel.com,
in The New England Financial Journal and in a variety of
educational publications.
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