John D. Rockefeller the founder of Standard Oil Company started to distribute dimes to children on the street on the advice from a public relation expert. He thought that this gesture would help to counteract his bad reputation of being a ruthless monopolist who eliminated his competition in the oil industry. John Rockefeller was implementing an example of Corporate Social Responsibility (CSR) .
Events around the world during the last decades have accentuate the need for corporate ethics. Their stakeholders, governments and international organizations need to take the issue of Corporate Social responsibility seriously. Life threatening incidents over the years such as the explosion at Union Carbide in Bhopal, India in 1984, the oil spillage at Prince William Sound, Alaska USA in 1989, a few corporate scandals example the mirror group UK 1991, Bank of credit and commerce International 1991 UK ,Enron USA 2001. Other issues such as global warming, human rights abuses, terrorism, climate change, globilization of the world economy . These problems affect how entities conduct the operational practices. These practices consequently impose on how corporate entities recognize their responsibilities to societies, and in turn societies’ expectation from corporate entities have increased.1
The idea of CSR has placed corporation not only in the position to be responsible for economic and legal obligations but also to a responsibility to society which extends beyond these obligations. In the 1920’s before the stock market crashed the doctrine of self interest was dominant. People’s interest was to make as much money as possible and to maximize profits 2
However concepts started to change during the great depression. Managers were now forced to balance interest of all stakeholders who pressured companies to use their wealth to meet the needs of society. This stage marked the first time for organizations to become socially responsible in order to survive. In the 1960’s CSR moved onto another stage. This period was marked by the quality of life management in which managers were now expected to manage the quality of life by helping to solve problems such as pollution and poverty at both local and national levels. They were expected to become involved in activities in their communities that improved the quality of life.2
Today CSR has reached the stage of life management . Two principles provide the basis for CSR today. According to Durnham and Pierce one is the principle of charity, that is people who have should give to those who do not. This belief is the foundation that organizations should practice philanthropy The other principle is that of stewardship that is when companies meet their obligations to society they can gain their power and wealth in so doing.2
CSR has grown fast and smoothly over the last 20yrs as companies strive to make operations more ethical. However it seems that companies were implementing CSR to counteract the damage on both sales and reputation caused by activist and stakeholders who were vigilantly monitoring their ethical bahavior.3
Countries may be affected differently by CSR example issues such as poverty, HIV/Aids, Country’s inability to repay international debt, the absence of electricity or running water whilst other issues of carbon oxide emissions , money laundering which may affect all countries but only made public in more industrialized countries.6
CSR is warmly embraced around the world since the 1980’s and are being revived. Entities around the globe are acknowledging that if they wish to compete successfully and survive in the modern markets they must incorporate CSR and satisfy stakeholders demands in this regard Doing “good” is now perceived as being trendy and rewarding if not immediate then absolutely in the longer term. 6
Companies are recognizing that CSR helps protect one’s reputation which in turn protect sale, share price and profits. One business ethics report suggested that companies with ethical commitments have an 18 percent higher profit than their competitor. Activist continue to attack companies on their behavior and make them aware that some of the issues they need to consider an example of this is the case of Nike v Kasky . Kasky a California based activist took Nike all the way to the supreme court. He claimed that Nike mislead the public about working conditions for Vietnamese, Chinese and Indonesians laborers. Before the case was tried a settlement was made in which Nike agreed to make an additional workplace related investment of $1.5 million to the Fair Labor Association. Nike also agreed to advocate corporate transparency. 9
During the 1990’s a number of CSR reporting initiative were established one is the Global Reporting Initiative(GRI) . This report was done by Multi stakeholder together with an independent institution and their mission is to develop and disseminate globally applicable sustainable reporting guidelines.
