Why Corporate Social Responsibility Matters



Published in ETHICAL CORPORATION MAGAZINE April 2006



Why Corporate Social Responsibility Matters

by

David Chandler & William B. Werther, Jr.

Corporate Social Responsibility (CSR) represents nothing less than a debate about the future of our society. Amidst issues of ethics, corporate governance, and other efforts to balance conflicting demands, society seeks to create the ideal mix of business success and societal acceptability.

Businesses are largely responsible for creating the wealth and well-being of society. However, they do not act alone. Governments are also crucial because they set the rules and parameters within which society operates, and nonprofit or nongovernmental organizations are needed where politics and profit do not reach. Nevertheless, without the innovation capitalism inspires, there is little social progress. Without the great wealth-producing engines of business, the taxes and charity needed to run government and nonprofits fade away—in time, reducing our standard of living to some primitive, pre-industrialization level. A simple example underscores these points: Look around and subtract everything produced by businesses. What is left?

Or, another example: What is the difference between the poorest and wealthiest nations? Is it not primarily the productivity and innovations of business organizations? And, where those organizations are absent or crippled by limiting regulations, political ideology, or limited resources, it is crushing poverty, ignorance, and disease that reign.

However ‘value’ is defined, businesses produce much of what is good in our society. At the same time, businesses can also cause great harm—as pollution, layoffs, industrial accidents, and other results of the profit motive amply demonstrate. But, when the self-interests of businesses and their stakeholders are aligned, the results can be widely beneficial—as the profit motive of business illustrates when a life-saving drug is created.

Between the great good and terrible harm business can induce lies an immense concern about the proper role of corporations in society, particularly as technological innovation expands their potential. At one extreme, the Nobel Prize winning economist Milton Friedman argues that, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.” At the other end of the spectrum is a belief system, more firmly established within the economies of western Europe and Japan, that corporations should act with greater responsibility toward all their constituents—employees, shareholders, lenders, suppliers, customers, communities and the wider environment in which they operate. Who is right? Are the two positions necessarily mutually exclusive?

In our university textbook, Strategic Corporate Social Responsibility, we seek to provide a framework within which students and general readers alike can answer these questions for themselves. The purpose of this book is to identify the key issues of CSR and provide a means, a (re)source, to explore this broad and rapidly-evolving topic of importance to everyone. This journey of exploration reveals that even the simple answers are colored with gray areas of honest debate—where reasonable, honorable, and well-intentioned people disagree. And, sometimes disagree vehemently!

What makes this exploration exciting—besides its relevance to every citizen of planet Earth—is that CSR is as topical as this morning’s headlines. Jobs and job losses, corruption and scientific breakthroughs, pollution and medical cures, global warming and technological innovations, all spring from the relentless drive for innovation and pursuit of profit that we call ‘business.’ And, when they compete in the marketplace, CSR offers a middle way; a sustainable path between unbridled capitalism with its mixed consequences on the one hand and rigidly regulated economies plagued with artificial and stifling limitations on the other.

As we explain in Chapter 3:

CSR exists to address the concerns of stakeholders who are impacted by businesses pursuing the profit motive. The primary focus of businesses, however, is the pursuit of profit—not CSR. What CSR seeks to do is to present business decision makers with a more balanced view of their operating environment so that decisions are optimized as to both the ends of profit and the means of execution. And, given the rapidly changing environments in which these strategies take place, the mix of issues will change for each firm as it adapts both its strategy and its execution to its turbulent environments. As a result, it is impossible to prescribe the exact issues any firm is likely to confront. Instead, we argue that a strategic lens offers the best viewpoint from which to look at CSR.

It is this strategic approach to CSR that we believe offers firms the best means of navigating today’s turbulent global business environment so that all stakeholders (including shareholders) benefit over the long term.

Word count: 754

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David Chandler (david.chandler@phd.mccombs.utexas.edu) is a Ph.D. student in strategic management at the University of Texas at Austin. Since graduating with an undergraduate degree in American Studies: Politics and Government in 1991 (University of Kent, UK), he has divided his time between the United States, the UK, and Japan, working in the fields of politics, education, and business. He has an MBA from the University of Miami, Florida and an M.Sc. in East Asian Business from the University of Sheffield in the UK.

William B. Werther, Jr. (werther@miami.edu) is the Codirector of the Center for Nonprofit Management at the University of Miami. With 30 years of experience among nonprofit, government, and business organizations, his expertise is widely sought. Public sector involvement includes work for the White House Conference on Productivity, the U.S. House of Representatives and NASA. Private sector work includes Anheuser-Busch, Bell Canada, Citicorp and IBM.

This article is excerpted from Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (), by William B. Werther, Jr. & David Chandler. © Sage Publications, 2006. All rights reserved.

About the book: This university textbook provides faculty and students with a comprehensive, stand-alone text to support traditional and innovative courses in corporate social responsibility (CSR). Adopting a stakeholder approach to CSR, the content and format of this sourcebook defines CSR within the global communications environment in which multi-national corporations operate today.

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