BUSS4 CSR Research Bullet 4

What factors determine the extent to which a business is socially responsible? Here are some outline thoughts to support research bullet 4

The fourth research bullet asks students to consider the: Factors that determine the extent to which a business is socially responsible

Definitions
Interdependence: when two or more things depend on each other (i.e. business and society)
Enlightened self-interest: acting in a way that is costly or inconvenient at present, but which is believed to be in one’s best interest in the long term. E.g. firms accepting some short term costs (lower profits) in return for long-term gains

Key Theory
The difference between what society requires of a business (laws, regulations) and what it expects of them
Self-regulation: can businesses be left alone to look after their affairs in a socially-responsible way?

Factors increasing extent of social responsibility
Nature of business ownership: e.g. social enterprises take on full extent of CSR (3 Ps - profit, planet & people)
Location of business: e.g. firms operating in Northern Europe have a tradition of greater adoption of CSR
Corporate culture & management style: direct influence on CSR. Younger management increasingly supporting CSR
Strength & influence of stakeholder pressure - role of media, NGOs, customers increasingly important
The higher the potential risks / costs; the higher the extent of CSR

Factors reducing extent of social responsibility
Smaller businesses may feel under less perssure to adopt CSR - less perceived risk of being caught out
Where key competitors are not gaining an advantage from CSR activities
Management styles and corporate culture which ignores or dismisses the requirements of CSR
Where businesses are controlled by a dominant owner - makes them less accountable to a broader shareholder base

Examples / Evidence
Some reasons why CSR has become “mainstream” (i.e. almost expected of business?):
- Expectations of companies have risen
- Consumers much more aware of the actions of firms
- Increased scrutiny by NGOs and pressure groups
- Business reputation is at risk if they are found to have behaved inappropriately
- Environmental concerns - state of the planet
- Increasing focus on risk management

Increasing take-up of CSR because of the perceived opportunity;
- Attracting, motivating and retaining the best people
- Need to be an organisation which top people want to work for
- Green agenda: opportunity to reduce operating costs as well as innovate to create new products and services
- A mindset of being closely attuned to changing customer and market needs

Various rankings attempt to measure the extent of / reputation for CSR - but how calculated?

“Depends on” Factors
The nature of the firm’s product: can firms which make things that are bad for society ever be socially responsible? (e.g tobacoo firms; arms manufacturers)
The extent of public scrutiny of the industry in which firms operate
The potential threat to firms from government legislation or formal regulation if the industry fails to meet acceptable standards of social responsibility

Possible Evaluation Arguments
How do we measure how “socially responsible” a business is? There is no consistent, objective measure - it is highly subjective
Absence of integrated social reporting makes comparison between firms almost impossible
The standards of what society considers to be responsible behaviour are constantly changing - the emergence of the sustainability agenda has almost certainly raised the bar higher than 5-10 years ago