The role of the UK government in the aspect of CSR has been significant. . Because of the influences of the European Union it became necessary for the UK government to issue Parliamentary Acts such as the Disability Discrimination Act 1995, Data Protection Act 1998, Human Right Act 1998 to name a few. All these were concerted efforts by government to ensure that employees had legal protection during employment. 6
DEFINITION AND THEORY
CSR have been variously defined but all the recent definitions have one common theme : they all state that modern business must be aware of the economic, social and environmental impact of their operations and actions on both their stakeholders and the natural environment. This will require them to minimize the adverse effects and maximize the consequential benefits of their action on stakeholders and the environment.
One expert defined Corporate Social Responsibility (CSR) as “the notion that corporations have an obligation to constituent groups in society other than stakeholders and beyond that prescribed by law or union contract”. 1 According to Kotler4 CSR is “a commitment to improve community well being through discretionary business practices and contributions or corporate resources”. We can focus on the word discretionary and point to note is that the activities are not law imposed but voluntary . This commitment by corporations is to put into practice contribution and ethical practices.
CSR is the ethical behavior of a company towards society, that is management acting responsibly towards other stakeholders who have a legitimate interest in the business. It is the commitment by businesses to behave in an ethical manner and contribute to economic development while improving the quality of life of the workforce and their families as well as the local communities and society at large.8
Nancy Lockwood, a researcher for the society for human resource management said: “Establishing a positive company reputation and brand in the public eye through good work that yield a competitive edge while at the same time contribute to others demands”1. Companies are now forced to shift from solely making profit to consider the responsibility to the environment and social responsibility in their business strategies. An example of this is the Body Shop5 . when the body shop was acquired by Loreal, customers and CSR activist were appalled. The body shop was well known for its display of ethics regarding many issues one being they were in opposition of animal testing, campaigning for human rights and building self esteem. Loreal on the other hand were severely criticized for animal testing and for exploiting women and creating insecurities in women. Customers felt betrayed and so decided to boycott the body shop products. The results was that the body shop reassured their customers that they have not compromised their values and ethics however they said that they are using this as an opportunity to extend their values to Loreal In addition to that they assured their customers that they will continue to operate as an independent entity. This case clearly emphasizes that displays of CSR was very important to the existence of the body shop.
The newest theory of social responsibility is called sustainability. This refers to the idea that socially responsible companies will out perform their peers as they focus on the world’s social problems and view these as opportunities to build profits and help the world at the same time. Another theorist said that total CSR has four components : economic, legal, ethical and philanthropic . Therefore as companies make profits they are required to obey the law (legal responsibility) and do what is right, just and fair(ethical responsibility) and be good corporate citizens(philanthropic responsibility).7
THE BRITISH AMERICAN TOBACCO
The British American Tobacco (BAT) an international tobacco company, during the years have had their share of trouble with increased litigation giving negative attention on the industry.. One notable case was the Carter case in Florida, Grady Carter who was a lifetime smoker contracted lung cancer. He was awarded $750,000 in damages by the Brown and Williamson Tobacco Corp. a subsidiary of BAT. The trouble did not end as the US Justice department is trying to have the industry pay $289 Billion for lying about the risks of smoking for the past 50 years.
Governments have added additional taxes per pack of cigarettes in order to reduce the habit. BAT being the second largest cigarette company was affected by this increase and so recorded a 25 percent decrease in profits as a result.
According to one medical expert the tobacco company was termed as a profit motivated disease vector, duty bound by corporate law to maximize profits13. With this reputation BAT has adopted the strategy of CSR in order maintain sustainability and profitability. In its 2003/2004 social report they acknowledged that that accepting CSR and contributing in the ways that a business can make good business sense. This explains BAT’s role in eliminating child labour in tobacco growing foundation and its claim that they do not employ child labour. 14
BAT has donated £380000.00 to help establish the UK’s first international centre for CSR at the University in Nottingham Business school. They have provided 250,000 farmers support in responsible tobacco leaf production. In China Bat aims to support the development of education ,including endowing a chair of marketing at the China Europe International Business School in Shanghai. In Malaysia BAT has given financial support to students who are talented and who may not have the resources to pursue higher education.15 BAT has since 2001 started to publicize their CSR activities by means of a public report in 14 countries . They believe that making this report public it would challenge those who claim that a tobacco company cannot be a socially responsible company16.
