Corporate Social Responsibility and Duty of Care
Part II: Corporate Social Responsibility and Duty of Care
Continuing on with the Duty of Care Series, in this second article I will discuss the social responsibilities ascribed to organisations and examine how expectations from external stakeholder’s affect decision making in an organisation.
Over recent decades, corporate social responsibility (CSR) has become a social imperative, creating an impetus for many organisation’s to prioritise it in their business strategies. As an evolving concept, with many meanings and implications attached, the social responsibility of organisations (role, mandate, scope) has been interpreted in many ways; regulation in the area extends from self-regulation to binding national legislation, creating further variations in its implementation. For the purpose of this article, I define CSR as social norms that require organisations to look beyond profit, evaluating the impact that their business has on society, the environment, and all stakeholders involved.
The positive aspects of CSR have been well publicised as having a distinct impact on brand loyalty, reputation, operations, employee retention, profit margins, and more. A 2016 study on employee engagement found that 64% of millennials will not work for a company that does not have a strong CSR practises, and more radically, 75% would be willing to take a pay cut to work for a company they considered socially responsible. Nonetheless, not all organisations voluntarily embrace social responsibility. Furthermore, even when CSR is conducted, it is not always strategically executed, as demonstrated by scandals made public in the media. Prominently, while running their ‘Clean Diesel’ campaign, Volkswagen was exposed in the media for manipulating their emissions testing. They had successfully curated the image of an environmentally friendly car manufacturer, winning several environmental awards. However, when it was subsequently revealed that they were operating fraudulently, they lost the trust of consumers and have been struggling to regain it ever since. Nike, Apple, H&M, Abercrombie, and many other global brands have similarly come under fire for irresponsible practises. Despite the strong business case for CSR, it often becomes a reactionary policy or programme after corporations see how failing to meet public expectations and pressure can directly influence their bottom line. The cost of ignoring the changing social norms and pressure to conduct socially responsible business can be exorbitant; however, the Volkswagen case also demonstrates that acquiescing presents a distinct set of risks.
All this is not to say that CSR is bad; but rather, if it is not strategically implemented, it can create an array of risks that often detract from any benefits that it created in the first place. The successful employment of CSR is not only running a profitable and sustainable business while living up to a high standard of moral values; more significantly, it involves embedding values of social responsibility into an organisation’s culture. The motivation behind CSR cannot strictly be complying with external norms to avoid negative consequences. In order for CSR to live up to its potential, there needs to be intrinsic motivation.
The imperative behind social responsibility varies, often depending on the values of society and the importance ascribed to certain issues. Meyer and Rowan (1977) claim that organisational rationality is not objective, but rather reflects social realities stemming from history, geography, and culture. This means, that depending on where they operate, multinational corporations are subject to different perceptions and expectations regarding their responsibilities. This makes it hard to set a baseline position that fits the organisation across borders, as in some markets it could mean that the policy rules exceed local expectations, while simultaneously operating below best practise in others. Further complicating this issue is the fact that values and norms fluctuate over time.
When it comes to certain issues, such as protecting the environment or refraining from the use of child labour, the need for CSR seems more apparent. However, responsibility is just as crucial when it comes to protecting employees from harm at the workplace, the core of duty of care (DoC). While not always perceived as such, it is my contention that CSR and DoC go hand-in-hand.
CSR has influenced the impetus behind the growth of the DoC concept; and in many ways, the two imperatives parallel each other, encouraging organisations to hold themselves accountable to the impact that they have on their stakeholders and the broader environment. From this perspective, the DoC concept can be considered to be an extension of CSR and the moral duties that this imposes on organisations. However, where the two concepts diverge is in regard to the objects of responsibility. The concept of CSR suggests that organisations have a responsibility towards society and the world around them. DoC on the other hand is primarily concerned with the responsibility of employers towards their employees and affiliated personnel. Thus, CSR looks outwards and embeds the organisation in a broader context, whereas DoC looks inwards to establish safe working conditions and attention to the wellbeing of the staff. Importantly, 3
DoC pervades the entire organisation. As a duty, it is not something that can be ‘managed away’; nor can it be relegated in hard times.
While not exclusively economically rational, engaging in this responsibility has the potential to bring significant value to an organisation. However, this value becomes diluted if it is strictly in response to external demands and operates as a compliance/audit function. In order for DoC to be truly business enabling, it cannot just be more commitment or boxes to tick; it must complement (and ideally enhance) existing operating procedures. While it is true that in order to remain relevant a company must be responsive to societal expectations, in order for DoC to be truly effective, the motivation must be intrinsic and corporations must embed this responsibility into the organisation. That is, DoC has to be integrated into the organisation such that company management and employees at all levels think and act responsibly, in lockstep.
If you have questions or comments, please contact Søren Bisgaard Vase (sbv@guardian-srm.com), Head of Analysis at Guardian-srm or Isha Pinto (ish@guardian-srm.com), Consultant.