In response to the increased litigation and negative attention on the industry, the tobacco company have become increasingly open about the dangers of their products16
BAT in Brazil have made the wearing of personal protection equipment mandatory when applying agrochemicals a condition of its contract with farmers.BAT is committed operate to strict standards and to ensure that sales and marketing are directed only to the adult consumers. They agree that there must be enforcement and penalties for breaking the law regarding such selling to minors.
BAT has supported staff members regarding group policy and has provided guidance and support in specific areas like, Whistle blowing, Conflicts of interest, bribery and corruption, accurate accounting and record keeping insider dealing and market abuse to name a few. Their standard require that all staff act with high standard of business integrity, and to comply with all laws and regulations wherever the companies operate. Stakeholders have produced a summary of the expectations of BAT.
All the reports BAT says are independently confirmed and are based on independently facilitated stakeholder dialogue. BAT claims that they became involved in CSR because it’s the right thing to do and that it supports long term business sustainability they also claimed that demonstrating CSR may help to overcome some barriers to trust amongst regulators. 17
At the end of 2008 BAT said that 40 percent of their global volume came from countries where their standards are generally stricter than local law. These standards cover all tobacco product marketing and any message through media, print ,promotional events and sponsorship. They cover some of the following: not to be aimed or appeal to youth, not to feature a celebrity or link tobacco with sports, not to appear in printed publications only if 75 percent are adults, carry a health warning on product packs, no billboards advertising within 100 meters of a school, no unsolicited free samples, public place smoking which includes bans on smoking in public places. They have also made it public of the dangers of smoking. BAT in many parts of the world have kept their standards and these standards in many cases are stricter than local laws or industry voluntary codes .Where their standards are lower than governments standard they obey the law.17
BAT has continued to pursue research and development and test marketing of innovative tobacco products that may be acceptable to the consumer. Their goal for 2009 is to be viable ,consumer acceptable reduced risk products to market. They are striving to develop and validate scientifically meaningful measurements to the exposure of tobacco smoke and to investigate how hey would measure potential harm. They are also striving to conduct their first clinical study of combustible prototype product that in smoking machine test produces lower levels of toxic compared to the conventional cigarette. In addition the will continue to develop and update our scientific website.17
BAT agrees that consumption of tobacco poses a real and serious treat to one’s health and Tobacco products should be appropriately regulated.
Many companies may use CSR as a mask for the devastating impact that multinational companies can have in an even more globalized world. 11 Bat for example, tobacco usage can never be termed as healthy no matter how “attractive” its made to be. Even if consumed in moderation it still has adverse effects on one’s health. Did BAT get involved in CSR to resist tighter regulation was a question asked also can the Tobacco company preach harm reduction. To the majority of public health policy it means urging people not to start using tobacco products.
Since tobacco advertising is prohibited in most countries is BAT using CSR as a form of advertising and making their activities public .
Making their CSR reports publicly available BAT has used this as a means of advertising. The sustainability reports list all their activities regarding CSR throughout the world. They have been doing good to cover over the damages they have caused over the years .From a public point of view it is important to remember that there is no safe form of tobacco. The tobacco company has strategically used CSR to satisfy stakeholders demands, and maximize profits.
There are major weaknesses in the CSR agenda and it may require further examination. One is the definition which is not clear allowing companies to make claims of being socially responsible and this cannot be challenged . Another is the voluntary approach gives the power to companies to set their own agenda without fear of significant challenge . Also the external regulatory environment is not having sufficient checks in place to ensure that corporations behave in a socially responsible manner. There are a number of barriers to successful CSR for example lets take the human Rights Act . There are broad variations regarding objectives , scope and coverage. First the existing initiative are created by different bodies some of which may have more authority than others. Companies are left confused as to what is expected of them . Because of the different levels of authority companies can pick and chose between clauses of the social contract.